The US dollar (USD) fell sharply on Monday while European equity markets jumped after officials from the incoming Trump administration indicated that President-elect Donald Trump would not immediately impose tariffs upon taking office. This announcement came ahead of Trump’s inauguration at 1700 GMT, reassuring investors and easing concerns over potential trade disruptions.

European Markets Respond Positively

Following reports from the Wall Street Journal, European markets moved firmly into positive territory. The pan-European STOXX 600 index rose 0.3%, while major indices across the continent gained around 0.5%. Similarly, MSCI’s All-World index advanced 0.4%, reflecting a global relief rally in response to calmer trade rhetoric.

Investor sentiment has been buoyed by the perception that the new administration may adopt a gradual approach to tariffs, rather than imposing immediate import duties that could disrupt global trade flows.

Dollar Weakens Against Major Currencies

The US dollar experienced broad-based declines, falling 1.15% against the Canadian dollar (CAD) to C$1.4319 and 1.4% against the Mexican peso (MXN). The euro (EUR) also gained 1.3% to $1.0401, marking one of its largest single-day rallies since late 2023. Meanwhile, the Chinese yuan (CNY) strengthened sharply in offshore markets, leaving the dollar down nearly 1% at 7.274.

According to Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, the mixed messaging from the administration—between hard-line tariff positions and market-friendly signals—has created optimism that negotiations remain possible. He emphasized that the markets will closely monitor tariff scope, impacted sectors, and phased implementation.

Cryptocurrency and Commodities Move Higher

Markets also saw notable movements in cryptocurrency and commodities:

• Bitcoin surged to a record $109,071.86 during early European trading before settling around $106,030, marking a 1.2% gain for the day.
• Trump’s newly launched cryptocurrency, $TRUMP, achieved a market capitalization of nearly $12 billion in its first trading days, with First Lady Melania Trump’s token reaching $1.9 billion.
• In commodities, gold rose 0.2% to $2,708 per ounce, while Brent crude futures fell 1.2% to $79.82, and US crude dropped 1.6% to $76.62. Analysts noted that expectations of eased energy sanctions on Russia and potential trade agreements are influencing investor sentiment.

Global Trade Implications

Trump has previously threatened tariffs of up to 60% on Chinese goods and 25% on Canadian and Mexican imports, actions that could have disrupted international trade, raised costs, and prompted retaliatory measures. The decision to delay immediate tariffs has reassured investors that trade tensions may not escalate abruptly, providing breathing room for global markets.

Monday’s market reactions were tempered by the U.S. holiday, meaning initial responses were observed primarily in foreign exchange markets, with further movements expected during Asian trading on Tuesday.

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Key Takeaways for Investors

• Dollar decline: Opportunities may arise for forex traders as the USD weakens against major currencies.
• European stock gains: Positive signals on trade policies can support equity market growth.
• Commodities and crypto: Safe-haven assets like gold and high-volatility assets like cryptocurrencies are responding to political developments.
• Global trade sentiment: The delay in tariffs reduces immediate risk but requires monitoring for future policy shifts.