By Nell Mackenzie
In an interesting turn of events on Monday, the U.S. dollar lost ground across the board while European stocks saw a substantial rise. This shift came after an incoming U.S. administration official announced that President-elect Donald Trump would hold off on imposing tariffs following his inauguration later in the day.
As the afternoon trading session progressed, European stock markets stood strong. Investors welcomed the news, initially broken by the Wall Street Journal, that Trump wouldn’t immediately enforce import tariffs post-swearing-in on Monday.
The pan-European STOXX 600 climbed by 0.3%, with key indices across the region posting gains of about 0.5%. On a broader scale, MSCI’s All-World Index saw an increase of 0.4%.
The dollar wasn’t having as good a day. It dropped by up to 1.3% at one point, showing marked weakness against currencies like the Canadian dollar, Mexican peso, euro, and China’s yuan—key trading partners of the U.S.
As Trump gears up to take the presidential oath at noon Eastern Time (1700 GMT), he promised what he called a “brand new day of American strength” during a rally on Sunday.
Expectations are high for him to roll out a series of executive orders immediately, reflecting his unpredictable nature. On Friday, Trump even launched a digital token, which saw an initial surge above $70 before settling around $50 as traders’ enthusiasm waned.
Since Monday is a holiday in the U.S., the first reactions from financial markets to Trump’s inauguration might be seen in the foreign exchange markets and then during Asian trading on Tuesday.
By 1518 GMT, euro zone bond yields had leveled off.
Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, commented, “In these past few weeks, we’ve noticed two opposing perspectives from the new administration—those favoring tariffs and those leaning towards a market-friendly approach.” He highlighted the significance of maintaining open negotiations, even though it leaves the outcomes uncertain. “A gradual approach could be promising,” he added.
The dollar saw a 1.15% fall against the Canadian dollar, touching C$1.4319, and a 1.4% drop against the Mexican peso.
Trump’s threats of imposing tariffs—as steep as 10% on worldwide imports and 60% on Chinese goods, alongside a 25% import surcharge on products from Canada and Mexico—have raised concerns about potential trade disruptions, increased costs, and possible retaliatory measures.
In the offshore market, the yuan made significant gains, leaving the dollar down nearly 1% for the day at 7.274.
Meanwhile, the Australian dollar, often considered a liquid substitute for the Chinese yuan, went up 1.2% on Monday to $0.6262. The euro also saw a boost, climbing 1.3% to $1.0401, marking one of its biggest daily gains since the latter part of 2023.
Bitcoin set a new record, reaching $109,071.86 in early European trade before retreating to about $106,030.10, still up by 1.2% for the day. It’s been quite a month for the top cryptocurrency, which has surged over 10%.
Trump’s own cryptocurrency, dubbed $TRUMP, made waves after its Friday launch, with its market value nearing $12 billion and attracting billions in trading volumes. First Lady Melania Trump’s cryptocurrency, launched on Sunday, achieved a market capitalization of $1.9 billion.
Commodities saw gold inch up by 0.2% to $2,708 an ounce, while Brent crude futures dropped by 1.2% to $79.82. U.S. crude also fell by 1.6% to $76.62, amid speculation that Trump might ease restrictions on Russia’s energy sector in exchange for a truce in Ukraine.
(Reporting by Nell Mackenzie and Dhara Ranasinghe; Editing by Amanda Cooper and Sharon Singleton)
