LIVE MARKETS-Central banks so-2024, now it's tariffs that matter for FX

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CENTRAL BANKS SO-2024, NOW IT'S TARIFFS THAT MATTER FOR FX

This week has been a good example of where the focus for currency markets is at the start of 2025, and all eyes are on President Donald Trump and tariffs, and much less on central banks.

This week we had meetings by the Federal Reserve - at which they took a break from last year's interest rate cuts - and the ECB, but FX traders have been much more interested in whether Trump imposes 25% tariffs on Canada and Mexico this weekend.

"FX traders have sold volatility around the Fed and ECB meetings this week to fund gamma purchases for next week’s tariff related outcomes," said Sagar Sambrani, senior FX Options trader at Nomura.

He then helpfully translated this point out of trader-ese.

"“It shows Trump and his policies are front and centre whereas central bank policies aren’t expected to be volatility-stirring over the next couple of months.”

They seem to be right so far. Thursday's ECB meeting did next to nothing for the euro in the spot market, nor was the dollar much moved by the Fed.

That's something of a change from last year, when all anyone cared about was when and how fast central banks would cut rates.

(Alun John)

FRIDAY'S OTHER LIVE MARKETS POSTS:

U.S. STOCKS BENEFIT FROM JANUARY FEEDING FRENZY CLICK HERE

EURO ZONE BLUE-CHIPS SET FOR BEST MONTH IN TWO YEARS CLICK HERE

EUROPE BEFORE THE BELL: STOCKS SET TO CLOSE OUT STRONG JANUARY IN GREEN CLICK HERE

MARKETS BIDE TIME AS ZERO HOUR NEARS ON TARIFFS CLICK HERE