European FX markets are on the transfer at present as they digest the primary of President-elect Trump’s late-night social media posts on financial coverage. His put up threatened to enact 25% across-the-board tariffs on imports from Canada and Mexico until they tightened border safety to deal with the flows of unlawful immigrants and medicines, notably Fentanyl. China was threatened with a further 10% on any present tariffs for not doing sufficient to deal with Fentanyl flows as properly. His put up on Reality Social stated he’d use govt orders to make this occur – which he may doubtlessly do below the US Worldwide Emergency Financial Powers Act (IEEPA), ING’s FX analyst Chris Turner notes.
DXY to remain bid within the 107-108 vary
“While most available in the market assume that Trump can be utilizing tariffs as a big bargaining stick – on this case to tighten US border controls – we’d watch out of dismissing their market affect as some grandstanding. If 25% tariffs got here near seeing the sunshine of day in Mexico, USD/MXN can be a 24/25 story, not simply 21. We already assume the currencies of Mexico and Canada may have a more durable Trump 2.0 than they did throughout his first time period.”
“The above may help set the tone in FX markets into year-end – specifically that Trump stands to ship on his pre-election guarantees. These insurance policies are typically optimistic for the greenback. Though the ultimate consequence of the tariff risk could also be much less extreme as soon as negotiations are concluded, we suggest adopting a defensive stance in FX markets in the intervening time.”
“Two additional inputs at present needs to be USD optimistic too. The primary needs to be a good bounce in November US shopper confidence after Trump’s win earlier this month. The second needs to be a mildly much less dovish set of FOMC minutes, the place the Fed may need acknowledged that among the draw back dangers to the economic system had receded forward of that coverage assembly on 7 November. DXY is to remain bid within the 107-108 vary.”
