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The US dollar fell on Monday ahead of Donald Trump’s inauguration, after officials of the incoming president announced that he would not immediately launch trade tariffs against some of the US’s biggest trading partners.

The currency fell 1 percent against a basket of six peers in London afternoon trading, putting it on course for its biggest daily decline in more than five months.

The fallout came as senior officials in the incoming administration told reporters that Trump intends to evaluate trade relations with Mexico, Canada and China, but signaled that he would stop quickly from imposing new tariffs. tariffs.

“The dollar has rallied for four months on the prospect that the new Trump administration will hit the ground running with tariffs,” said Chris Turner, head of financial market research at ING. “These early reports point to a more measured approach.”

Markets have been betting since early October that Trump’s proposals for trade tariffs and tax cuts would stoke inflation, pushing the Federal Reserve to keep interest rates higher.

The euro and sterling jumped, adding 1.2 percent and 1.1 percent respectively – on track for their best days since November and December 2023 respectively.

The Mexican peso added 1.2 percent. The Canadian dollar rose 0.9 percent, putting it on course for its strongest day since May 2023.

“The dollar is very overbought and has been for weeks now. There is a correction coming,” said Brad Bechtel, global head of FX at Jefferies.

Wall Street is closed on Monday. US government bonds have recently sold off, partly in anticipation of the inflationary impact of tariffs on the US economy.

“One thing the FX market is looking forward to is more volatility,” said ING’s Turner. “And we certainly see that.”

James Nelligan, a strategist at JPMorgan, wrote on Monday that “there will be no immediate implementation of the tariff . . . will be a short-term disappointment in the dollar and it will understandably be weaker in sympathy.

However, he added that there is still scope for “potentially aggressive tariffs down the line once reviews of trade relations with federal agencies take place”.