USD Steady on Tariff Threat
This weekend the US successfully used the threat of tariffs on Colombia to secure its policy of deporting illegal immigrants. The use of tariffs as a policy lever now appears well understood by the market and may serve to dampen marginal volatility, notes ING FX analyst Chris Turner.
"The FX market is still operating on the potential 1 February deadline for tariffs on Mexico, Canada and China – and that should prevent the dollar from correcting too much this week. Instead, focus should shift back to the macro side given a slew of central bank rate meetings, Q4 GDP data and some key inflation data around the world." "Overall, we think Wednesday's FOMC meeting should not be a negative event risk for the dollar given the strong US activity data. The bigger risk for the dollar could come from the release of December core PCE inflation data on Friday. Here, a 0.2% month-on-month reading could suggest inflation is not as worrisome as some have feared and see the market pricing for a Federal Reserve easing cycle this year shift to 50bp from the current 43bp."
Source: FXStreet
