As we begin the week, the U.S. dollar is showing strength against most major currencies, reflecting a cautious tone in global markets. Key highlights include:

• EUR/USD: Down 0.55%, the euro is under pressure as the dollar gains traction.
• GBP/USD: Sterling has also declined, trading 0.5% lower.
• USD/CAD: The Canadian dollar is relatively stable, with USD/CAD slightly higher at +0.06%.
• USD/JPY: The dollar is up 0.4% against the yen, rounding out broad strength across the majors.

Tariff Developments

The market continues to react strongly to tariff-related comments, often with outsized moves driven by speculation rather than concrete policy. Overnight, President Trump signaled his preference for much higher tariffs than the 2.5% universal tariff plan proposed by other U.S. policymakers.

• This has added support to the dollar, as traders anticipate further policy clarity.
• Markets are now focusing on a range of potential initial tariffs between 2.5% and 25%, reflecting ongoing uncertainty and sensitivity to trade policy developments.

Tech Sector Volatility

Recent news in the tech sector has injected additional volatility into the markets. Speculative reports and policy conjecture continue to play a major role in driving market sentiment.

Looking Ahead: Central Bank Decisions

This week will feature significant central bank activity, which is likely to influence currency markets:

• FOMC (Wednesday): The Federal Reserve is expected to hold rates steady, but the focus will be on the post-meeting comments. With President Trump advocating for lower rates, the Fed's response will be closely scrutinized.
• Bank of Canada (Wednesday): Markets are pricing in another 25-basis-point rate cut, which could put pressure on the Canadian dollar.
• ECB (Thursday): Similarly, the European Central Bank is expected to cut rates by 25 basis points, maintaining the focus on a dovish interest rate environment globally.

Conclusion 

With central bank decisions dominating the agenda, we anticipate a bid tone in the dollar heading into the latter part of the week. However, given the sensitivity of markets to tariff and policy comments, any unexpected developments could quickly alter sentiment. Stay tuned for further updates as the week progresses.