Market Volatility: Dollar Edges Up Amid Tariff Concerns and Central Bank Meetings
The US dollar experienced a mixed performance on Monday, gaining ground against the euro but losing value against the yen. This shift in market sentiment comes as concerns about US tariffs resurfaced, and investors prepared for a series of central bank policy meetings and economic data releases later this week.
Tariff Fears Resurface
Last week, the dollar experienced its weakest performance in over a year, driven by expectations that tariffs imposed by US President Donald Trump would be lower than initially feared. However, tensions between the US and Colombia have reignited concerns about the impact of tariffs on global trade.
Central Banks Take Center Stage
Monetary policy decisions from the US Federal Reserve, European Central Bank, Bank of Canada, and Riksbank are expected to dominate market attention this week. While no rate changes are anticipated, investors will closely scrutinize any clues about the outlook for interest rates.
Dollar Index Remains Steady
The dollar index, which measures the currency against six others, rose 0.1% to 107.58, still close to the one-month low it touched last week. The index has risen nearly 4% since the US elections in early November.
Tariff Risks and Inflation Concerns
The prospect of high US tariffs on goods from countries including China, Canada, and Mexico, as well as the euro zone, has stoked concerns about a renewed bout of inflation. This has boosted Treasury yields and the greenback in recent months.
Currency Market Moves
The Mexican peso, a barometer of tariff worries, dropped around 1% to 20.48 per dollar, while the Canadian dollar was down 0.4% at 1.44. The euro was 0.2% lower at $1.0474, and Sterling last fetched $1.2446.
Inflation Data and Central Bank Decisions
Inflation data from Germany, France, and Japan will be released on Friday, while the Fed’s favorite inflation gauge is due in the US. The Bank of Japan pushed its policy rate to the highest level since the global financial crisis and revised up its inflation forecasts.
Bitcoin Eases Amid Regulatory Developments
Bitcoin, the world’s best-known cryptocurrency, eased to a 1-1/2-week low of $97,810.50, but remained close to the record high of $109,071.86 touched last week on hopes Trump will usher in friendlier regulations.
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