Forexlive Americas FX news wrap: A tangled tariff web we weave

• Trump expected to issue tariffs against Canada and Mexico starting March 1
• White House: The report is false. The Feb 1 deadline still holds
• White House: Trump has not made up his mind on the tariff timeline for the European Union
• Mexico’s Sheinbaum: If the US imposes tariffs, this puts aside the USMCA trade pact
• Fed’s Goolsbee: I have comfort we are on the path to 2% inflation
• Fed’s Bowman: Inflation risks remain, rate cuts expected but data-dependent
• US December PCE core +2.8% vs +2.8% expected
• US Q4 employment costs 0.9% versus 0.9% estimate
• Canada November GDP -0.2% vs -0.1% expected
• Canada April-Nov budget balance -22.72 billion vs -19.14 billion a year ago
• ECB’s Villeroy: We should be sustainably around 2% inflation target by summer
• Bill Gates says prior macro-economic analogies don’t apply to AI
• Bakers Hughes oil rigs +7 in the current week
• Germany January preliminary CPI +2.3% vs +2.6% y/y expected

Markets:

• Gold up $3 to $2796
• US 10-year yields up 7 bps to 4.58%
• WTI crude oil down 27-cents to $72.46
• S&P 500 down 30 points to 6039
• USD leads, JPY lags

January comes to an end and it was certainly a dramatic one, which is no surprise given the new President.

The PCE report was a good one for inflation, though only when you’re rounding to the second decimal or digging deep in the numbers. It was a reminder that the Fed won’t be threatening rate hikes any time soon, even if the pace of cuts could slow or stop. The dollar took the report in stride and in the early going it was mostly month-end flows bouncing around the market.

That led to some choppy moves that were tough to explain but the market certainly got something more-tangible to chew on later.

It started with a Reuters report saying Trump might announce tariffs but they wouldn’t go into place until March 1, allowing time for exemptions and negotiations. The market liked the sound of that and the US dollar fell with USD/CAD dropping 100 pips to 1.4375. It wasn’t limited to CAD and MXN either as EUR/USD rose 60 pips in a consistent move across FX.

Of course, the White House denied that report about 90 minutes later and reiterated that the White House would be putting tariffs on Mexico and Canada on Saturday, as planned. That reversed the move and in some cases more. USD/CAD ran to 1.4225 while other moves were also erased. The net was that most things ended up back where they started the US afternoon.

However stocks soured particularly hard. The S&P 500 had been up nearly 50 points at the highs and was down 40 points at last look, or 0.6%. Apple was particularly hard hit in an ugly reversal after a strong open.

The weekend will be an interesting one and virtually guarantees some fireworks when markets reopen. In the meantime, enjoy the weekend!

See: February 1. March 1. It doesn’t matter because it’s all a bluff

This article was written by Adam Button at www.forexlive.com.