USD: Some short-term uncertainty – ING

Monday's correction in the dollar has not run very far at all. That sell-off was premised on Day One not nearly being as aggressive with tariffs as many had feared. Currently, the market’s attention is on two significant upcoming dates, ING’s FX analyst Chris Turner notes.

DXY can trade in a 108.00-108.60 range today

“1 April is a deadline for the US Commerce Department and the US Trade Representative to conduct a root-and-branch review of why the US persistently runs large trade deficits. Large trade deficits are an anathema to the America First agenda. These reviews are due by 1 April and ING's Inga Fechner discusses what's at stake here. This means in theory, substantial tariffs may not come in until after April once the recommendations have been made.”

“The second big date is 1 February. Seemingly in off-the-cuff remarks, President Trump has floated the possibility of 25% tariffs on Mexico and Canada, plus 10% tariffs on China by this date if progress is not made on fentanyl or border issues. This threat is probably preventing the dollar from correcting further. That said we have been seeing a little more stability in some EM currencies, where the Brazilian real is sub 6.00 again after heavy local FX intervention.”

“Today the focus will probably be on Trump's digital dialogue in Davos at 11ET,16GMT/17CET. One new area of interest may be the international tax code, where he could potentially tariff counties trying to enact the OECD's Global Minimum Tax – clearly something on the mind of his tech industry sponsors. Let's see if we hear more about this today, but we would say this dialogue is another positive dollar event risk. DXY could trade a 108.00-108.60 range today and again is very much exposed to Trump headlines.”