February 04, 2025 at 09:37AM
Trump may have delayed the 25% tariffs on Canada and Mexico but the additional 10% tariffs on China did go into effect earlier. Beijing did respond with their own counter-tariffs but they will only go into effect on 10 February. And with Trump teasing talks with Xi before heading to bed, there’s still some hope.
The dollar opened the week with a gap higher but lost all of its allure from there in trading yesterday. There was a slight bounce earlier but even that seems to have faded quite a bit now. EUR/USD is flat on the day as it starts to eat back into that opening gap on the week:
The near-term chart still shows sellers in control, with price action resting below the key hourly moving averages. But any major downside move will be contingent on tariff headlines and trade developments in the next few days.
For now, the tariffs can being kicked down the road suggests hope that Trump may not let all hell break loose on the trade front. However, the EU and China are definitely in the crosshairs next.
Elsewhere, USD/JPY is still seen up 0.2% to 155.10 but off its earlier high of 155.51 on the session. AUD/USD is also still down 0.3% to 0.6205 but off its earlier low of 0.6170 after the China retaliation headlines hit.
Meanwhile, USD/CAD itself is nearly flat at 1.4440 with sellers stepping back in after a push to 1.4500 earlier in the day.
Looking to broader markets, there is still caution to be heeded though. S&P 500 futures are down 0.2% and 10-year Treasury yields are holding the line but only marginally higher today by 1.2 bps to 4.565% at the moment.
This article was written by Justin Low at www.forexlive.com.
