Tariffs to Hit Markets Today – 25% on Canada and Mexico
US markets fell on Friday ahead of the now-confirmed tariffs on Canadian, Mexican, and Chinese imports. All three major US indices closed lower, with the Dow down 0.75%, the S&P 500 down 0.5%, and the Nasdaq losing 0.28%. Investors anticipate further declines in today’s sessions following the weekend’s developments.
Currencies saw gapping at the open this morning, particularly in CAD, as markets reacted to the tariff news. The US Dollar Index (DXY) pushed higher, trading over 0.7% above Friday’s close at 109.37. US Treasury yields remained steady on Friday, but traders expect them to open higher once New York trading begins. Oil prices dipped, with Brent down 0.29% to $75.67 and WTI off 0.28% to $72.53. Meanwhile, gold hit a new all-time high of $2,817.23 before retreating to close at $2,801.12.
FX Volatility Rises on Tariffs
FX traders are bracing for heightened volatility following extreme ‘gapping’ in the Asian Monday morning session. Several major currencies saw significant differences between Friday’s closing levels and this morning’s opening trades as markets reacted to President Trump’s tariff updates.
USDCAD surged 168 pips higher in thin trading this morning and was the most affected, but gapping was also observed in the Euro, as well as in MXN and CNH in emerging markets. Further FX movements are expected throughout the day, with the US dollar strengthening on continued tariff confirmation and pulling back if any signs of a potential reprieve emerge. However, most traders anticipate that the US will proceed with implementation tomorrow and are looking for short-term dollar-buying opportunities.
Geopolitics to Dominate Market Moves Today
Markets are set for a volatile session as traders react to ongoing tariff and counter-tariff developments. While several economic data releases are scheduled today, they are expected to have only a minor impact compared to the geopolitical situation.
The Asian session has an early focus on Australian Retail Sales figures, with a 0.7% month-on-month decline expected. In Europe, Eurozone CPI data is due, with the core inflation rate forecasted to rise by 2.6% year-on-year. In the US, the first major economic release of the week will be the ISM Manufacturing PMI, expected to print at 49.3. However, geopolitical developments are likely to overshadow these data points in the short term.
