USD: Dollar might decline today – ING

The US Dollar (USD) found firmer terrain at the start of the week and received some help in late European hours from President Trump’s claim that tariffs on Canada and Mexico are moving ahead. The 25% duties were delayed by one month at the start of February, and Monday 3 March is the new deadline to avert a USMCA trade war, ING’s FX analysts Francesco Pesole notes.

USD can edge back lower today

"We’d not be surprised to see Trump raise the tariff threat until the last minute to gain negotiating leverage, like in February. Our working assumption remains that 25% tariffs on Mexico and Canada won’t materialise, and markets are also pricing in only a modest risk of that happening. We could see FX taking the threat more seriously along the week, so USD/CAD and USD/MXN face near-term upside risks."

"On the data side, expect quite a lot of scrutiny on today’s Conference Board consumer confidence. The index jumped in November after the US election but declined in December and January. Consensus is looking at another slowdown to 102.5 from 104.1, with 100 potentially being the pain level for a market reaction. We’ll also see the Richmond Fed indices today after regional Fed activity measures (from Chicago and Dallas) came in soft yesterday."

"We outlined yesterday how we did not expect this week to have one-way traffic in the dollar. The upside risks for USD today primarily stem from other hawkish comments on tariffs by Trump or other US officials. Barring that, and considering the market’s tendency to call the bluff on tariffs, we think the dollar can edge back lower today as consumer confidence risks disappointing. That would feed into a growing narrative of softening consumption, and favour some dovish repricing of Fed expectations."