Today’s markets analysis on behalf of George Pavel General Manager at Naga.com Middle East
4th February 2025
The US Dollar traded higher, as ongoing trade tensions continued to fuel risk-aversion, boosting safe-haven assets such as the US currency. Although President Trump postponed new tariffs on Canada and Mexico for one month, uncertainty could remain present during this period. In contrast, China’s swift decision to impose retaliatory tariffs on US goods has triggered market volatility, casting a bullish short-term outlook for the greenback.
Recent economic data and comments from Federal Reserve officials have further strengthened the dollar. The ISM Manufacturing PMI exceeded expectations, marking the first expansion in over two years, raising the likelihood of the Fed maintaining a hawkish stance. Chicago Fed President Austan Goolsbee also cautioned that inflationary pressures remain a concern, suggesting the central bank may be hesitant to cut interest rates amid ongoing uncertainties.
Meanwhile, in the bond market, the US treasury yields rose across all the maturities with the 10-year note holding above 4.55%. However, should trade tensions persist, yields could face downward pressure if investors move to the bond market en masse. Looking forward, all eyes will be on this week’s key US economic releases including JOLTs, ISM Services PMIs and Non-Farm Payrolls. These indicators may provide further hints into future Federal Reserve policy moves.