Forex Today: US Dollar rallies as Trump delivers on tariff threats
Here is what you need to know on Monday, February 3:
The US Dollar (USD) gathers strength on the first trading day of February as markets adopt a cautious stance in reaction to US President Donald Trump's tariff announcements. Later in the European session, January inflation data from the Euro area will be watched closely by investors. In the second half of the day, the US economic calendar will feature ISM Manufacturing PMI data for January. Meanwhile, market participants will keep a close eye on headlines surrounding the Trump administration's trade policies.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.19% | 0.87% | 0.33% | 0.14% | 1.23% | 0.75% | 0.11% | |
| EUR | -1.19% | 0.08% | 0.46% | 0.25% | 0.49% | 0.87% | 0.22% | |
| GBP | -0.87% | -0.08% | -0.71% | 0.17% | 0.42% | 0.78% | 0.15% | |
| JPY | -0.33% | -0.46% | 0.71% | -0.20% | 1.04% | 1.33% | 0.42% | |
| CAD | -0.14% | -0.25% | -0.17% | 0.20% | -0.01% | 0.61% | -0.02% | |
| AUD | -1.23% | -0.49% | -0.42% | -1.04% | 0.01% | 0.37% | -0.25% | |
| NZD | -0.75% | -0.87% | -0.78% | -1.33% | -0.61% | -0.37% | -0.64% | |
| CHF | -0.11% | -0.22% | -0.15% | -0.42% | 0.02% | 0.25% | 0.64% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Trump announced on Saturday that they will impose sweeping 25% tariffs on Mexican and Canadian imports and 10% on Chinese goods entering the US. In response, Canadian Prime Minister Justin Trudeau set out "far-reaching" 25% tariffs on US goods, worth more than $100 billion. Similarly, Mexican President Claudia Sheinbaum announced on Saturday that she ordered retaliatory tariffs against the US. While speaking to reporters on Sunday, Trump said that he would "definitely" impose tariffs on European imports but refrained from providing any details regarding the size or the timing.
In the European morning on Monday, US stock index futures are down between 1.5% and 2.5%. In the meantime, the USD Index is up nearly 1% on the day at around 109.50.
EUR/USD opened with a large bearish gap and was last seen trading slightly below 1.0250, losing more than 1% on a daily basis. In the Euro area, the core Harmonized Index of Consumer Price is forecast to rise 2.6% on a yearly basis in January.
Pressured by the broad-based US Dollar strength, GBP/USD stays on the back foot early Monday and trades below 1.2300.
During the Asian trading hours, the data from Australia showed that Retail Sales declined by 0.1% on a monthly basis in December. This reading came in better than the market expectation for a decrease of 0.7% but failed to help the Australian Dollar (AUD) find support. At the time of press, AUD/USD was down 1.2% on the day at 0.6140.
USD/CAD shot higher at the weekly opening and rose above 1.4700 for the first time since 2003. Similarly, USD/MXN gathered bullish momentum and climbed to its highest level in nearly three years at 21.2951 before retreating slightly.
After setting a new record-high above $2,800 on Friday, Gold corrects lower on Monday and trades below $2,790.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
