Just a Tweet Away
The week ahead will prove to be light on the data front. There is still the possibility of some data surprises coming from US growth and EU inflation on Thursday and Friday respectively. However, by and large the FX market will have to take its direction from elsewhere this week. Despite a stunted recovery in the US Dollar on Friday, the Dollar index still recorded its third consecutive week of losses.
Some of the weakness that is emerging in the US Dollar is undoubtedly a result of an unwinding of Dollar longs that characterised January. In turn, it is highly likely that a discount to the threat of tariffs is at least partially responsible for this rotation away from the greenback. As a result, tariff risks are likely being underpriced. We can see evidence of this eroding or missing risk premium in currencies other than the Dollar also.
Those currencies at high risk of depreciation should President Trump’s reciprocal tariffs materialise include the Euro, Brazilian Real, Indian Rupee, Thai baht, Canadian Dollar and Mexican Peso to name but a few. There is little to no discernible risk premia evident within the valuations of such currencies that would be attributable to tariffs. The decision to delay the imposition of tariffs on China and Mexico took place on 4th February and offered an extension of 30 days. With that deadline moving into focus in just one week’s time, USDCAD and USDMXN both trading at what is to date the month’s lows which means they could face buying interest.
Discussion and Analysis by Charles Porter
Related Insights
Daily Brief – Defiance
Charles Porter
Tue 12 May 2026
Defiance Yesterday’s market was defying one of two things: logic or gravity. Come to think of it, perhaps both. Take cable, GBPUSD, yesterday. The key events beyond minor data releases centred around any chatter from either side of the Iranian conflict and Starmer singing for his supper. Sing he did and tweet the President did, […]
Daily Brief – Short-lived relief rally
Charles Porter
Tue 19 May 2026
Short-lived relief rally A tantrum in the bond market has continued to erode away at risk conditions in recent sessions. In the UK, the sell-off in gilts and corporate bonds has been particularly acute thanks to heightened political instability, the origins of which we have covered thoroughly in recent briefings. Yesterday, headlines delivered enough optimism […]
Daily Brief – Room to manoeuvre
Charles Porter
Tue 26 May 2026
Room to manoeuvre Kevin Warsh was sworn into office at the White House on Friday. Despite limited market movement on Friday, many prices gapped significantly come the open yesterday. Whilst the UK and US observed a bank holiday yesterday, many indices and currencies were on the move. The theme across the market was risk on […]
