Trump Tariffs Loom, Dollar Struggles to Recover
The US Dollar Index (DXY) trended sluggishly around 99.06 on Monday (January 19th), as liquidity thinned as US markets were closed for Martin Luther King Jr. Day. Despite limited movement, global sentiment remained "heavy" after US President Donald Trump threatened tariffs related to the Greenland dispute, sending market participants back into risk-off mode.
Trump stated that he would impose 10% tariffs starting February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the UK, and threatened to escalate to 25% on June 1 if no agreement is reached on Greenland. From Europe, the response is heating up: several reports indicate the European Union is considering a retaliatory package, including the option of reviving planned tariffs on €93 billion worth of US imports.
In major forex markets, the dollar weakened against European currencies: EUR/USD held around 1.1650 and GBP/USD in the 1.3440 area, as both the euro and sterling benefited from the rising political risk premium in the dollar's favor. Meanwhile, USD/JPY hovered around 158.00—remaining sensitive to safe-haven flows amid trade tensions—and AUD/USD recovered to around 0.6720 after a boost from warmer-than-expected Australian inflation data.
In Canada, USD/CAD hovered around 1.3870 despite a strong annual inflation report—the market believes geopolitical headlines and trade war risks remain dominant in shaping the dollar's direction at the start of the week.
Source: Newsmaker.id
