The euro traded near $1.03, close to its late 2022 lows, as dollar strength persisted after Donald Trump was sworn in as US President. While Trump refrained from imposing tariffs immediately following his inauguration, he later announced plans to introduce tariffs of up to 25% on Mexico and Canada starting February 1st. This renewed concerns about trade tensions and potential inflationary pressures. Meanwhile in Europe, ECB policymakers have been advocating for caution regarding further rate reductions. Eurozone inflation rose for the third consecutive month to 2.4% in December, though this increase was largely expected due to favourable base effects from the previous year. The ECB, which has already cut rates four times since June, is likely to maintain its easing trajectory over the next six months. Markets currently anticipate a 25bpst reduction in the key deposit rate at the ECB's upcoming meeting next week.
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