USD: Highly binary outcomes from tariff event – ING

US-Ukraine talks fell through on Friday after a heated exchange in the Oval Office between US President Donald Trump and Ukrainian President Volodymyr Zelenskyy. While the mineral deal is off the table at the moment and the US has taken a step back from brokering a peace deal, markets are not pricing out the chance of a Ukraine-Russia truce. A summit with Zelenskyy and European leaders in London yielded a pledge to end the war, but also recognised the US remains instrumental in bringing Russia to the negotiating table, ING’s FX analysts Francesco Pesole notes.

USD to remain bullish ahead of next month’s round of tariffs

"But the biggest market driver today will be any updates on US tariffs on Mexico and Canada, as 25% duties are due to come into effect tomorrow. Canadian and Mexican officials are attempting to strike another last-minute deal, and US officials have also floated the idea of imposing smaller than 25% tariffs. One possibility is that – alongside increased commitment to fighting illegal drug traffic – Trump will require both countries to replicate US tariffs on China, which may be hiked from 10% to 20%."

"The US calendar will also be watched closely this week, as some soft data recently dented the notion of US exceptionalism and contributed to the dollar’s partial retreat. We expect ISM surveys to reaffirm that the US has started the year on a soft tone, and see some risk that today’s manufacturing index will drop back below 50.0. On Friday, we expect a slightly below-consensus 140k payroll figure, with unemployment inching higher to 4.1%."

"We remain bullish on the USD ahead of next month’s round of tariffs, but if we are right with our baseline calls for a tariff delay and softish US data, this should not be a good week for the greenback."