The US dollar experienced a decline against several major currencies recently but has shown signs of recovery today. This rebound was expected as market participants anticipated some consolidation ahead of the upcoming Federal Open Market Committee (FOMC) meeting. The dollar's downward trend appears to have softened, primarily driven by new tariff threats from the administration. Treasury Secretary Scott Bessent, seen as a moderate, has proposed a gradual increase in universal tariffs by 2.5% each month, aiming to reach levels previously advocated by President Trump. However, Trump has indicated that this increase may not suffice, hinting at imminent tariffs on key sectors such as semiconductors and pharmaceuticals. As a result, the dollar is gaining ground against all G10 currencies, with most experiencing declines of 0.4% to 0.6%.

Asia Pacific Markets

In the Asia Pacific region, markets have shown mixed reactions due to various economic factors. The offshore yuan is trading stronger against the US dollar, having recovered from a significant drop earlier in January. The recent Lunar New Year celebrations in mainland China have influenced trading volumes, leading to a firmer tone for the yuan today.
Meanwhile, the Japanese yen gained nearly 1% yesterday as US stock market fluctuations raised concerns about valuations and prompted a drop in US yields. This shift allowed the yen to appreciate against the dollar, which had previously fallen to around JPY153.70 but has since rebounded to nearly JPY156. However, without surpassing JPY156.25, the dollar risks continuing a trend of lower highs.

European Markets

European markets are exhibiting positive momentum as they recover from recent losses. The euro has pulled back slightly after reaching approximately $1.0535 yesterday, marking its most significant advance since last summer. Currently trading around $1.0420, it faces critical resistance at $1.0460; failure to regain this level could lead to further declines towards $1.0355.
Concurrently, the British pound has shown resilience after depreciating about 10% from late September through mid-January. It recently reached near $1.2525 but has since stalled around support levels between $1.2400 and $1.2425. A breach below this range could signal further testing of lower support levels.

American Markets

In the United States, the dollar's strength is primarily attributed to new tariff proposals that have bolstered its value across various currencies. The Dollar Index has reclaimed the crucial 107.75 mark, indicating a potential shift in bearish momentum that had characterized earlier trading sessions this month. As traders await the FOMC meeting's outcome, today's durable goods orders report may provide insights into fourth-quarter GDP estimates. Notably, Boeing's order numbers showed improvement in December despite cancellations offsetting new orders, suggesting a recovery from previous declines. Additionally, house prices in the US appear to have edged up slightly in November, while consumer confidence metrics are under scrutiny following a recent dip in sentiment reported by the University of Michigan survey.