Trump’s tariff comments moves markets.

• Tariff announcements drive volatility: President-elect Donald Trump proposed a 25% tariff on imports from Canada and Mexico to combat drug trafficking and unauthorized border crossings, alongside a 10% supplementary tariff on Chinese imports.
• Global economic risks: French central bank head Villeroy noted that Trump’s tariff and tax plans could elevate U.S. inflation while weighing on growth in other economies.
• Bank of England policy outlook: The BoE’s gradual easing approach is driven by persistent inflation concerns, though external member Swati Dhingra advocates for swifter rate cuts.
• Policy concerns: Dhingra highlighted that current BoE policies are weighing on investment, noting that UK inflation trends are in line with other advanced economies.

USD

Market volatility spiked after U.S. President-elect Donald Trump announced plans for significant tariffs. Proposals included a 25% tariff on imports from Canada and Mexico to curb drug trafficking and unauthorized border crossings, along with a 10% supplementary tariff on imports from China. The USD initially strengthened on these announcements but later gave up its gains. Meanwhile, the Canadian Dollar and Mexican Peso faced sharp declines. European and Japanese markets remained relatively unscathed, with the euro holding onto gains following its bounce from a two-year low on Monday.

EUR

Eurozone risks are mounting as European Central Bank (ECB) officials caution against new U.S. tariffs and their potential to derail growth and inflation. Policymakers like Mario Centeno have emphasized the importance of staying vigilant to avoid inflation undershooting the ECB’s 2% target. French central bank head Villeroy highlighted how Trump’s tariff plans and tax cuts could exacerbate global economic pressures, boosting U.S. inflation while slowing growth abroad. Investor concerns over trade impacts, weakening Chinese demand, and geopolitical risks have stalled momentum in European stocks, with inflation expectations dipping below 2% for the first time since mid-2022.

GBP

The British Pound saw strong recovery against the USD as Donald Trump’s tariff threats focused on North American economies. While trading sideways against most peers, GBP investors await key U.S. data, including the FOMC minutes and October PCE inflation figures, for further direction. The Bank of England maintains a gradual approach to easing, citing persistent inflation concerns, though external policymaker Swati Dhingra supports more aggressive cuts, noting that UK inflation aligns with global trends. Dhingra also pointed out how current policies are negatively impacting investment.

Economic Calendar