By Kevin Buckland

TOKYO (Reuters) - China's yuan slumped to a record low in offshore trading on Monday, while Mexico's peso and Canada's dollar tumbled to multi-year troughs after U.S. President Donald Trump slapped the countries with tariffs, triggering fears of an escalating trade war.

The U.S. dollar's gain was broad, with the euro also dropping to a more than two-year low and the Swiss franc - despite typically acting as a safe haven - sliding to the weakest since May.

Canada and Mexico immediately vowed retaliatory measures, and China said it would challenge Trump's levies at the World Trade Organization.

Cryptocurrency bitcoin fell back below $100,000 to its lowest in nearly three weeks.

"The surprise for markets ... is that Canada and Mexico retaliated immediately and that others, i.e. China and the EU, may follow their lead, resulting in a sharp contraction in global trade," said Tony Sycamore, a market analyst at IG.

"The starting date of U.S. tariffs on Canada, Mexico and China of Feb. 4 was also much sooner than many had anticipated."

As Trump had promised last month, the United States hit Canada and Mexico with duties of 25% and China with a 10% levy, calling the measures necessary to combat illegal immigration and the drug trade.

The tariffs, outlined in three executive orders, are due to take effect 12:01 a.m. ET (0501 GMT) on Tuesday.

Trump's move was the first strike in a what could be a destructive global trade war that would result in a surge in U.S. inflation that would "come even faster and be larger than we initially expected," said Paul Ashworth of Capital Economics.

Investing.com - U.S. President Donald Trump imposes tariffs on imports from Canada, Mexico, and China, exacerbating worries over the uncertain impact of an increase in global trade tensions. Google-parent Alphabet (NASDAQ:GOOGL) and e-commerce giant Amazon (NASDAQ:AMZN) post quarterly returns, as well as weight-loss drugmakers Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO). Meanwhile, new U.S. jobs data could provide a fresh glimpse into the state of labor demand in the world's largest economy -- and potentially factor into the Federal Reserve's future interest rate path. Here's your look at what's happening in markets in the week ahead.

1. Trump imposes tariffs on Canada, Mexico, and China

Tariffs, which have been a lingering source of uncertainty for markets in recent months, are set to be front of mind this week.

On Saturday, President Trump signed an executive order placing 25% levies on imports from Canada and Mexico, as well as a 10% duty on goods incoming from China. The White House has said there are "tentative plans" for the tariffs to come into effect on Tuesday.

Trump had earlier threatened these countries with a February 1 tariff deadline in order to push them to roll out actions to stem the flow of illegal immigrants and the opiate fentanyl into the U.S. However, before the weekend, Trump suggested that there was little these countries could do to avoid the levies, which could disrupt trillions of dollars in annual trade.

Some economists have argued that Trump's move may also drive up inflationary pressures in the U.S., potentially slowing the pace of possible Federal Reserve interest rate cuts this year. Indeed, Fed officials have adopted a wait-and-see approach to future monetary policy decisions, citing a murky economic outlook clouded by the prospect of tariffs.

Stock markets ended lower on Friday, weighed down by anxiety over Trump's trade stance. Analysts have widely flagged some type of a sell-off in equities on Monday.

2. Oil

The tariffs included a carve-out for energy products from Canada, with these items facing levies of 10%.

Crude oil makes up about a quarter of all imports the U.S. receives from Canada, worth roughly $100 billion in 2023, according to data from the U.S. Census Bureau cited by Reuters.

Trump added that his administration is also projected to announce wider tariffs linked to oil and natural gas around February 18, a comment that sparked a jump in oil prices in extended hours trading on Friday.

Last week, both the Brent and West Texas Intermediate crude benchmarks finished lower, as traders worried that a sharp uptick in fuel costs would dent global economic activity and broader energy demand.

3. Jobs data

Elsewhere, investors will have the chance to parse through fresh labor market data this week, including the January jobs report on Friday.

Economists forecast that the U.S. added 154,000 roles last month, down from a blockbuster 256,000 in December. Meanwhile, the unemployment rate is tipped to come in at 4.1%, matching the prior month's pace.

Average hourly earnings growth is seen at 0.3%, also equaling December's rate.

The figures will help to determine the state of labor demand in the beginning of the new year and may factor into how the Fed, which slashed interest rates several times in 2024, approaches monetary policy in the months to come.

Along with inflation remaining above the Fed's 2% target level, a robust jobs market helped underpin the central bank's decision last week to leave rates unchanged and signal that it was in no rush to bring borrowing costs down further.

4. Alphabet, Amazon to report

On the earnings front, more results from major technology companies are due out this week.

Highlighting the agenda is Google-parent Alphabet and e-commerce giant Amazon, which are set to unveil their quarterly figures on Tuesday and Thursday, respectively.

As it was with these companies' Big Tech peers Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) last week, analysts will likely be keen to hear how Alphabet and Amazon executives view their artificial intelligence spending strategies following the emergence of a low-cost AI model from Chinese start-up DeepSeek.

DeepSeek said its model showed comparable performance to OpenAI's ChatGPT, but used less-advanced data and cost only around $6 million to build. Although doubts remains around the statement, it was enough to roil markets last week and pose questions around the necessity of billions of dollars in AI expenditures by some of Silicon Valley's most prominent businesses.

Semiconductor group Qualcomm (NASDAQ:QCOM) and chip designer Arm Holdings (NASDAQ:ARM) are also due to post their latest returns this week, as well as ride-hailer Uber (NYSE:UBER).

Beyond tech, drugmakers Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO), both of which have been at the forefront of a spike in popularity of new weight-loss treatments, are also expected to report.

5. Bank of England decision

The Bank of England holds its latest policy-setting meeting this week, and is widely expected to cut interest rates and hint at more reductions to come as the UK economy stagnates.

Economists anticipate the BoE will cut its benchmark rate to 4.5%, from 4.75%, on Thursday, when it will also update its economic growth and inflation forecasts.

Since the BoE published its last projections in November, the economy has stagnated and measures of inflation most closely watched by rate-setters dropped last month.

Analysts at Bank of America Securities have agreed with the consensus, expecting an 8-1 vote in favor of a reduction by the Monetary Policy Committee.

“The faster than expected drop in services inflation, weak growth and labor market loosening supports the case for a cut,” BOA analysts said, in a note dated January 31.

Investing.com - European stock markets edged higher Friday, with investors digesting more corporate earnings as well as regional inflation data after the European Central Bank’s latest easing of monetary policy.

At 03:05 ET (08:05 GMT), the DAX index in Germany climbed 0.1%, the CAC 40 in France gained 0.2% and the FTSE 100 in the UK rose 0.2%.

ECB boosts sentiment

Sentiment has been boosted by the decision of the European Central Bank to cut interest rates on Thursday, as widely expected, and to also keep the door open to further policy easing amid concerns over lackluster economic growth.

It was the fifth ECB rate cut since June and markets expect as many as three more reductions this year.

Further evidence of the difficulties the German economy, the largest in the eurozone, is suffering came with the release of the latest retail sales data, which showed a fall of 1.6% on the month in December.

Investors will also study preliminary inflation readings from Germany, after the French consumer price index for January rose below the ECB’s 2% medium term target.

Across the pond, December's core PCE price index in the United States - the Federal Reserve's preferred measure of inflation - is set for release later in the session, and could provide further clues on the central bank's rate outlook.

Novartis boosted by strong demand for key drugs

In the corporate sector, Novartis (SIX:NOVN) reported strong fourth-quarter results Friday, with the Swiss drugmaker citing strong demand for established heart failure drug Entresto and multiple sclerosis drug Kesimpta.

Investing.com –Asian currencies declined on Friday, led by sharp losses in the South Korean won and Malaysian ringgit, as markets were rattled by fresh tariff threats from U.S. President Donald Trump, while the Japanese yen remained steady following strong inflation data from Tokyo.

Trump threatened that he would impose significant trade tariffs on BRICS nations should the bloc pursue plans to develop a common currency aimed at reducing reliance on the U.S. dollar.

The US Dollar Index was marginally higher in Asian trading hours on Friday, while Dollar Index Futures rose 0.4%.

The greenback was supported by expectations of slower rate cuts in 2025, and the lingering impact of Trump's tariff policies.

Trump's tariff threat sparks risk-off mood, Asia FX tumbles

Trump’s proposal to impose steep tariffs rattled markets, particularly export-reliant economies.

The South Korean won tumbled 0.8% against the U.S. dollar on Friday, with the USD/KRW pair set to rise nearly 2% for the week.

The Malaysian ringgit’s USD/MYR pair jumped 0.8%, and was on track for a 1% weekly gain.

Trump on Thursday reiterated his intention to implement a 25% tariff on imports from Canada and Mexico starting this Saturday, with potential additional tariffs on Chinese goods.

Additionally, he threatened that the BRICS bloc, which consists of Brazil, Russia, India, China, South Africa, and others, could face “100% tariffs” if they move away from the dollar.

Earlier in the week, the U.S. Federal Reserve held rates unchanged and indicated that the policy would remain restrictive until inflation is fully tamed.

With expectations of higher-for-longer U.S. rates, and prospects of a stronger dollar, Asian currencies faced further downward pressure.. 

The Chinese yuan’s onshore pair USD/CNY inched 0.2% higher, while the offshore pair USD/CNH was largely muted.

The Singapore dollar’s USD/SGD pair inched 0.2% higher, while, the Indian rupee’s USD/INR pair ticked up 0.1%.

The Indonesian rupiah fell further, with the USD/IDR pair rising 0.4%, even after the Bank Indonesia intervened to Thursday to assure the markets of stable supply and demand in forex markets

The Australian dollar's AUD/USD pair inched 0.2% amid rate hike bets.

Japanese yen muted despite rate hike bets after Tokyo CPI

The Japanese yen’s USD/JPY pair was largely unchanged, in line with the broader mood, even as a strong inflation print from Tokyo kept rate hike bets alive.

Data on Friday showed that Tokyo's consumer price index (CPI) inflation rose as expected in January, reaching a nearly two-year high, driven by strong private spending.

Headline CPI inflation accelerated to 3.4% year-on-year, up from 3% in December, marking its highest level since April 2023, while core CPI, which excludes fresh food prices, increased 2.5% year-on-year, hitting an 11-month high.

With a strong inflation print, market participants firmed up interest rate hike bets, although the Bank of Japan is not expected to raise rates further until at least mid-2025.

By Rae Wee

SINGAPORE (Reuters) - The yen was on track for its best monthly start to the year since 2018 on Friday, helped by the view that the Bank of Japan (BOJ) is likely to keep raising rates this year while its global peers elsewhere look to ease policy.

The Mexican peso and Canadian dollar were on guard ahead of a looming Feb. 1 deadline which U.S. President Donald Trump has said would be the date he imposes 25% tariffs on imports from the two countries.

The loonie languished near a five-year low at C$1.4490 and was set for a weekly decline of 1%.

Mexico's peso was recovering from its steep fall from the previous session and last stood at 20.6849 per dollar, though it remained on track for its worst weekly performance since October with a roughly 2% fall.

"If (Trump) wants to talk tough, he's got to act tough as well, and that starts with actually announcing something concrete tomorrow," said Tony Sycamore, a market analyst at IG.

"It's something which I think is coming and more than likely we'll get some more colour on that tomorrow ... It's not good to keep the uncertainty overhanging markets."

In Japan, the yen was last a touch stronger at 154.19 per dollar, having already climbed more than 1% for the week thus far. It was set to gain 1.9% for the month, which would mark its best January performance in seven years.

The yen has drawn support from expectations of further rate hikes from the BOJ this year, with Deputy Governor Ryozo Himino also saying on Thursday that the central bank will continue to raise interest rates if the economy and prices move in line with the bank's forecasts.

WASHINGTON (Reuters) - The U.S. Treasury Department said on Thursday it was withdrawing from a global body of central banks and regulators devoted to exploring ways to police climate risk in the financial system.

"The U.S. Department of the Treasury's (Treasury) Federal Insurance Office (FIO) today notified the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) that it is withdrawing its membership," the U.S. Treasury Department said in a statement.

By Anjana Anil and Sherin Elizabeth Varghese

(Reuters) - Safe-haven demand due to geopolitical uncertainties and concerns over global economic growth amid U.S. President Donald Trump's tariff plans have hoisted gold prices to a record high, once again bringing the key $3,000 threshold onto investors' radar.

Spot gold climbed to a record high of $2,798.40 a troy ounce on Thursday, starting 2025 with fresh vigour after logging its strongest annual performance since 2010 last year.

"There's concerns that some of the (economic) growth may come down because of the policies and tariffs that the current administration is looking to implement," said Phillip Streible, chief market strategist at Blue Line Futures.

"So when you've got higher inflation and lower growth, stagflation becomes the economic theme. Gold tends to work very well in that particular environment."

Trump's tariff plans are widely perceived as inflationary and with potential to trigger trade wars, driving up safe-haven demand for bullion as it is traditionally seen as a hedge against price pressures and geopolitical uncertainty.

"I can see (gold) trying to reach up to that $2,900 level at some point during the first quarter; after we breach that, we'll set new levels," said Bob Haberkorn, senior market strategist at RJO Futures.

"At some point this year, gold could ultimately trade north of $3,000."

THE US MARKET

Amid concerns about the U.S. import tariff plans, the U.S. gold futures have been trading at a premium to the spot price for several months and widened the price spread again on Thursday.

In a sign of these concerns, 12.9 million troy ounces of gold were delivered to COMEX-approved warehouses since late November, raising stocks there by 73.5% to 30.4 million ounces, the highest since July 2022.

The deliveries came from London, Switzerland and other major gold-trading hubs.

The London Bullion Market Association said on Thursday that it was monitoring the situation and liaising with CME Group (NASDAQ:CME) and U.S. authorities.

London gold market stocks and liquidity remain strong with the average daily trade volume since the start of January is 47.1 million ounces, the association added.

GOLD AND THE US RATE EXPECTATIONS

Gold hit multiple record peaks last year, bolstered by the Federal Reserve's rate-cutting cycle, safe-haven demand and robust central bank buying.

The Fed, in its January meeting kept benchmark interest rates unchanged as widely expected, after easing a full basis point in 2024. This marks the first pause since the start of its easing cycle in September.

The non-yielding bullion tends to thrive in a low-interest rate environment.

As to purchases by central banks, the People's Bank of China has been a key driver of gold demand as it kept on adding bullion to its reserves over the past year despite the price growth - in what analysts see as the PBOC's broader strategy to diversify the reserves.

Analysts suggest that continued purchases by China's central bank could provide further support to gold prices in the coming months.

By Leika Kihara and Makiko Yamazaki

TOKYO (Reuters) -The Bank of Japan raised interest rates on Friday to their highest since the 2008 global financial crisis and revised up its inflation forecasts, underscoring its confidence that rising wages will keep inflation stable around its 2% target.

The decision marks its first rate hike since July last year and comes days after the inauguration of U.S. President Donald Trump, who is likely to keep global policymakers vigilant ahead of potential repercussions from threatened higher tariffs.

BOJ Governor Kazuo Ueda told a news conference that the weak yen continued to put upward pressure on import prices, while wage hikes were becoming more embedded and broad-based among companies.

"We have not preset idea," he said on the timing of the next rate hike, saying the BOJ will make a decision on a meeting-to-meeting basis by looking at data available at the time.

At its two-day meeting concluding on Friday, the BOJ raised its short-term policy rate from 0.25% to 0.5% - a level Japan has not seen in 17 years. It was made in a 8-1 vote with board member Toyoaki Nakamura dissenting.

The widely expected move underscores the central bank's resolve to steadily push up interest rates to around 1% - a level analysts see as neither cooling nor overheating Japan's economy.

It also marks another step Japan is taking away from the deflation and stagnant economic growth that dogged the country for decades.

"The likelihood of achieving the BOJ's outlook has been rising," with many firms saying they will continue to raise wages steadily in this year's annual wage negotiations, the central bank said in a statement announcing the decision.

"Underlying inflation is heightening towards the BOJ's 2% target," the central bank said, adding that financial markets remain stable as a whole.

The BOJ made no change to its guidance on future policy, saying that it will continue to raise interest rates if its economic and price forecasts are realized.

But it removed a phrase stressing the need to scrutinise risks surrounding overseas economies and markets, underscoring its conviction that solid U.S. growth will underpin Japan's economy - at least for now.

The BOJ revised up its inflation forecasts and said risks to the price outlook were skewed to the upside, signaling its focus on the growing case for more rate hikes.

"Their logic remains the same. They are still far away from neutral, so it's natural to make an adjustment," said Naka Matsuzawa, chief macro strategist at Nomura Securities in Tokyo.

"Unless the BOJ either changes the logic of rate hikes, or even raises the neutral point, which they have been mulling - about 1% - there's not going to much room for the market to price in further hikes in the future."

The BOJ's path is bound with uncertainty, however, with trade uncertainties and Trump calling for further rate cuts by the U.S. Federal Reserve and similar action from central banks around the world.

The yen rose around 0.5% to 155.32 per dollar after the BOJ's decision and inflation upgrades, while the two-year Japanese government bond (JGB) yield rose to 0.705%, the highest since October 2008.

In its quarterly outlook report, the board raised its price forecasts to project core inflation moving at or above its 2% target for three straight years.

It also said risks to the inflation outlook were skewed to the upside amid intensifying labour shortages, rising prices of rice and the boost to import costs from a weak yen.

"With regards to this year's annual wage negotiations, there have been many views expressed by firms that they will continue to raise wages steadily," the report said.

The head of Japan's union umbrella group told Reuters on Friday that Japanese annual pay increases must exceed the 5.1% secured last year as real wages continue to fall.

The board now projects core consumer inflation to hit 2.4% in fiscal 2025 before slowing to 2.0% in 2026. In the previous projection made in October, it expected inflation to hit 1.9% in both fiscal 2025 and 2026.

It made no change to its forecasts that Japan's economy will grow 1.1% in fiscal 2025 and 1.0% in 2026.

While the U.S. economy has been solid and financial markets stable as a whole, the BOJ must be vigilant to uncertainties surrounding U.S. policy conduct, the report said.

"The hike may have been expected but in what feels like the first time in a very long time, there were no major downgrades to their economic outlook," said Matt Simpson, senior market analyst at City Index in Brisbane.

"This keeps the door open to another 25bps hike by the year-end, and rates to sit at a whopping 0.75%."

Japan's core consumer inflation accelerated to 3.0% in December, the fastest annual pace in 16 months, data showed earlier on Friday, in a sign rising fuel and food prices continue to push up living costs for households.

After taking the helm in April 2023, Ueda dismantled his predecessor's radical stimulus programme in March last year, and pushed up short-term interest rates to 0.25% in July.

BOJ policymakers have repeatedly said the central bank will keep raising rates, if Japan makes progress in achieving a cycle in which rising inflation boosts wages and lifts consumption - thereby allowing firms to continue passing on higher costs.

By Sinéad Carew and Johann M Cherian

(Reuters) -The benchmark S&P 500 rose to a record closing high on Thursday, as investors assessed a mixed bag of corporate earnings and digested comments from President Donald Trump, including a call for cuts in interest rates and oil prices.

At the World Economic Forum in Davos, Switzerland, Trump demanded that OPEC lower oil prices and that central banks reduce interest rates, while he warned global business leaders they will face tariffs for products made outside of the U.S.

While investors have been cautiously monitoring Trump's comments about tariffs, they "like the idea of interest rates coming down, of oil prices coming down," said Lindsey Bell, chief strategist at 248 Ventures.

"All in all, the market is optimistic the more they hear about Trump policies. We're just seeing a reflection of that optimism," said Bell.

However, investors have been concerned that tariffs could add to inflation pressures and slow the pace of interest rate cuts by the U.S. Federal Reserve.

The Fed is expected to leave interest rates unchanged next week at its first policy meeting of the year.

Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, said the Fed is expected to base rate decisions on economic data rather than presidential demands.

"I don't think the Fed is going to pay much attention to this," said Tuz, referring to Trump's comments on rates. "They're looking at the data and they're going to make their decision based on what they see."