‘Trade War’ Begins, Canada Retaliates with 25% Tariffs on America!

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The results of the first FOMC meeting of 2025 last week did not surprise the market when the interest rate remained at 4.50% as expected.


The impact was not very noticeable after the follow-up statement with a cautious tone by Federal Reserve (Fed) Chairman Jerome Powell with the market closing at the end of last week being relatively quiet.


However, the situation changed over the weekend when President Donald Trump became more aggressive in implementing tariffs, especially on Canada, Mexico and China.


The heat of the trade war has already begun to be felt when Canadian Prime Minister Justin Trudeau announced a 25% tariff retaliation on the United States (US).


Following this, Trump has now announced that he will hold discussions with Canada and Mexico regarding tariffs.


The market is currently being driven by risk-off market sentiment following the tariff retaliation situation, giving the US dollar an advantage as a safe-haven currency to strengthen at the opening of trading early this week.


The Canadian dollar was significantly affected by the fall in the value of its currency against the US dollar to its lowest level since 2003.


Other major currencies also experienced a similar situation with the Australian dollar falling to a 5-year low.


The Euro and Pound recorded an opening price difference (gap) of around 100 pips on their respective price charts against the US dollar in the Asian session this Monday morning.


Investors will expect the US dollar to gain ground for the first few sessions, but will remain vigilant for any unexpected situations triggered by Trump.

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