29/01/2025 - 08:33 UTCThe US dollar gained against most major currencies on Tuesday, with the dollar index (USDX) up by approximately 0.55%, amidst renewed fears of trade wars and their potential impact on global growth that have strengthened the dollar's safe-haven status. The Financial Times reports that the new Treasury Secretary is proposing a gradual increase in tariffs, starting at 2.5% and potentially reaching 20%."
The main US stock indices recovered on Tuesday, following a sharp decline in the previous session triggered by the rapid rise of Chinese AI startup DeepSeek with investors now shifting their focus on the latest Federal Reserve policy meeting. The tech sector experienced a partial recovery on Tuesday, with AI chip leader Nvidia showing slight gains, despite a massive $593 billion loss in market value the previous day.
In addition to tech sector developments, company earnings reports are dominating market attention. General Motors shares declined more than 9% after reporting a fourth-quarter loss due to significant charges related to its China operations. Boeing shares rose by around 3% after CEO Kelly Ortberg outlined plans for a turnaround, following six consecutive years of annual losses, including its largest annual loss since 2020.
On Wednesday, key central banks (the Bank of Canada and the Federal Reserve) will unveil their interest rate decisions. Markets will keenly observe the subsequent FOMC press conference for potential signals regarding future U.S. rate cuts. The Fed is widely expected to keep borrowing costs unchanged at the end of its meeting on Wednesday, following a string of reductions late last year that left the all-important benchmark rate at a range of 4.25% to 4.50%.
Later this week, some price action is also expected upon the release of the Core PCE price index and Advanced GDP data from the U.S. Market attention will also be on crucial economic data releases, including the U.S. Jobless claims and pending home sales on Thursday, and Eurozone’s CPI, Canada’s GDP and the Chicago PMI on Friday.
The EUR/USD currency pair ended the session on Tuesday slightly lower as markets prepared for the Federal Reserve’s (Fed) policy announcement on Wednesday. While investors overwhelmingly anticipate that the Fed will maintain interest rates at their current level in January, market participants will be closely monitoring Fed Chair Jerome Powell’s press conference, as well as any remarks from U.S. President Donald Trump.
The first half of the week remains quiet on the European economic calendar, leaving traders focused on Thursday’s key Gross Domestic Product (GDP) data releases from both Germany and the broader eurozone, which will offer insights into the region’s economic performance in the fourth quarter.
Gold prices climbed on Tuesday after rebounding from four-day lows, supported by a recovery in U.S. equities and renewed safe-haven demand.
Market sentiment remained on edge following U.S. President Donald Trump's latest trade remarks. Investors turned to gold as Trump reaffirmed his push for aggressive tariff policies.
Adding to trade war concerns, Trump announced plans to impose tariffs on semiconductors, pharmaceuticals, steel, aluminum, and copper.
Looking ahead, the Federal Open Market Committee (FOMC) has commenced its two-day meeting, with the Federal Reserve widely expected to keep interest rates unchanged.
Oil prices climbed on Tuesday, recovering from multi-week lows, after the White House reaffirmed President Donald Trump’s plan to impose tariffs on Canadian and Mexican imports later this week. However, gains were tempered by concerns over weaker demand amid disappointing economic data from China and rising temperatures in key markets.
The White House confirmed that Trump remains committed to implementing 25% tariffs on Canadian and Mexican imports starting Saturday, while also considering additional tariffs on China. The move has fueled uncertainty in energy markets.
Traders now await official inventory data from the Energy Information Administration (EIA), due on Wednesday, for confirmation of the building.
The US 500 closed higher on Tuesday as technology stocks staged a recovery from the previous session’s steep losses, with investor focus now shifting to the Federal Reserve’s policy decision later today.
Tech stocks rebounded on Tuesday, led by AI chip giant Nvidia, which edged higher after suffering a record $593 billion market value loss in the prior session, the largest single-day decline for any company.
General Motors saw its stock tumble more than 9% after reporting a fourth-quarter loss due to substantial charges related to its China operations.
By contrast, Royal Caribbean surged 12% after posting stronger-than-expected fourth-quarter earnings and issuing an upbeat outlook for 2025.
Market attention remains firmly on the Federal Reserve’s two-day policy meeting, which began Tuesday. Key economic data, including the Fed’s preferred inflation measure—the Personal Consumption Expenditures (PCE) Price Index—and advance fourth-quarter GDP estimates, are also due this week.
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