The latest Market Talks covering U.S. politics. Published exclusively on Dow Jones Newswires throughout the day.

0959 ET - The dollar reclaims some ground as U.S. markets reopen following Martin Luther King Jr. Day, while President Trump is yet to impose tariffs. The currency fell ahead of Trump's inauguration on news that he would wait before imposing trade restrictions. ICE's DXY index remains below Friday close, but up from recent lows as the greenback strengthens around 0.3% versus the euro and the pound. Spartan's Peter Cardillo expects the dollar to remain relatively strong. Tariffs, he says, are more likely to cause recession in economies other than the U.S. In case of a trade war, "the U.S. could survive better than other countries" that rely more on trade, he says. (paulo.trevisani@wsj.com; @ptrevisani)

0957 ET - Investors should be considering the risk of capital controls limiting movement of money across borders as the U.S. takes a populist turn, warns Ken Rogoff, former chief economist of the IMF. The risk remains small--a "tail risk" in investor jargon--but the danger is real when the next crisis hits, Rogoff says, along with price controls. "Trump could get lucky. But the typical populist doesn't put in price controls because they like them. They do it because they are inconsistent. He has policies that are inconsistent," Rogoff says. "The risk of Biden-type inflation over the next five to seven years is very high," he says on the sidelines of the World Economic Forum in Davos. "There's got to be a shock [before controls are put in place], but there's always a shock." Rogoff, a Harvard economics professor, says controls would also have been a risk if Kamala Harris had won the election. (james.mackintosh@wsj.com)

0953 ET - President Trump's threat to impose a 25% tariff on all Canadian imports, this time starting Feb. 1, will outrank any concern from Bank of Canada policymakers about an acceleration in underlying prices, says BMO Capital Markets chief economist Doug Porter. The slowdown in headline inflation "was clearly flattered" by a temporary sales-tax holiday introduced last month, he says. And the 3-month trend on BOC's preferred core readings are above 3%, or the upper end of BOC's target range. "We believe that the heavy overhang of trade uncertainty overrides almost all else," Porter says, arguing the BOC cuts next week as part of a risk-management exercise. (paul.vieira@wsj.com; @paulvieira)

0940 ET - Russian President Vladimir Putin could attack Ukraine with 10 times more troops than the ones deployed to invade the country in February 2022, if the West doesn't provide Ukraine with clear security guarantees following a cease-fire, Ukraine President Volodymyr Zelensky tells the World Economic Forum in Davos. He warns that Putin has accelerated its weapons production and increased the Russian army, but Europe isn't investing enough to ramp up its own arms production. Putin could then try to occupy other former Soviet states, and demand that EU and NATO countries such as the Baltic or Finland abandon those blocks, he says. Ukraine has good relations with U.S. President Donald Trump, but it is important that Europe conveys to him the risks that could arise from Ukraine, Zelensky says. (cristina.gallardo@wsj.com)

0927 ET - Soybean futures are leading CBOT grains higher pre-market, with the most-active contract up 2.1% following Trump's inauguration. A call between Trump and Chinese President Xi on Friday helped bolster the sentiment that a new trade war between the two sides isn't necessarily at hand--which has fund traders pivoting into long positions in soybeans, says Tomm Pfitzenmaier of Summit Commodity Brokerage in a note. But Pfitzenmaier adds that there's a lot of unknowns that remain in place. "There is still a lot of uncertainty about tariffs, biofuel policy and Argentine weather," he says. Soybeans are up 2.1%, while wheat rises 1.8% and corn climbs 0.8%. (kirk.maltais@wsj.com)

0907 ET - The Canadian dollar and Mexican peso risk falling further against the U.S. dollar if U.S. President Trump follows through on his proposal for 25% tariffs on imports from those two countries, ING forex strategist Francesco Pesole says in a note. ING estimates that the risk of such hefty tariffs on Canadian goods is unlikely fully priced in, raising the prospect of further falls in the Canadian dollar. "We expect a USD/CAD rally north of the 1.45 area for now," he says. USD/CAD rises 0.9% to 1.4442, having earlier hit a multi-year peak of 1.4512, according to FactSet. USD/MXN rises 0.8% to 20.656. (miriam.mukuru@wsj.com)

0900 ET - Europe can't afford to be a second or third-level ally for the U.S., Ukraine President Volodymyr Zelensky tells the World Economic Forum in Davos, Switzerland. It's not clear whether Europe will have a seat at the negotiating table where the end to the Ukraine-Russia war will be decided, he says. "Europe needs to learn how to fully take care of itself so that the world can't afford to ignore it," Zelensky says. (cristina.gallardo@wsj.com)

0850 ET - Treasury yields extend their losses in the first day of trade in the U.S. after President Trump's inauguration. Trump stops short of imposing tariffs in his first day, but reaffirms they are coming. Yields fell last week on relatively mild inflation data, while the Fed is expected to keep interest rates unchanged next week and cut them once or twice later this year. Data due ahead of the FOMC meeting are unlikely to change the outlook. The 10-year is at 4.557% and the two-year at 4.254%. (paulo.trevisani@wsj.com; @ptrevisani)

0842 ET - Europe will do everything it can to maintain a good defense cooperation with its transatlantic partners within the NATO alliance, German Chancellor Olaf Scholz tells the World Economic Forum in Davos, Switzerland, in a message targeted at the U.S. in particular. The new U.S. President Donald Trump has said he wants all NATO countries to increase their defense spending to 5% of their gross domestic product. Scholz notes that "nearly every European country" is spending more than 2% of its GDP on defense. "My view is that we should keep this and that those who have not reached the goal should do it very fast," he says. According to NATO data, 23 out of NATO's 32 member states spent above the 2% minimum threshold on defense last year. Spending by Italy, Belgium, Croatia, Luxembourg, Portugal, Slovenia, and Spain remains below the 2% target. (cristina.gallardo@wsj.com)

0840 ET - The Canadian dollar retreats, with early-week gains wiped out. It now risks dropping towards a record low against the U.S. dollarafter President Trump told reporters he's eyeing a Feb. 1 start date for hefty tariffs on Canada and Mexico, citing inadequate border security, economist David Rosenberg says. Canada and Mexico "probably do feel a little broken at this point," Rosenberg says in his note to clients. USD/CAD earlier hit its highest since early 2020 at 1.4512, FactSet data show. Another break higher could set the stage for the Canadian dollar to drop towards a record low of C$1.61, set back in 2002. (Paul.Vieira@wsj.com, @paulvieira) Corrections & Amplifications

This item was corrected at 1417 GMT. USD/CAD earlier hit its highest since early 2020 at 1.4512, FactSet data show. The original version misstated the year as 2000.

0821 ET - Mexican beer maker Constellation Brands would be among the alcohol purveyors most impacted by Donald Trump's proposed tariffs on Mexican imports, Bernstein analysts say in a research note. The President said he plans to place a 25% tariff on imports from Canada and Mexico starting on Feb. 1. That would dent Constellation's group operating income by 33% if it doesn't raise prices, or about 23% if it raised prices by 5%, they say. Jose Cuervo maker Becle could see a 20% to 30% hit to profits based on its pricing actions, the analysts say. Jack Daniel's maker Brown-Forman would see modest 1% hit to group operating income from tariffs on Mexico, but a 10% hit if Europe responds with retaliatory tariffs, the analysts say. (dean.seal@wsj.com)

0817 ET - Tariff talk and the impact on global growth are pushing down oil futures more than President Trump's "drill baby drill" narrative, TP ICAP's Scott Shelton says in a note. "My general thought is that tariffs are bearish, and we are trading that this morning and accelerating lower on long positioning," he says in a note. Trump plans to speed up permitting to raise U.S. output, and said his administration will refill the Strategic Petroleum Reserve "right to the top." He held off imposing tariffs on Inauguration Day, but said he plans 25% tariffs on imports from Mexico and Canada on Feb. 1. Most-active WTI is off 2.5% at $75.49 a barrel and Brent is down 1.7% at $78.83 a barrel. (anthony.harrup@wsj.com)

(END) Dow Jones Newswires

January 21, 2025 09:59 ET (14:59 GMT)

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