Market Information Monday 3 February 2025

Traders are betting on a deeper divergence between European and US interest rates, pushing the euro lower as the European Central Bank is expected to continue cutting rates amidst weak inflation data from Germany and France. The Federal Reserve’s decision to hold rates steady makes the dollar more attractive, with some forecasters predicting euro-dollar parity in the coming months. This divergence is further emphasized by potential US punitive trade tariffs and solid US growth, contrasting with stagnating euro zone growth.

Global currency markets are bracing for volatility as President Trump sets a Saturday deadline to impose 25% tariffs on imports from Mexico and Canada, impacting their currencies significantly. Implied volatility for the Canadian dollar and Mexican peso has spiked, with increased demand for options hedging against sharp currency movements. The U.S.-Canada-Mexico trade tension is being closely watched, serving as a benchmark for future U.S. trade policy impacts on currency markets.

President Trump’s plan to impose tariffs on imports from its neighbors could raise gas prices in the US, affecting consumers and various industries, as a significant portion of US refined crude oil comes from these countries. Economists predict that US drillers won’t significantly boost production to offset potential price increases because many refineries cannot efficiently process domestic light crude. The impact on prices is uncertain and may depend on actions by OPEC+, which has been managing global production levels to influence prices.

The 6M Euribor decreased with 1 basis point to 2.59% compared to previous business day. The 10Y Swap decreased with 6 basis points to 2.41% compared to previous business day.
In the attachment, today’s market data on money and capital market rates as well as other rates are presented.