Market comment on behalf of Ruben Ferreira – Head of Portuguese Operations at FlowCommunity
28th January 2025
The U.S. dollar rebounded from previous losses as market participants reacted to new tariff threats from Donald Trump targeting imported computer chips, pharmaceuticals, and steel. The tariffs aim to boost domestic manufacturing, especially in industries linked to military hardware, as part of broader efforts to strengthen U.S. industrial output. Rising concerns over China’s AI advancements, particularly through the startup DeepSeek, have added urgency to these protectionist efforts.
Meanwhile, the risks of seeing a 25% tariff on imports from Mexico and Canada could continue to fuel risk-off sentiment, driving demand for safe-haven assets like the U.S. dollar.
At the same time, traders are closely monitoring monetary policy decisions, which may shape market sentiment in the weeks ahead. The Federal Reserve begins its two-day meeting today, with the interest rate decision expected tomorrow. While no change in rates is anticipated, the focus is on the Fed’s 2025 outlook. A hawkish approach could strengthen the dollar, whereas a dovish tone could weaken the currency. In addition, the Bank of Canada and the European Central Bank are set to announce interest rate decisions later this week, intensifying the global focus on central bank policy.
In the bond market, U.S. Treasury yields edged higher, with the 10-year note yield hovering between 4.5% and 4.6%. As the Fed’s interest rate decision deadline approaches and uncertainty over Trump’s trade policies persists, heightened volatility is expected, which could support US yields.