The forex market with major currencies remained steady on Friday as traders evaluated new tariff plans and inflation data. The U.S. dollar and other major currencies showed little movement, despite Washington's proposal for reciprocal tariffs. Although these tariffs will not take effect immediately, their potential enforcement within weeks has left traders cautious.
On Thursday, U.S. President Donald Trump instructed his economic team to draft plans for reciprocal tariffs. These would apply to countries imposing taxes on U.S. imports. While the implementation timeline remains uncertain, the announcement has stirred market reactions. Some analysts believe there is still room for negotiations before the tariffs take effect.
Ray Attrill, head of FX strategy at National Australia Bank, noted that the delay offers traders a temporary sense of relief. He mentioned that markets are drawing comfort from the fact that new tariffs will not be imposed before April. This window allows investors to reassess their positions in the forex market.
The U.S. dollar hovered near its weakest level since January 27, trading at 107.25. This drop followed the release of U.S. producer price index (PPI) data, which influenced inflation expectations. While headline PPI figures exceeded forecasts, key components suggested core PCE inflation may remain lower than feared. The Federal Reserve closely monitors core PCE inflation when adjusting monetary policy.
Despite some favorable PPI details, consumer price data from January indicated strong increases. Carol Kong, a currency strategist at Commonwealth Bank of Australia, pointed out that inflation could still surpass the Fed's 2% target. She added that concerns over stalled disinflation and President Trump’s tariff measures might keep the Fed cautious in the coming months.
Futures traders currently anticipate around 33 basis points of rate cuts for the year. This expectation has shifted slightly from previous levels, reflecting ongoing uncertainty. Before Thursday’s data release, markets had priced in 29 basis points of cuts, while before Wednesday’s CPI report, they anticipated 37 basis points.
The dollar index, which measures the U.S. dollar against major peers, remained nearly flat at 107.07. Traders continue to monitor tariff developments and inflation signals to gauge the next market moves.
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Major currencies hold steady as traders assess tariff plans and inflation data. The U.S. dollar remains near recent lows.
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