Trump’s Return: How the U.S. Inauguration Shaped Global Markets

As of Monday, January 20, 2025, the U.S. Inauguration Day marked the return of President Trump to the White House, an event that captured global attention and set the stage for potential shifts in both domestic and international policies. While U.S. markets were closed for the public holiday, the anticipation surrounding what the new administration might bring had a significant impact on global financial markets. Investors were on edge, speculating about the possible effects of upcoming policy announcements, especially regarding trade and tariffs. This uncertainty created a wave of market volatility, making this week a crucial one in the broader market landscape.

Now, let’s take a closer look at the key economic events that are driving market movements this week.

Key Economic Events of the Week

Monday
US Inauguration Day

Tuesday
GB Unemployment Rate
DE ZEW Economic Sentiment index
CA Inflation Rate YOY

Thursday
JP Balance of Trade

Friday
JP Inflation Rate
BoJ Interest Rate Decision
DE HCOB Manufacturing PMI
GB S&P Global Manufacturing PMI
GB S&P Global Services PMI
US  Existing Home Sales

Dollar Edges Higher Amid Tariff Uncertainty

The U.S. dollar edged slightly higher on Wednesday during indecisive trading, as uncertainty surrounding President Donald Trump’s proposed tariffs left financial markets on edge.

Late Tuesday, Trump announced that his administration was discussing a 10% tariff on Chinese imports starting Feb. 1, the same day he previously proposed imposing 25% levies on goods from Mexico and Canada. Trump also mentioned potential duties on European imports but provided no further specifics.

Despite these threats, the lack of concrete details from Trump’s first day in office caused the dollar to slide 1.2% against a basket of major currencies earlier in the week. On Tuesday, the greenback stabilized, ending flat after an attempted recovery fizzled amid reassurances from U.S. officials that any new tariffs would be introduced gradually.

As of 0625 GMT, the dollar index, which measures the U.S. currency against six major peers, was unchanged at 108.14.

The dollar gained 0.23% to 155.87 yen, while the euro dipped 0.17% to $1.0410, and sterling eased 0.13% to $1.2343.

Although Trump threatened tariffs as high as 25% on Mexico and Canada, he has refrained from imposing them, even as he signed several executive orders. His decision to exclude China, for now, is being interpreted as a sign of a more measured approach to tariffs than what he promised during his campaign, easing fears of rising inflation and aggressive Federal Reserve action.

Interest Rate Expectations Weigh on the Dollar

Markets now anticipate a quarter-point interest rate cut by the Federal Reserve in July, with the possibility of another reduction by year-end seen as a coin toss.

The Canadian dollar weakened by 0.1% to C$1.4337 against the U.S. dollar, following a volatile week in which it dropped as low as C$1.4520, its weakest level since March 2020. The currency faced additional pressure from a cooling inflation rate, which fell to 1.8% in December, partly due to sales tax relief.
The Mexican peso also slipped 0.15% to 20.6430 per dollar.

(DISCLAIMER: The above charts, technical and scenario analysis mentioned above as (preference, second preference & comment), are based on information provided entirely by Trading Central.)

Kiwi and Aussie Dollars Under Pressure

Elsewhere, the New Zealand dollar slid 0.42% to $0.5655 as annual inflation for the fourth quarter came in at 2.2%, comfortably within the central bank’s target range of 1% to 3%. Traders are now pricing in 65% odds that the Reserve Bank of New Zealand will cut rates by half a percentage point at its February policy meeting.

The Australian dollar also declined 0.24% to $0.6258.

Japanese Yen Outlook: USD/JPY Trends Lower Ahead of BoJ Decision

The USD/JPY pair is carving out a series of lower highs and lows ahead of the Bank of Japan (BoJ) interest rate decision, sliding to a fresh monthly low of 154.78.

The pair’s decline suggests that USD/JPY may continue to reverse gains made since the December low of 148.65, as it breaks out of January’s opening range. This trend points to a potential shift in sentiment, influenced by fluctuations in carry trade activity and expectations around monetary policy.

With the Federal Reserve appearing poised to further unwind its restrictive stance, changes in the policy divergence between the BoJ and the Fed could exert additional pressure on the USD/JPY exchange rate in the coming weeks.

(DISCLAIMER: The above charts, technical and scenario analysis mentioned above as (preference, second preference & comment), are based on information provided entirely by Trading Central.)

GBP/USD recovered to 1.2350 on fresh US Dollar weakness

GBP/USD regained lost momentum and hovered near 1.2350 in the European session on Wednesday. The pair draws support from a renewed US Dollar selling as risk sentiment improves despite US President Trump’s tariff threats.

(DISCLAIMER: The above charts, technical and scenario analysis mentioned above as (preference, second preference & comment), are based on information provided entirely by Trading Central.)