Investing.com – The US dollar fell on Wednesday on uncertainty over President Donald Trump’s plans for tariffs, while sterling fell on disappointing government bond data.
At 04:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 107.755, after falling more than 1% at the start of the week.
Dollar slips due to uncertainty about rates
The dollar remained in the background as traders tried to gauge the full scope of President Donald Trump’s tariffs and the potential pain the new administration plans to inflict on key trading partners.
Trump said late Tuesday that his administration was discussing imposing a 10% tariff on goods imported from China on Feb. 1, the same day he said Mexico and Canada would face tariffs of about 25%.
He also indicated that Europe would also suffer from the imposition of tariffs on European imports, but he has refrained from imposing those tariffs despite signing a flurry of executive orders after his inauguration on Monday.
“Data will play a minor role this week as all focus will be on Trump’s first executive orders,” ING analysts said in a note. “By the way, the Federal Reserve is in a quiet period ahead of next Wednesday’s meeting. Expect plenty of headline trading and short-term noise, with risks still tilted towards a stronger dollar.”
Sterling is falling after a dip in retail sales
In Europe, trading was 0.1% lower at 1.2349 after data showed Britain suffered a larger-than-expected budget deficit in December, partly offset by rising interest costs on debt.
was £17.8 billion in December, more than £10 billion higher than a year earlier, the Office for National Statistics said on Wednesday.
Rising yields on British government bonds have pushed up the cost of servicing the country’s debt and could force the new Labor government to cut public spending to meet budget rules.
rose slightly to 1.0429, but the common currency remains broadly weak, with the European Central Bank widely expected to cut rates more consistently this year than its main rivals, the Federal Reserve and the Bank of England.
Rates are expected to be cut four times in the next six months, with a cut next week expected to be largely a foregone conclusion.
“The direction is very clear,” ECB President Christine Lagarde told CNBC in Davos about interest rates. “The pace we’ll see will depend on the data, but a gradual move is certainly something that’s on our minds at this point.”
BOJ meeting threatens to be big
In Asia, yields fell 0.1% to 155.69 ahead of the Bank of Japan’s two-day policy meeting later this week.
The country is widely expected to raise rates on Friday, and it could reiterate its commitment to further rate hikes if the economy continues to recover.
was trading largely unchanged at 7.2715, with the Chinese currency still weak after Trump said he was considering imposing 10% tariffs on Chinese imports from February 1.
