February 2025 Monthly Report

Read the Ballinger Monthly Report for February below.

The FX market was at the mercy of US tariff sentiment in January, as Trump began his second term. The dollar entered 2025 on a strong footing, thanks to a 7% rally in the final quarter, and began by extending gains as long-end yields rose globally, inflation concerns resurged, and markets priced in a tariff risk premium that pulled the likes of EUR/USD lower from levels suggested by rate differentials.

But the week of Trump’s inauguration was the worst for the dollar since 2023. He hit the ground running on most promises, but failed to deliver any tariffs. That is, until this month with the 10% tariff on China and the now-delayed 25% duties on Canada and Mexico. The centrality of Trump’s decisions led to a meaningful change in the most important market catalysts. Source articles, off-the-cuff comments, social media posts, and other unscheduled events now seem to matter as much as the key data – if not more. Unpredictability and uncertainty are deliberate hallmarks of Trump’s dealmaking leadership style, often leaving markets clueless as how to accurately price the risks

The yen outperformed the G10, thanks to a third BoJ hike and some hawkish rhetoric, while the pound, hurt by evaporating fiscal headroom, took the biggest losses of January.