Investors assess Trump’s stance on tariffs

The dollar, bitcoin, and treasury yields have softened as investors assess Trump’s stance on tariffs. The dollar declined against a range of currencies, the yield on the 10-year Treasury moderated, and bitcoin retreated from its recent peaks following President Donald Trump’s inaugural address, as the lack of any immediate announcement regarding widespread tariffs offered a measure of comfort to equity markets.
The trajectory of certain currencies exhibited volatility, reflecting investors’ recalibrated reactions to the new administration. The dollar strengthened against both the Canadian dollar and the Mexican peso following President Trump’s announcement of a 25% tariff on imports from these nations, effective February 1. By early morning in Europe, the DXY U.S. dollar index had declined by 0.8%, settling at 108.545. Nonetheless, “the U.S. dollar may experience fluctuations prior to the U.S. administration’s confirmation of trade policy,” noted Schroders in a recent communication. Observers of the financial landscape anticipate that the dollar will find long-term support due to the Federal Reserve’s measured stance on interest rate reductions in contrast to its global counterparts.
U.S. Treasury yields declined as there were no immediate, widespread tariff announcements, with the 10-year yield recently decreasing by six basis points from Friday to 4.55%, following Monday’s market holiday, as reported by LSEG. According to Eugene Leow, a senior rates strategist at DBS Group Research, the initial market response indicated that “significant apprehension was ingrained across various asset classes.” “A portion of this apprehension has now been alleviated.”
Trump’s collection of executive orders did not introduce prompt alterations to U.S. trade policy and refrained from disclosing “day-one” tariffs, indicating a potential pivot towards bilateral negotiations, according to CIMB analyst Michelle Chia in a recent note. Bitcoin retreated from Monday’s record peaks amid initial letdown over President Trump’s failure to unveil additional strategies aimed at invigorating the cryptocurrency market during his inauguration, noted Jochen Stanzl of CMC Markets. Nevertheless, a mere endorsement from Trump could potentially lead to a substantial resurgence in bitcoin’s value, he asserted. Bitcoin recently experienced a decline of 0.3%, trading at $102,291, a distance from its peak of $109,072.
In early European trading, U.S. stock futures rose approximately 0.3%, while the Stoxx Europe 600 index opened largely flat, reflecting minor declines in France’s CAC 40 and Germany’s DAX. The FTSE 100 experienced a modest increase of 0.1%. In the interim, equity markets across Japan, China, and Hong Kong concluded the trading session predominantly in positive territory. The Shanghai Composite Index ended the day unchanged, while the Shenzhen Composite Index recorded a modest increase of 0.25%. The Hang Seng Index in Hong Kong experienced an increase of 0.9%, while the Nikkei Stock Average saw a modest rise of 0.3%. South Korea’s benchmark Kospi experienced a slight decline of 0.1%.
In other developments, benchmark crude oil prices declined in response to Trump’s intentions to enhance U.S. oil-and-gas production, which encompass the relaxation of Arctic drilling restrictions and the removal of a moratorium on liquefied natural gas export permits. Brent crude has recently declined by 0.5%, settling at $79.73 per barrel, while WTI has experienced a more pronounced drop of 1.4%, now priced at $76.30 per barrel. In his address, Trump proclaimed a national energy emergency and asserted his intention to replenish strategic reserves “right to the top.”