Today’s markets comment on behalf of Joseph Dahrieh, Managing Principal at Tickmill
22nd January 2025
The US dollar struggled to find a clear direction and traded in a narrow range as market participants sought clarity on Trump’s trade policies. Following threats to impose a 25% tariff on Canada and Mexico, yesterday’s remarks hinted at a 10% tariff on China. Although the greenback could gain strength on expectations of inflationary pressures tied to these policies, the lack of formal action has led to speculation that the administration might adopt a more measured approach.
Meanwhile, the Bank of Japan’s (BoJ) upcoming interest rate decision adds another layer of complexity to the dollar’s outlook. Should the BoJ decide to raise rates, the Japanese Yen may strengthen, while a decision to maintain rates could weigh on the currency and benefit the US dollar.
In the bonds market, Treasury yields held steady, with the 10-year note yield hovering between 4.6% and 4.5%. This reflects investor caution amid trade uncertainties and looming short-term volatility. Investors are also closely monitoring the Federal Reserve’s interest rate decision later this month, which could further shape the dollar’s trajectory. A combination of a strict trade policy and the anticipation of a hawkish Fed stance might support both US yields and the dollar.