Following Monday’s volatile action, investors are clinging to a cautious stance early Tuesday, while assessing the latest developments surrounding the US tariff policy and retaliatory measures against it.
The economic calendar will not offer any high-impact data releases, with several Federal Reserve policymakers delivering speeches later in the day.
US President Donald Trump’s 25% tariffs on Canadian and Mexican imports, as well as the additional 10% on Chinese goods, took effect early Tuesday.
In response, Canada said that it will start imposing reciprocal 25% tariffs on US imports worth about 30 bln Canadian Dollar and is in active and ongoing discussions with provinces and territories to pursue several non-tariff measures.
Meanwhile, China’s Commerce Ministry announced on Tuesday that it would slap additional tariffs of up to 15% on US imports of key farm products, including chicken, pork, soy and beef. Mexican President Claudia Sheinbaum is expected to announce her response in a news conference in Mexico City later in the day.
After ending the previous week on a bullish note, the DXY Dollar Index turned south in the second half of the day on Monday and closed the day deep in negative territory. Early Tuesday, the index fluctuates in a tight channel at around 106.50.
In the meantime, the benchmark 10-year US Treasury bond yield remains below 4.2% following Monday’s decline and US stock index futures trade marginally higher on the day.
EURUSD benefitted from the selling pressure surrounding the dollar and rose more than 1% on Monday, erasing a majority of last week’s losses in the process. Early Tuesday, the pair fluctuates near 1.0500.
GBPUSD gathered bullish momentum and advanced to the 1.2700 area on Monday. The pair is in a consolidation phase in the European morning on Tuesday.
During Asian trading, data from Australia showed that retail sales increased by 0.3% on a monthly basis in January, as expected.
The minutes of the Reserve Bank of Australia’s (RBA) February monetary policy meeting showed that policymakers did not commit to additional rate cuts but placed more weight on the downside risks to the economy. AUDUSD stays under modest bearish pressure early Tuesday and trades at around 0.6200.
Despite the broad USD weakness, USDCAD closed marginally higher on Monday. The pair holds its ground early Tuesday and trades near 1.4500. After rising nearly 0.7% on Monday, USDMXN continues to push higher and was last seen trading at its strongest level in a month at 20.8480, rising about 0.8% on the day.
Gold capitalised on the risk-averse market atmosphere and rose more than 1% on Monday. XAUUSD trades within a touching distance of $2,900 in the European morning on Tuesday.
(Source: OANDA)
