US Futures Surge, Dollar Dips amid Relief Over Trump's Tarriff Hold-off

On Monday, US equity futures witnessed a rise, while the dollar declined, fueled by relief over President Trump's decision to refrain from imposing China-specific tariffs on his first day in office.

Trump, sworn in as President, promised a series of executive orders, but these will initially exclude new tariffs on the three biggest US trading partners. Contracts on the S&P 500 gained 0.4%, despite Wall Street closures for a holiday. The dollar gauge retreated 1.1%, continuing its descent from a 13-month high reached earlier in January.

The Mexican peso trimmed earlier gains after Trump's announcement of a national emergency at the southern border. Sources familiar with the plans indicate a shift away from a trade war towards potential engagement with Beijing. Trump reportedly plans a memorandum directing federal agencies to scrutinize existing trade policies with China, Canada, and Mexico.

Senior macro strategist at State Street Global Markets, Marvin Loh, expressed hope that Trump would moderate his extreme rhetoric. Michael Green, chief strategist at Simplify Asset Management, highlighted the uncertainty and volatility to come, emphasizing the challenge of balancing the risk of tariffs against the potential for their non-imposition.

Trump's economic policies, including tax cuts and fiscal spending, may bolster the dollar and lift Treasury yields. Nomura Holdings and T. Rowe Price predict a rise in 10-year Treasury yields to 6% this year, while a minority of bond traders anticipate an interest rate hike by the Federal Reserve, defying the prevailing view of rate cuts.

Trump's invocation of emergency powers to promote domestic energy production and shift away from renewables caused declines in Siemens Energy AG, Enel SpA, and Vestas Wind Systems A/S. Crude oil prices fell.

Meanwhile, Bitcoin hit another record, benefiting cryptocurrency traders after Trump and his wife unveiled their memecoins over the weekend. Key events for the week include the World Economic Forum in Davos, GDP data from South Korea, and rate decisions from the ECB, Turkey, Norway, and South Africa.

Key Market Moves:

Stocks
* S&P 500 futures: +0.4%
* Dow Jones Industrial Average futures: +0.4%
* MSCI World Index: +0.3%

Currencies
* Bloomberg Dollar Spot Index: -0.9%
* Euro: +1.1%
* British pound: +1%
* Japanese yen: +0.3%
* Mexican peso: +1.1%

Cryptocurrencies
* Bitcoin: -0.2%
* Ether: +1.8%

Bonds
* 10-year Treasury yield: 4.63%
* 10-year Germany yield: 2.53%
* 10-year Britain yield: 4.66%

Commodities
* West Texas Intermediate crude: -1.7%
* Spot gold: +0.1%