November 26, 2024

“Trump is back to moving the markets with his social media posts, leading to some volatility overnight and some new lows for the Canadian dollar. The focus today will be on the minutes from the November FOMC meeting, with markets eyeing a string of critical central bank decisions next month.”

Tim Hallinan – Trading Director

USD

It is time for markets to get used to nervously watching Trump’s social media again. The latest dollar boost came from a late-night post that blindsided markets with a promise to sign executive orders on day one slapping 25% tariffs on all imports from Mexico and Canada and an additional 10% tariff on China. With the vast majority of Canadian and Mexican exports going to the US, these tariffs could be extremely damaging to their economies – CAD is down 1% to a four-year low and MXN has fallen 1.5% this morning. The Chinese yuan is also trading at a four-month low. The announcement hammered home Trump’s promise to follow through aggressively on the policies he threatened during his campaign, but it is also clear that the tariffs are being used largely as a tool of leverage, with the threats being used to demand that the affected countries work to stem the flow of fentanyl and illegal migrants to the US. Today, investors will be looking at a consumer confidence print, which is expected to rebound, and the November Fed minutes.

GBP

Sterling is trading weaker against a broadly stronger dollar this morning. UK sentiment continues to suffer from the tax increases in last month’s budget, and Reeves sought to defend her choices in front of some disappointed business leaders at the CBI conference yesterday. We have a speech from the BoE’s Chief Economist Huw Pill this afternoon, who leans towards the hawkish side of the spectrum and is often a market mover. The topic of conversation is on economic inactivity and the growth outlook in the UK, so the focus for investors will be on whether the recent softer data signals have increased his willingness to move forward with easing.

EUR

The euro is on the backfoot today amid some broad dollar strength, after rising on Bessent’s Treasury appointment yesterday. At one point EUR/USD had risen by 1% as Bessent was read as a potential check on Trump’s aggressive trade policy, given that he has argued in the past for a layered approach to tariff implementation. With Trump’s late-night social media posts rocking markets overnight, however, it appears that Bessent may not be an obstacle to a stronger dollar at all. There will likely be some nervousness as the market waits on a post about his plans for the eurozone, whose trade surplus with the US he doesn’t very much like. It is a quiet day on the domestic side for the euro, but we do get several speeches from the likes of Villeroy, Centeno, and Rehn this morning. The rhetoric we have heard this week has been relatively dovish, reflecting Friday’s weak growth signals.

Markets

Wall Street closed higher across the board yesterday as markets applauded Bessent’s appointment as Treasury secretary, but Asian and European stocks are being hit hard this morning from Trump’s early tariff threats, particularly those with exposures to Mexico.

Main Economic Events (All Times CET)

4:00pm: US Consumer Confidence & Home Sales
8:00pm: Fed November Meeting Minutes

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