On Monday, traders were keeping a close eye on market movements as tariff concerns and trade war talk filled the news. Amid this uncertainty, gold soared to record highs, reminiscent of Kendrick Lamar’s big wins at the Grammys. Meanwhile, bitcoin and U.S. stocks bounced back from their earlier dips, while oil and the U.S. dollar slipped lower.
As February kicked off its first day, here’s a look at how some of your key investments fared:
Headlines to Note:
- China’s Caixin manufacturing PMI for January came in at 50.1, missing the forecast of 50.6, and down from the previous 50.5.
- Switzerland’s January manufacturing PMI recorded at 47.5, lower than the predicted 49.0 and the prior 48.4.
- The Eurozone’s manufacturing PMI for January was revised upward from 46.1 to 46.6.
- In the UK, S&P Global’s manufacturing PMI was slightly revised up to 48.3 from the previous 48.2.
- Canada saw its PMI at 51.6, down from 52.2, with output price inflation reaching its highest since August and a slight rise in staffing levels.
- The U.S. manufacturing PMI saw an upward adjustment to 51.2, with job creation at its peak since June 2024, and factory gate price inflation increasing at its fastest since March 2024.
- The ISM manufacturing PMI in the U.S. resumed expansion in January.
FOMC members suggested a cautious approach to future rate cuts, with:
- Raphael Bostic mentioning a preference to pause policy changes.
- Susan Collins highlighting tariff uncertainty as a reason to delay adjustments.
- Austan Goolsbee advising prudence in rate cuts due to tariff impacts.
OPEC+ has opted to maintain its plan to boost output from April. In a development with significant market implications, President Trump agreed to halt tariffs on Canada and Mexico following commitments to enhance border enforcement.
Broad Market Price Movements:
Following Trump’s announcement of new tariffs over the weekend, the market reacted with volatility. The U.S. session calmed somewhat as news emerged that Mexican tariffs would be postponed by a month. Initially, there was a widespread risk-off trading mood after imposing 25% tariffs on Canada and Mexico and 10% on China, but this eased later in the day.
Oil prices were notably volatile—WTI crude initially spiked to $74.40 before retreating, spurred by OPEC+ aligning with their production boost plan from April. The possibility of reduced demand from a trade war added to the downward pressure, leading to a roughly 2% drop.
Bitcoin dramatically rebounded, climbing back above $100,000 after dipping to $91,550. Gold, a sought-after safe haven, also reached new heights at $2,833.90, although risk appetite improved as the day progressed.
In the bond market, U.S. Treasury yields moved in a somewhat unexpected pattern; the 10-year Treasury yield dipped to 4.46% in a flight to safety, recovering to 4.54% later. Despite clawing back some losses, global equities ended the day lower, with tech stocks particularly affected by trade fears and last week’s DeepSeek AI development.
U.S. Dollar vs. Major Currencies:
Following Trump’s tariff announcement, the U.S. dollar gained strength, especially against commodity-driven currencies during Asian trading hours. But as the news of delaying Mexican tariffs surfaced, the greenback began to lose traction. This trend continued into the U.S. session, exacerbated by a stronger-than-expected U.S. manufacturing PMI but offset by the delay of Canadian tariffs.
Particularly notable was the USD/CAD pair, which soared to a 22-year high of 1.4973 before sharply retreating to 1.4655 following the Canadian tariff news. Meanwhile, EUR/USD climbed from 1.0212 to 1.0275, and GBP/USD rose from 1.2249 to 1.2345 as market fears eased somewhat.
Future Economic Calendar Highlights:
- France’s government budget balance is up at 7:45 am GMT.
- Spain’s unemployment numbers come in at 8:00 am GMT.
- In the U.S., watch for JOLTS job openings and factory orders at 3:00 pm GMT, followed by speeches from FOMC members Bostic at 4:00 pm GMT and Daly at 7:00 pm GMT.
- New Zealand will release labor market data at 9:45 pm GMT, and Japan will report average cash earnings at 11:30 pm GMT.
While European traders might expect some action from Spain’s unemployment figures and France’s budget update, expect volatility to ramp up during the U.S. session with key data releases and FOMC remarks that could impact USD trends. Keep an eye on potential trade or tariff-related updates as they could drive market sentiment throughout the day. Stay tuned to catch any market-moving news!
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