Dollar set to snap 3-day rise before Powell testimony, US data
THE US dollar was set to snap a three-day rising streak on Tuesday (Feb 11) as markets became increasingly numb to US tariff threats while awaiting testimony from Federal Reserve Chair Jerome Powell later in the day and inflation data on Wednesday (Feb 12).
Analysts said the risks of US import duties remained, but there were good reasons to monitor fundamentals.
Powell will deliver his semiannual monetary policy testimony before the Senate Banking, Housing and Urban Affairs Committee at 1500 GMT. US inflation data is due on Wednesday, following strong jobs figures that supported US Treasury yields and the greenback last week.
US President Donald Trump moved to substantially raise tariffs on steel and aluminium imports and said he would announce plans to impose reciprocal tariffs on other countries over the coming days.
Futures priced in around 37 basis points’ worth of Fed rate cuts by the year-end which implies one 25 bps cut and a 48 per cent chance of a second easing move.
Recent comments from Fed officials have underscored their no rush approach to further monetary easing, particularly as they wait for further clarity over how Trump’s policies will affect economic growth and inflation.
The US dollar index – which gauges the dollar’s value relative to a basket of six major currencies – was down 0.1 per cent at 108.28. It rose 0.37 per cent last week, in its biggest daily rise in almost a month, after US jobs data.
“The threat of more US tariffs remains, also against the European Union. Retaliation could even lead to a tail risk scenario of a global trade war,” said Athanasios Vamvakidis, global head of forex research at BofA.
“Even if the worst is avoided, we are concerned that prolonged uncertainty will have negative implications for the global economy,” he added.
The European Union said it would respond with “firm and proportionate countermeasures” after Trump’s decision to impose tariffs on all steel and aluminium imports.
The euro was up 0.15 per cent at US$1.0320.
It rose 0.14 per cent at 11.2654 against the Swedish crown after hitting 11.2460, its lowest since September 2024.
It was also up versus the Norway’s crown after hitting the day before 11.6173, its lowest since November.
A White House official confirmed the 25 per cent tariffs on steel and aluminium imports will take effect on March 4.
Analysts said steel and aluminium duties could be based on national security grounds and implemented immediately. However, broad-based reciprocal tariffs will take longer due to required preparatory work.
The US dollar rose 0.15 per cent against the Canadian dollar to C$1.4333, but the loonie was still some distance away from a 22-year low hit earlier this month.
Canada, Brazil, Mexico, South Korea and Vietnam are the biggest sellers of steel into the US, according to American Iron and Steel Institute data, while Canada is the dominant supplier of imported aluminium.
The yen was down 0.15 per cent at 152.22 per dollar. It hit 150.93 on Friday, its highest since December 10.
The Japanese currency has been among the best-performers since January’s Bank of Japan meeting, with investors focused on the divergence between real yields in Japan and the US.
The Australian dollar rose 0.05 per cent to US$0.6271.
Australian Prime Minister Anthony Albanese said on Tuesday Trump has agreed to consider exempting Australia from his steel and aluminium tariffs, in what Albanese called a constructive phone call with the US president. REUTERS
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