Dollar softens on Trump inauguration day

The dollar weakened on President Trump’s inauguration day, with markets eyeing potential tariff policies and deregulation

By Ahmed Azzam | @3zzamous | 20 January 2025

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  • Over 200 directives, including orders on trade and deregulation, are expected from the administration.

  • Potential tariff changes could reshape U.S. trade relationships and impact global markets.

Dollar retreats amid Trump's inauguration day

The U.S. dollar softened on President Trump's inauguration day, with the dollar index dipping to 109.1. U.S. stock futures edged higher, reflecting cautious optimism as investors awaited key remarks from Trump's inaugural address and potential executive actions, particularly on trade and deregulation. Trading activity remained muted as U.S. markets observed the Martin Luther King Jr. holiday.

European equities saw mixed performances, with major indices fluctuating between minor gains and losses. Over 200 directives, including legally binding executive orders and proclamations, are anticipated from the new administration. Market participants are closely monitoring policies targeting tariffs, which could reshape U.S. trade dynamics and ripple across global markets.

The administration’s deregulation agenda, spanning energy and the burgeoning cryptocurrency sector, is also expected to influence market sentiment. Analysts warn that sweeping changes could create volatility, particularly in sectors sensitive to regulatory shifts.

ECB’s Holzmann: January rate cut unlikely amid elevated inflation

Austrian ECB Governing Council member Robert Holzmann cast doubt on a potential rate cut at the European Central Bank’s upcoming January meeting, citing persistent inflation concerns. “A cut is not a foregone conclusion for me at all,” Holzmann told Politico, emphasizing his commitment to a data-driven approach.

Inflation in the eurozone remained “well above” the ECB’s 2% target in December, with January figures projected to echo this trend. Holzmann cautioned against prematurely cutting rates, warning that such a move could undermine the ECB’s credibility, especially as inflationary pressures outpace expectations.

Holzmann, known for his hawkish stance, expressed skepticism that inflation would return to the 2% target by year-end, citing unexpected developments. These include a colder-than-expected winter accelerating gas reserve depletion, disruptions in Ukrainian gas transit, and the risk of sustained high energy prices.

China holds key lending rates steady for third month

The People’s Bank of China (PBoC) maintained its loan prime rates (LPR) steady for the third consecutive month in January, aligning with market expectations. The one-year LPR, a benchmark for corporate and household loans, was held at 3.1%, while the five-year LPR, a key reference for property mortgages, remained unchanged at 3.6%.

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