Trump’s tariff threats boosted Dollar; Peso, Loonie, Gold & Oil Lower

The Trump trade picked up steam as investors cheered his pick for Treasury Secretary, Scott Bessent. Beliefs he will be a steadying voice in the administration’s fiscal measures, while still following President-elect Trump’s tariff and tax commitments, underpinned.

Asia & European Sessions:

• Trump threatened on Monday to impose sweeping new tariffs on China, Canada and Mexico on his first day as US President to crack down on illegal immigration and drugs. He would impose a 25% tax on all products entering the country from Canada and Mexico, and an additional 10% tariff on goods from China as one of his first acts as president of the US.
• Bessent’s 3-3-3 plan aims to cut the deficit to 3% of GDP, boost growth to 3%, and increase oil production to 3 mln barrels.
• Treasury yields dove in a curve flattener, extending their drops through the session, on expectations inflation will decelerate. A strong 2-year auction also supported.
• The Dow led the charge, climbing 0.99% to 44,736, a new record peak as the rally broadens. The S&P500 climbed to 6020, a session peak, but finished with a 0.3% gain to 5987. The NASDAQ closed 0.27% higher.
• Today, stock markets in Europe are posting broad losses, with the DAX down -0.6%, the FTSE 100 0.4%, after a largely weaker close across Asia.
• ECB: Lane suggests ECB must be open-minded on speed of rate cuts. The ECB’s Chief Economist said in a speech on Monday evening that “remaining open-minded about the speed and scale of adjustments is in fact a valuable strategy across various environments, as different situations may necessitate distinct approaches.” This careful, step-by-step strategy enables us to observe the responses of the economy to our decisions and continuously refine our understanding of their impacts.” The comments leave the door open to a 50 bp move in December, but also tie in with our expectation that the central bank will deliver a 25 bp while tweaking the forward guidance and commit to additional moves.

Financial Markets Performance:

• The USDIndex hit a session high of 107.50 and is currently lower at 106.85.
• Mexican peso and Canadian dollar slumped as the dollar is being viewed as a haven after the comments of President-elect Donald Trump on tariffs on Canada, Mexico and China. USDCAD spiked to 1.4177 and USDMXN rallied to 20.74.
• Oil and Gold lost ground, in part on cooling geopolitical risks, and on Trump trades. Oil dropped -3.03% to $69.09 per barrel, in part on the Trump trade and on talk of a potential cease fire between Israel and Hezbollah. Similarly, gold fell -3.26% to $2605 per ounce.

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Andria Pichidi

Market Analyst

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