The US Dollar (USD) starts the week a little firmer overall from Friday but well of its best overnight levels. Comments from President Trump over the weekend confirmed that reciprocal tariffs would be announced on steel and aluminum imports in the next few days. The president indicated on Friday reciprocal tariffs in some form were coming, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD mixed on reciprocal steel and aluminum tariff news

“The CAD and MXN are a little softer in response—as both Canada and Mexico are major suppliers to the US, along with Brazil. The JPY is also underperforming on the session. The USD is trading mixed overall after failing to hold early session gains. Global stocks are higher and fixed income is steady to marginally softer. Markets have taken the latest tariff salvo pretty much in their stride after the volatility triggered by last weekend’s tariff news. Details remain limited and Australia has already announced that it will ask for an exemption.”

“Investors are perhaps cautious about what the ultimate ‘bite’ of these tariffs will be. The USD is certainly struggling to make meaningful headway and that may fuel speculation that the tariff risk premium is largely—though perhaps not yet fully—priced into FX at this point. The USD remains quite richly-priced from a broader point of view. While most attention was on the US NFP data last week, the sharp jump in U. Michigan 1Y inflation expectations from 3.3% to 4.3% caught the eye.”

“Some of that likely represents the partisan split that has emerged in survey data recently but Fed officials have singled out inflation expectations as something they would be sensitive to. The NY Fed’s inflation expectations gauge is released at 11ET. Inflation (CPI, PPI, Import Prices) data dominate the rest of the week’s economic calendar. Fed Chair Powell testifies at the Senate Banking Committee at 10ET Tuesday (and House Financial Services Committee Wednesday).”