Softening the Tone: “May or May not Impose Tariffs”

Trump 2.0 officially began last week, with executive orders aimed at reshaping the federal government already underway. His top priorities include immigration, birthright citizenship, drug cartels, artificial intelligence, climate, and energy. However, he has yet to sign any measures regarding Chinese tariffs. Instead, he has threatened Mexico, Canada, and the European Union with tariffs.

“They're going to be in for tariffs. It's the only way you're going to get fairness,” Trump stated.

In the U.S., the Composite Purchasing Managers’ Index (PMI) declined to 52.4 this month, marking the lowest level since April. While the manufacturing index exceeded expectations, the services index fell short of forecasts. In the Eurozone, the manufacturing index rose to its highest level in eight months, although it remained in the contraction zone, and the services index experienced a slight decline.

Eurozone consumer sentiment improved after three months in line with forecasts but continues to remain in negative territory.

The Bank of Japan (BoJ) has raised interest rates by 25 basis points to 0.50%, as widely anticipated, reaching the highest level since 2008.

This week, two major bank announcements are on the radar. The Federal Reserve (Fed) is expected to keep interest rates unchanged as uncertainty looms. Conversely, the European Central Bank (ECB) is anticipated to cut rates from 3.15% to 2.9%.

Additionally, the Fed's preferred inflation measure, the U.S. Personal Consumption Expenditures (PCE) price index for December, is set to be released. Prices are projected to rise by 0.3% month-over-month, up from 0.1%, and by 2.6% year-over-year, compared to 2.4%. Any significant deviation from these forecasts could influence future monetary policy.