Forex Today: Trump Tariffs Send US Dollar Soaring - 03 February 2025

Tariffs imposed by the USA on select countries over the weekend are strongly moving markets in the greenback's favor, especially in the Forex market.

1. The news is dominated by tariffs. The new tariffs imposed by the USA against Mexico (25%), Canada (25% except energies 10%), and China (10%) have produced unusually large movements in the Forex market within ony a few hours of the weekly open. The move is strongly in favor of the USD and strongly against the tariff affected and threatened countries:
   1. USD/CAD rises by 1.8% to new 20-year high price.
   2. USD/MXN rises by 3.08% to new 18-month high price.
2. This move looks likely to continue or at least be sustained. Developed economies have not seen this kind of trade war in decades, so markets will probably find it hard to price in these developments. Traders will be wise to trade Forex today and look to be long of the US Dollar.
3. President Trump has also said in recent hours that he will definitely impose new tariffs against the EU, which has sent the EUR/USD currency pair lower by 1.36% as it falls to a level close to a multi-year low/
4. Canada has retaliated with a blanket tariff of 25% on US imports, but it seems to be having little effect on the market. Canada imports about 20% more than it exports to the USA.
5. The Australian Dollar as a major exporter of raw materials currency is also hit hard, with the AUD/USD currency pair lower by 1.85% and also trading at a 3.5-year low price.
6. As the tariff war takes effect and creates a strong risk-off environment, we see risky assets generally declining and safe havens such as the Japanese Yen getting a boost. Almost all major equity indices are lower, even in the USA, although there that may be due mostly to US Dollar strength.
7. Coffee futures continued their long-term bullish trend last Friday, rising strongly to a new record high price. Trend traders will be interested to be long of Coffee. Although Coffee futures can be expensive, retail traders and investors can gain exposure to Coffee via the COFF ETF.
8. Bitcoin has been hit by the risk-off environment, trading almost 4% down on the day below $95,000.
9. There will be a release of US ISM Manufacturing data today
10. It is a public holiday in China today.

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