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09.02.2025
23:50
Japan Trade Balance - BOP Basis dipped from previous ¥97.9B to ¥62.3B in December
23:50
Japan Current Account n.s.a. came in at ¥1077.3B below forecasts (¥1362B) in December
23:50
Japan Bank Lending (YoY) came in at 3% below forecasts (3.1%) in January
German Chancellor Olaf Scholz said late Sunday that the European Union (EU) can act "in an hour" if US President Donald Trump slaps threatened tariffs on the bloc.
Separately, Bernd Lange, the leader of the European Parliament's trade committee, said that in order to avert a trade war, the EU was prepared to cut its 10% import tax on vehicles to "closer" to the 2.5% levied by the United States.
Market reaction
At the press time, the EUR/USD pair was down 0.19% on the day to trade at 1.0309.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
AUD/USD weakens to around 0.6245 in Monday’s early Asian session.
Trump announced a 25% tariff on steel, aluminum imports.
US Nonfarm Payrolls rose by 143,000 in January vs. 170,000 expected.
The AUD/USD pair attracts some sellers to near 0.6245 during the early Asian session on Monday. The US Dollar (USD) edges higher amid the fear of a trade war threat.
Trump said on Friday he plans to announce reciprocal tariffs on many countries by Monday or Tuesday, without specifying which countries. Additionally, Trump stated on Sunday that he plans to impose 25% tariffs on all steel and aluminum imports into the US on Monday, and Australia will not be exempt. The new tariffs might hit Australian exports and exert some selling pressure on the Australian dollar (AUD), though it is not yet clear when the new taxes will be imposed.
The US Federal Reserve (Fed) is now expected to keep interest rates on hold this year after the January jobs data showed that U.S. job growth slowed in January but that the Unemployment Rate ticked lower. This, in turn, supports the Greenback and acts as a headwind for AUD/USD.
Data released by the US Bureau of Labor Statistics (BLS) on Friday showed that Nonfarm Payrolls (NFP) in the US rose by 143,000 in January, compared to the 307,000 increase (revised from 256,000) seen in December. This figure came in below the market expectation of 170,000. Meanwhile, the Unemployment Rate edged lower to 4% in January from 4.1% in December. Finally, annual wage inflation, as measured by the change in the Average Hourly Earnings, climbed 4.1% YoY in January, surpassing the market expectation of 3.8%.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
US President Donald Trump said on Friday that he plans to announce reciprocal tariffs on many countries by Monday or Tuesday, which will take effect almost immediately, per Reuters. Trump did not identify which countries would be targeted but he suggested it would be a broad effort that could also help solve U.S. budget problems.
On Sunday, Trump plans to impose 25% tariffs on all steel and aluminum imports into the US on Monday, which would come on top of existing metals duties in another major escalation of his trade policy overhaul.
Market reaction
The US Dollar attracts some buyers following this headline. At the press time, the DXY is up 0.28% on the day to trade at 108.38.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
China’s Consumer Price Index (CPI) rose at an annual pace of 0.5% in January after reporting a 0.1% growth in December. The market consensus was for a 0.4% increase in the reported period.
Chinese CPI inflation came in at 0.7% MoM in January versus December’s 0%, softer than the 0.8% estimate.
China’s Producer Price Index (PPI) declined 2.3% YoY in January, following a 2.3% fall in December. The data came in below the market consensus of -2.1%.
Market reaction to China’s inflation data
At the press time, the AUD/USD pair is down 0.43% on the day to trade at 0.6243.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
01:31
China Consumer Price Index (YoY) above expectations (0.4%) in January: Actual (0.5%)
01:31
China Consumer Price Index (MoM) below expectations (0.8%) in January: Actual (0.7%)
01:30
China Producer Price Index (YoY) came in at -2.3% below forecasts (-2.1%) in January
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