Forex Today: US Dollar rallies on US President Trump's tariff threats
Here is what you need to know on Tuesday, January 21:
After declining sharply on the first trading day of the week, the US Dollar (USD) Index benefits from the souring risk mood and gathers bullish momentum on Tuesday. The European economic docket will feature ZEW Survey - Economic Sentiment data for Germany and the Eurozone. Later in the day, December Consumer Price Index (CPI) data from Canada will be watched closely by investors.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.38% | 0.42% | -0.09% | 0.91% | 0.57% | 0.61% | 0.21% | |
| EUR | -0.38% | 0.04% | -0.42% | 0.52% | 0.20% | 0.23% | -0.19% | |
| GBP | -0.42% | -0.04% | -0.50% | 0.48% | 0.15% | 0.19% | -0.22% | |
| JPY | 0.09% | 0.42% | 0.50% | 0.97% | 0.64% | 0.66% | 0.27% | |
| CAD | -0.91% | -0.52% | -0.48% | -0.97% | -0.33% | -0.29% | -0.70% | |
| AUD | -0.57% | -0.20% | -0.15% | -0.64% | 0.33% | 0.03% | -0.37% | |
| NZD | -0.61% | -0.23% | -0.19% | -0.66% | 0.29% | -0.03% | -0.41% | |
| CHF | -0.21% | 0.19% | 0.22% | -0.27% | 0.70% | 0.37% | 0.41% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
During the early trading hours of the American session on Monday, reports of US President Donald Trump refraining from announcing day-one tariffs at his inauguration ceremony caused the USD to come under selling pressure. Later in the day, Trump said they could impose tariffs on China if they make a TikTok deal and China doesn't approve it. Additionally, he noted that they are thinking about putting a 25% tariff on imports from Mexico and Canada, triggering a USD rally in the Asian trading hours on Tuesday.
The UK's Office for National Statistics reported on Tuesday that the ILO Unemployment Rate edged higher to 4.4% in the three months to November from 4.3%. Other details of the jobs report showed that Employment Change was +35K in the same period. Finally, wage inflation, as measured by the change in the Average Earnings Including Bonus, climbed to 5.6% from 5.2%, as expected. GBP/USD showed no immediate reaction to these figures and was last seen trading deep in negative territory below 1.2300.
After losing more than 1% on Monday, USD/CAD reversed its direction and touched its highest level since March 2020 above 1.4500 in the Asian session on Tuesday before correcting lower toward 1.4450. On a yearly basis, the CPI in Canada is forecast to rise 1.8% in December, down slightly from the 1.9% increase recorded in November.
USD/MXN turned north as Trump's tariff comments weighed heavily on the Mexican Peso. The pair was last seen gaining more than 1% on a daily basis at 20.7640.
EUR/USD registered strong gains on Monday but lost its traction early Tuesday. At the time of press, the pair was down about 0.4% on the day at 1.0375.
Gold closed marginally higher on Monday and gathered bullish momentum early Tuesday. XAU/USD was last seen trading at its strongest level since early November above $2,725.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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