Trump's tough talk continues to roil FX markets

President Trump has reignited market anxieties, reaffirming his commitment to slap a hefty 25% tariff on imports from Canada and Mexico starting February 1st. Citing a cocktail of grievances, from the unchecked flow of fentanyl to substantial trade deficits, Trump's tough talk continues to roil FX markets. However, he's left traders hanging by a thread with his indecision over whether to exclude oil imports from this tariff tirade, promising a resolution shortly.

Not missing a beat, Trump also flagged an impending tariff onslaught against China, although likely much more measured than initially assumed. He pinpointed the drug and fentanyl issues. However, he stopped short of confirming a February 1st start date. This sabre-rattling has prompted vows of retaliation from Mexico and Canada, setting the stage for a potential tit-for-tat tariff war that could stifle North American and Global growth amid the hit to trade dynamics.

In the currency markets, the yuan led a broad retreat among Asian currencies, rattled by the looming shadow of Trump's tariff threats.

But here’s a tip for the nimble traders out there: keep your eyes peeled for any last-minute backpedaling by Trump on these tariffs—much like his recent reversal with Colombia. If Trump blinks, and market whisperer Howard Lutnick's hints of a pullback materialize, watch for the Canadian dollar to soar back to its November 25th levels around $1.40. That’s a swift 4-figure rally waiting to happen for those quick on the draw. So, ready your positions—this weekend could either confirm fears or fuel fortunes.