Forex Today: Focus shifts to US data as Trump tariff talks inject volatility into markets
Here is what you need to know on Tuesday, February 4:
Following Monday's wild fluctuations that were triggered by headlines surrounding US President Donald Trump's tariff policy, markets seem to be settling down early Tuesday. In the second half of the day, JOLTS Job Openings data will be featured in the US economic docket. Several Federal Reserve (Fed) policymakers will also be delivering speeches during the American trading hours.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.55% | -0.11% | 0.17% | -1.61% | 0.21% | -0.15% | -0.38% | |
| EUR | -0.55% | -0.26% | 0.94% | -0.88% | 0.12% | 0.60% | 0.37% | |
| GBP | 0.11% | 0.26% | 0.08% | -0.62% | 0.38% | 0.87% | 0.63% | |
| JPY | -0.17% | -0.94% | -0.08% | -1.77% | 0.20% | 0.62% | 0.10% | |
| CAD | 1.61% | 0.88% | 0.62% | 1.77% | 0.75% | 1.50% | 1.26% | |
| AUD | -0.21% | -0.12% | -0.38% | -0.20% | -0.75% | 0.49% | 0.25% | |
| NZD | 0.15% | -0.60% | -0.87% | -0.62% | -1.50% | -0.49% | -0.24% | |
| CHF | 0.38% | -0.37% | -0.63% | -0.10% | -1.26% | -0.25% | 0.24% |
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).
The US Dollar (USD) benefited from the risk-averse market atmosphere at the beginning of the week after Trump announced over the weekend that they will impose 25% tariffs on Canadian and Mexican imports and 10% on Chinese goods. In the American session on Monday, Mexico's President Claudia Sheinbaum said that the US has agreed to pause tariffs on Mexico for 30 days for further negotiations. Similarly, Canadian Prime Minister Justin Trudeau announced late Monday that Trump will postpone tariffs on Canadian imports for at least 30 days. Following the rally seen in the first half of the day, the USD Index reversed its direction and closed virtually unchanged on Monday.
During the Asian trading hours on Tuesday, China’s Commerce Ministry said they will impose 15% tariffs on US coal and liquified natural gas (LNG) imports. "Additional 10% tariffs will be imposed on crude oil, farm equipment and some automobiles," the Ministry said. Markets remain cautious early Tuesday, with US stock index futures losing about 0.2% on the day. In the meantime, the USD Index stays in positive territory slightly below 109.00.
After falling sharply early Monday, EUR/USD staged a rebound and erased a majority of its daily losses. The pair, however, struggles to hold its ground in the European morning on Tuesday and trades slightly below 1.0300.
GBP/USD benefited from the improving risk mood in the American session and posted daily gains on Monday. The pair stays on the back for early Tuesday and fluctuates at around 1.2400.
USD/CAD reached its highest level since April 2003 near 1.4800 on Monday but declined sharply in the second half of the day to close with a daily loss of more than 0.6%. The pair edges higher to begin the European session on Tuesday and trades above 1.4450. Similarly, USD/MXN made a U-turn after reaching a multi-year high at 21.2950 and lost more than 1.5% for the day to close at 20.3435. USD/MXN stays relatively quiet early Tuesday and trades near Monday's closing level.
Gold touched a new all-time-high of $2,830 on Monday but retraced a portion of its daily rally in the American session. XAU/USD stays in a consolidation phase and holds above $2,810 early Tuesday.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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