The United States' imposition of a 10% tariff on China officially takes effect today, marking a significant development in the ongoing trade tensions between the two economic giants. This move by the US has sparked fears of a trade war, prompting China to retaliate with its own counter-tariffs. These escalating tensions have contributed to fluctuations in global markets, with noteworthy impacts on currency trading and economic indicators.
In an effort to bolster border security and combat drug trafficking, the United States and Mexico have reached an agreement to enhance enforcement measures along their shared border. Meanwhile, the United States and Canada have decided to delay the implementation of tariffs for 30 days, allowing time for negotiations to take place. This strategic delay aims to mitigate potential adverse effects on trade relations between the two countries.
The United States is also experiencing shifts in its economic landscape, as evidenced by the latest data from the Institute for Supply Management (ISM). The ISM January manufacturing Purchasing Managers' Index (PMI) rose to 50.9, marking the highest reading since September 2022. This positive development indicates growth within the manufacturing sector, providing a glimmer of hope amid broader economic uncertainties.
Despite these positive signals, the US dollar has experienced significant fluctuations in currency trading. The EUR/USD pair is trading with sizeable losses near 1.0300 in early Europe on Tuesday, while the AUD/USD continues its bearish streak below 0.6200 during the early European morning. These movements reflect investor concerns and risk sentiment influenced by ongoing trade tensions and market volatility.
In another development, the Socialist Party's decision to abstain from the budget vote may offer a lifeline to the Prime Minister, potentially aiding in the survival of his administration. This political maneuvering adds another layer of complexity to an already dynamic global economic environment.
As economic indicators continue to evolve, inflation remains a key focus in the United States. The January inflation print showed a continued softer momentum in underlying inflation, suggesting that price pressures may be easing. This development is closely watched by policymakers and investors alike as they assess the broader economic outlook.
In the realm of monetary policy, attention turns to the Federal Reserve as key figures such as Fed's Daly and Bostic are scheduled to speak later this evening. Their insights are anticipated to shed light on future policy directions and provide valuable guidance to market participants.
The labour market remains a focal point as well, with the release of the US JOLTs labour turnover data for December scheduled for today. The number of job openings has stabilized in recent months, indicating some level of resilience despite prevailing economic challenges.
Across the Atlantic, Sweden's manufacturing sector is showing signs of strength. The manufacturing PMI for January rose to 52.9, marking the sixth consecutive month in the growth zone. This steady expansion underscores Sweden's robust economic performance amid broader European economic conditions.
Additionally, minutes from last week's Riksbank meeting will be released at 9:30 CET, providing further insights into Sweden's monetary policy considerations and economic outlook.