US dollar stabilizes, trade concerns add to volatility

27 Ocak 2025

Today’s markets analysis on behalf of Joseph Dahrieh, Managing Principal at Tickmill

The U.S. dollar regained stability amid renewed trade risks. President Trump’s brief proposal for a 25% tariff on Colombian goods in response to Colombia’s refusal to accept deported migrants raised some doubts among traders. This escalation initially drove demand for safe-haven assets, including the dollar. However, the situation eased as Colombia agreed to US conditions. While the dollar saw a brief rebound, this support may be limited as tensions stabilize.

Attention is now shifting to central bank decisions, including those from the Federal Reserve, Bank of Canada, and European Central Bank, which are expected to have an impact on market sentiment. Key economic data, such as GDP and inflation, will also be closely monitored. The outcome of these events could influence the strength of the dollar.

In the bond market, U.S. Treasury yields declined with the 10-year note yield plugging below 4.6% as monetary policy expectations continue to change. As the Fed’s rate decision approaches, market participants are focused on Chairman Powell’s speech for signs of future monetary policy steps. A hawkish tone could potentially lead to a rebound in yields and the dollar. A dovish stance might exert downward pressure on both. Ongoing trade policy uncertainty could also contribute to market volatility, providing additional support for safe-haven assets like the dollar.

 

Zaid Barem / YMM