The dollar rebounded sharply on Tuesday after plunging hours earlier as Donald Trump’s first day back in the U.S. presidency brought mixed messaging on tariffs and highlighted investors’ sensitivity to headlines about trade policy.
U.S. stock futures rose after bouncing around on Monday as traders digested Trump’s statements on economic policy and trade levies, while European equities eked out small gains.
Reuters reoorts that Mexican peso and Canadian dollar tumbled on Monday night – reversing sharp gains from earlier in the day – after Trump said he was mulling imposing 25% tariffs on the neighbouring countries as soon as Feb. 1.
That sent the Mexican peso sliding 1.3% against the U.S. dollar while the Canadian dollar tumbled to a five-year low of $0.689 ,
Around 11 hours earlier the U.S. dollar had plunged against its peers after a presidential memo, first reported by the Wall Street Journal, said the administration would probe trade issues but stop short of day-one tariffs.
The dollar index , which measures the currency against six peers, was last up 0.64% at 108.69 on Tuesday, although failed to make back the 1.2% it lost on Monday in its biggest daily fall since November 2023.
“The first few hours of the Trump administration have underscored that the policy environment will be dynamic once again and markets should brace for volatility,” said Charu Chanana, Saxo’s chief investment strategist.
“Clearly, the markets celebrated too soon with tariff threats missing at the outset in Trump’s inaugural speech.”
The euro was last down 0.62% at $1.0353, after rallying 1.4% on Monday amid the relief about a delay in tariffs. Sterling was 0.67% lower at $1.2248 after jumping 1.3% the previous day.
The Canadian dollar and Mexican peso swung on tariff headlines on Trump’s first day
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Trump also said he wanted to reverse the U.S. trade deficit with the European Union, either with tariffs or more energy exports.
U.S. stock futures rallied after struggling in early trading, leaving Nasdaq futures 0.56% higher and S&P 500 futures up 0.49%.
European carmakers slipped around 0.4% (.SXAP), opens new tab on Tuesday after Trump revoked a 2021 executive order signed by his predecessor that sought to ensure half of all new vehicles sold in the United States by 2030 were electric.
TRUMP TEMPEST
The dollar has risen around 5% since Trump won the Nov. 5 election, partly because the U.S. economy has remained strong and partly as investors have braced for wide-ranging tariffs that would likely hurt America’s trading partners.
Many investors had expected early action on tariffs, hence the big moves sparked by the memo indicating no immediate action.
U.S. Treasury yields were down 4 basis points on Tuesday at 4.57%, after reopening for trading after a public holiday.
