Economy Update – Baghdad
The U.S. dollar experienced an uptick during early trading in Asia on Monday, following President Donald Trump’s announcement of a proposed 25% customs duty on all steel and aluminum imports.
This decision has exerted downward pressure on the euro, while the Australian and New Zealand dollars—both closely linked to commodity markets—have also seen declines.
Additionally, Trump indicated that he would unveil reciprocal customs duties on Tuesday or Wednesday, which will apply to all nations and match existing tariffs imposed by those countries.
This development escalates concerns regarding a potential global trade war, especially with countermeasures from China set to take effect on Monday.
According to market data, the euro slid by 0.1% to $1.0317 in early trading, nearing the lowest level seen in over two years at $1.0125, reached last week. Investors remain vigilant about the potential tariffs that Trump has threatened against Europe.
The Australian dollar decreased by 0.21% to $0.6264, remaining close to a five-year low hit the previous week. Meanwhile, the New Zealand dollar also fell by 0.12% to $0.5649.
The Canadian dollar declined by more than 0.2%, reflecting its position as the leading supplier of aluminum to the U.S.
Charo Chanana, head of investment strategies at Saksu, remarked that traditional strategies are no longer viable, especially as China has diminished as a significant steel supplier to the U.S. following the 2018 tariffs.
“While immediate concerns may not revolve around inflation, potential counter-effects such as economic slowdown could arise. The most significant anxiety stems from the increasing uncertainty and a shift toward a more protectionist global environment,” she noted.
Looking ahead, investors will shift their focus to U.S. inflation data expected on Wednesday, alongside Federal Reserve Chair Jerome Powell’s testimony before the House of Representatives on Tuesday and Wednesday, where tariffs are likely to be a central topic.
Analysts caution that these tariffs could be inflationary, potentially placing additional pressure on the Federal Reserve to sustain elevated interest rates. Market expectations are currently anticipating an increase in interest rates by 36 basis points this year, a slight adjustment from an initial forecast of 42 basis points after a robust employment report was released on Friday.
Experts from Macquarie Financial and Investment Services highlighted the optimistic signals from January’s employment report concerning the labor market and overall economic growth. However, rising uncertainty has prompted a reevaluation of the anticipated trajectory of Federal Reserve policy this year.
“Our revised outlook suggests no change in the federal funds interest rate until 2025, predicting it will remain within the 4.25% to 4.5% range. Previously, we anticipated another 25 basis point cut either in March or May,” they explained.
The dollar index, which gauges the performance of the U.S. currency against six major counterparts, stabilized at 108.23 during early trading, with no notable movements in the British pound, remaining at $1.23915.
The Japanese yen experienced a decline of 0.4%, trading at approximately 152 yen per dollar; however, it remains close to a one-month high achieved last Friday amid escalating expectations for an interest rate hike by the Bank of Japan within the year.
