US recap: Dollar trims advance after tariffs delayed

The dollar index pared gains on Monday after Mexican President Claudia Sheinbaum and President Trump agreed to delay implementing tariffs, easing concerns about a North American trade war. Mexico pledged to reinforce its northern border with 10,000 National Guard members.

Trump later qualified these reports by saying that nobody is out on tariffs and that there will be future negotiations with Mexico. He also said that he had a good talk with Canadian Prime Minister Trudeau, that the US has not been treated well by Canada, and that he will speak to China over the next 24 hours.

In US data, January manufacturing PMI moved back into growth territory with the prices paid component higher than forecast and the employment gauge moving into expansion territory.

Boston Federal Reserve President Susan Collins said tariffs may drive up inflation, while noting there’s a lot of uncertainty and no urgency on the part of the US central bank to change the direction of monetary policy. Atlanta Fed president Raphael Bostic said uncertainty around tariffs and other policies have made it difficult for the Fed to anticipate how the economy will evolve and made a cautious approach to further rate cuts appropriate.

EUR/USD remained down about 0.8% at 1.0285 on concerns that the European Union may be the next target of tariffs. The pair sank to as low as 1.0125 earlier on Monday, its lowest EBS level since November 2022. European leaders warned that Trump’s threat to expand tariffs to the EU risked igniting a trade war that would harm consumers on both sides of the Atlantic.

GBP/USD reversed nearly all its loss after the agreement between the US and Mexico though an expected Bank of England rate cut on Thursday remains a headwind for the pair.

USD/JPY found support at 154 though lower Treasury yields and softness in tech stocks saw its recovery stall below 155. Prime Minister Shigeru Ishiba is set to have discussions with Trump later this week.

Treasury yields were mixed as the curve flattened sharply. The 2s-10s curve was down about 6 basis points to +26.7bp.

The S&P 500 fell 0.67% fueled by weakness in tech shares.

Oil was little changed after OPEC+ agreed to stick to its policy of gradually raising oil output from April.

Gold rose 0.65% due to the tariff uncertainty while copper advanced 1.09%

Heading toward the close: EUR/USD -0.81%, USD/JPY -0.18%, GBP/USD +0.06%, AUD/USD -0.55%, DXY +0.63%, EUR/JPY -1.00%, GBP/JPY -0.16%, AUD/JPY -0.73%.

(Editing by Burton Frierson; Reporting by Robert Fullem)