The US Dollar (USD) strengthened at the beginning of the week, buoyed by President Trump’s remarks regarding tariffs on Canada and Mexico. A new deadline, set for 3 March, has been established to prevent a potential USMCA trade war.

There is speculation that Trump may continue to leverage tariff threats for negotiations. While the market predicts a low probability of 25% tariffs being implemented, the USD/CAD and USD/MXN pairs may experience short-term upward pressure.

Attention will be focused on the Conference Board consumer confidence index, with expectations of a decline to 102.5. A drop in consumer confidence could suggest softening consumption and lead to a reassessment of Federal Reserve expectations.

At the start of the week, the US dollar gained strength as markets reacted to Trump’s comments on tariffs concerning Canada and Mexico. With a fresh deadline set for early March, traders are watching closely to see whether his administration will maintain its hard stance or use the threat of tariffs as a bargaining tool. The likelihood of tariffs reaching 25% remains low, but even the possibility has caused some movement in dollar-related currency pairs.

For those trading the Canadian dollar or Mexican peso, this means short-term shifts could provide opportunities. The USD/CAD and USD/MXN pairs have already felt upward pressure, as some investors reposition to anticipate potential trade complications. However, this is not just about tariffs—other economic indicators are coming into play, shaping expectations for the Federal Reserve in the weeks ahead.

One of the key metrics in focus is the Conference Board consumer confidence index. Analysts are expecting the figure to dip to 102.5, which would signal a potential downturn in consumer sentiment. If confidence declines further than expected, it could hint at weaker consumer spending, something the Fed cannot ignore. With inflation concerns still present, softer consumption data might change the outlook on interest rates.

A shift in the Fed’s stance would not only impact the US dollar but also global risk sentiment. If consumer confidence weakens more than anticipated, markets may reassess how quickly the central bank is willing to adjust policy. That could, in turn, affect everything from equities to bond yields, creating ripple effects across multiple asset classes.

For traders navigating derivatives markets, this sets up a few clear areas of focus. Keeping an eye on economic releases, particularly those tied to consumer sentiment, will offer deeper insight into market behaviour. With tariff discussions ongoing and confidence numbers ahead, there are multiple points of uncertainty that could drive volatility. Timing entries and exits carefully will be key as these themes continue to unfold.