The question in the headline doesn’t concern blizzards paralyzing the U.S. Midwest or wildfires raging in Los Angeles. Instead, according to leaks, an economic state of emergency might be on the agenda of Donald Trump’s administration. If enacted, such a measure would grant the president significant leeway in imposing tariffs. These reports have fueled the strengthening of the U.S. dollar and unsettled stock market indices today.
Trump’s Trade Strategy
The inauguration of Donald Trump’s second term as president is fast approaching on January 20. The world is trying to adapt to this reality, but it’s not easy. Trump is a leader unlike most others in liberal democracies: his rhetoric is bold and often unsettling, filled with statements that can shock and provoke uncertainty.
Despite the “America First” mantra, Trump has recently focused on countries like Canada, Greenland, and Panama (particularly the Panama Canal). He hasn’t ruled out military interventions to protect U.S. interests, echoing past U.S. actions in Central America.
However, markets today were stirred by different news—leaks reported by CNN suggest the White House is considering declaring an economic state of emergency. This would give the president broad authority, including the ability to impose tariffs unilaterally. Such measures would allow Trump to swiftly deliver on his campaign promises, particularly regarding trade policies.
While it seems unlikely that Trump would abandon one of his flagship campaign pledges, the new reports raise questions about the speed and scope of potential tariffs. The uncertainty, combined with the possibility of unchecked presidential action, has injected volatility into the markets.
The Dollar Surges
The euro began to weaken during Tuesday’s session, with the hourly EUR/USD chart indicating a potential double-top formation, signaling a return to downward trends. Wednesday’s reports about the Trump administration’s plans further bolstered the dollar, pushing the EUR/USD exchange rate below $1.03, edging closer to January 2 lows of $1.025.
This broader market trend has also impacted emerging-market currencies, including the Polish złoty. The EUR/PLN rate hit 4.275 zł, the upper boundary of a 3-groszy sideways trend it has been in for a month. The USD/PLN rate exceeded 4.15 zł but retreated slightly in the afternoon. Meanwhile, the Swiss franc climbed above 4.55 zł, reflecting market anxiety.
The Labor Market’s Role
Despite these strong market drivers, the outcome of today’s trading may remain undecided due to upcoming labor market data, which investors consider critical.
Today, the ADP report revealed that only 122,000 new non-farm jobs were created in the previous month, falling short of the 139,000 forecast and the 146,000 from the prior report. This is the weakest result since August (99,000), when several states were recovering from hurricane damage, and the third weakest reading of the past year.
However, weekly jobless claims data provided some relief. Only 201,000 claims were filed, beating expectations of 214,000 and marking the best result since February of last year.
These contrasting reports have left investors grappling with mixed signals. The decisive non-farm payrolls (NFP) report from the Department of Labor is due Friday and is expected to set the tone for the week’s conclusion.
Market Volatility Ahead
Despite the uncertainty, Wednesday’s session could still deliver significant drama, especially as U.S. traders take the reins later in the day. Market activity will be subdued tomorrow due to a national day of mourning in the U.S., honoring the funeral of the 39th president, Jimmy Carter.
Author: Adam Fuchs, Currency Analyst at Walutomat.pl
Source: Manager Plus
