European stocks and currencies rallied sharply on Monday after the Washington Post reported that US tariffs might be less aggressive than President-elect Donald Trump has previously threatened, injecting optimism into regional markets.
Sources close to the matter told the Washington Post that Trump’s aides are exploring tariff plans that would apply to every country, but only cover critical imports, defined as those deemed necessary for national or economic security. The discussion revolves around imposing tariffs only on specific sectors, the report said.
As a result, the euro rallied as much as 1.2%, while European stocks received a boost, with auto shares in particular bouncing back. The pound rose 0.8%, reaching session highs, while the Mexican peso and the Canadian dollar gained 1% and 0.4%, respectively, in offshore markets.
However, analysts caution that it is unclear what “critical imports” refer to, but it appears that officials are already preparing to water down the worst of Trump’s campaign promises by narrowing the scope of the tariffs.
Meanwhile, reports on Monday suggested that Canadian Prime Minister Justin Trudeau might announce his resignation later in the day, which could have a significant impact on global markets. US stock index futures bounced 0.7-0.9%, signaling an extension to Friday’s rally in the benchmark indices, although trading remains skittish.
