According to Claudia Sheinbaum and Donald Trump, tariffs between the US and Mexico are paused for one month. This has already triggered a rebound for the crypto market, particularly XRP.

However, Canadian Prime Minister Justin Trudeau is retaliating harshly to US tariff efforts. His country is much more entangled with crypto markets than Mexico, presenting a real wild card.

US and Mexico Reach Agreement

Proposed tariffs between the US and Mexico have been wreaking havoc in the crypto market. US tech stocks were already reeling from DeepSeek, but new tariffs against Mexico, Canada, and China have caused billions in crypto liquidations.

XRP, which rallied over 300% since Trump’s election victory, dropped by over 25% over the weekend after the US president indirectly imposed a global trade war. Ripple’s altcoin slumped to $2.01 on Monday morning, its lowest in over a month.

Nonetheless, Mexican President Claudia Sheinbaum has reached an agreement with Donald Trump to postpone the process.

“We had a good conversation with President Trump with great respect for our relationship and sovereignty; we reached a series of agreements. Our teams will begin working today on two fronts: security and trade. Tariffs will be paused for one month from now,” Sheinbaum claimed via social media.

Sheinbaum claimed that her government would direct the National Guard to police the drug trade in the US. Trump concurred, announcing the deal.

Now that these new tariffs have apparently been halted, the markets have started to recover. In particular, the value of Ripple’s XRP token jumped up 6%.

Overall, XRP has regained the majority of its losses from earlier today. In fact, most of the ‘made in USA‘ cryptocurrencies, such as Cardano, Chainlink, and Hedera, have recovered significantly following the agreement.

Going forward, it seems that these assets will be highly driven by the political decisions and economic policies of the US.

Politics and Macroeconomic Factors Continue to Influence the Crypto Market

This development validates the predictions that tariffs would present a buying opportunity in crypto. Mexico and the US are significant trading partners, and Trump’s bluster has turned into a mutually beneficial trade deal.

The markets are sighing in relief, but there’s still a fly in the ointment: a lack of progress with Canada.

Unlike his counterpart in Mexico, Canadian Prime Minister Justin Trudeau has proved unyielding about US tariffs. He denounced these actions in a major speech, and Canada is preparing to retaliate with a trade war offensive of its own.

Tariffs against China are also apparently intact, but the country’s response is far more muted.

Canada, compared to Mexico, is substantially more entangled with the US crypto market. BlackRock launched a Bitcoin ETF in Canada, and 40% of the country’s institutional investors hold crypto.

The markets have been rebounding from one set of tariffs, but Canadian defiance may play an outsized role in this industry.

Ultimately, however, this situation is far too chaotic to predict accurately. Sheinbaum fervently denounced US tariffs against Mexico yesterday but shocked the markets with a successful deal this morning.

Trump and Trudeau may reach their own reconciliation agreement, which could have any number of impacts on the crypto market. Regardless, it’s evident that we’re in a new era of chaotic price moves.

XRP, once on the verge of reaching a new all-time high, has recently charted a two-month low. This shift comes amid widespread bearish market conditions, leading to massive liquidations among XRP holders. 

The sudden downturn caused significant losses, and traders are now facing a volatile market environment.

XRP Traders Face Massive Loss

XRP traders have faced their largest liquidations in six months as the altcoin price slipped below $2. In a single day, long liquidations surged to $64 million, highlighting the rapid exit of traders. This spike in liquidations reflects growing fear and uncertainty in the market.  

As a result, the large number of liquidations could hinder the future support XRP receives from the Futures market. Many bullish traders were forced to close positions, which could affect market sentiment moving forward. The price dynamics and heavy sell-offs have added further pressure on XRP’s recovery.

Realized profits from XRP holders surged to $1.5 billion as panic selling intensified. Investors moved to secure profits after the sharp price decline, fearing additional losses should XRP fail to recover. The large profit-taking event further exacerbated the downward pressure on XRP, reinforcing the uncertainty around its near-term price trajectory.

Increased profit-taking activity has slowed the recovery process for XRP, especially with some investors choosing to move to stable assets. However, this behavior also reflects cautious optimism, as traders may wait for signs of stabilization before re-entering the market. This dynamic will play a key role in XRP’s next move.

XRP Price Prediction: Consolidation Next?

XRP has been down 17% over the past 24 hours, trading at $2.38. The biggest damage occurred during the intra-day low when the price fell 38% to hit $1.77. This sharp drop indicates significant market volatility, with investors unsure about the coin’s near-term future.  

At present, XRP is hovering above the critical support of $2.18 while facing resistance at $2.73. This range has historically been a consolidation zone for the altcoin, suggesting that XRP could remain trapped within this price band for some time. A breakout from either of these levels will be crucial.

If XRP can reclaim $2.73 as support, it would have a chance to rise toward $2.95. Successfully breaching this resistance would invalidate the current bearish outlook, paving the way for potential recovery.

Crypto markets are closely monitoring key US economic data this week to assess the health of the nation’s economy. As February commences, critical labor market reports — closely watched by the Federal Reserve—are on the calendar.

Given the potential impact on portfolios, traders may adjust their strategies around these upcoming events.

ISM Manufacturing

The Institute of Supply Management (ISM) will release the January ISM Manufacturing data on Monday, February 2, marking the first business day of the month. This nationwide survey of purchasing managers at manufacturing firms is widely viewed as a critical gauge of the US economy’s health.

The previous ISM manufacturing index was 49.3, with a consensus forecast of 50.0 for January. Readings above 50 indicate expansion, with the positive data boosting investor confidence in the economy’s strength. This could lead to increased risk appetite in the market.

If the ISM manufacturing index falls below the consensus of 50.0, it would suggest a contraction in the manufacturing sector. This could lead to concerns about the economy’s overall health and potentially negatively impact investor sentiment.

As a result, Bitcoin and other risk assets may experience increased volatility and downward pressure as investors seek safer assets during economic uncertainty.

“If ISM Manufacturing PMI rises, US stocks and the dollar strengthen, while crypto may drop due to tighter monetary policy expectations. If it falls, stocks can weaken, IHSG may be pressured by global sentiment, and crypto can go up or down based on risk sentiment and liquidity,” a user on X commented.

Job Openings

On Tuesday, February 4, the US Bureau of Labor Statistics (BLS) will release the December Job Openings and Labor Turnover Survey (JOLTS). The publication will provide data about the change in the number of job openings in that month and the number of layoffs and quits.

The data provides valuable insights regarding the supply-demand dynamics in the labor market, a key factor affecting salaries and inflation. In hindsight, the JOLTs survey showed that openings rose in November to 8.1 million.

Now, the consensus is also 8.1 million in December. Suppose the JOLTS data for December shows that job openings have increased as per the consensus forecast of 8.1 million or remain stable at that level; in that case, it indicates a strong labor market with ample opportunities for job seekers.

This positive economic indicator could improve consumer confidence, increased spending, and economic growth. In such a scenario, Bitcoin and other risk assets may benefit as investors anticipate a stronger economy and potential inflationary pressures.

Of note is that the state of the labor market is a key factor for Fed officials when setting policy. Therefore, if the data shows unexpected weakness, it could prompt a more dovish stance from the Fed. This could lead to lower interest rates or other accommodative measures.

Conversely, strong labor market data could push the Fed towards a more hawkish stance, possibly resulting in tighter monetary policy.

ADP Employment

The ADP Employment Change, released by Automatic Data Processing Inc., measures changes in private-sector employment in the US. An increase in this indicator typically suggests stronger consumer spending and supports economic growth. As a result, a high reading is generally bullish, while a low reading is considered bearish.

Wednesday’s ADP Employment Change report is an early indicator ahead of Friday’s official jobs data. Following December’s modest figures of 122,000, analysts are closely monitoring for signs of a slowing labor market.

A weaker-than-expected report could lift markets on hopes of Federal Reserve easing. At the same time, a stronger-than-expected result might trigger short-term volatility as traders adjust expectations for rate cuts.

“With earnings from tech giants and key economic data like ADP employment and ISM reports, this week could be a major inflection point for both equities and macro trends. Expect high volatility,” a crypto analyst on X observed.

Initial Jobless Claims

On Thursday, February 6, the weekly jobless claims will also shed light on the health of the US labor market. The previous initial jobless claims data came in at 207,000 for the week ending January 25. The median forecast is 213,000 for last week.

Meanwhile, weekly unemployment claims have been falling steadily for several weeks after hitting their highest level in October of more than over. Nevertheless, US initial jobless claims declined, continuing the rise in jobless claims.

This points to an environment where employers try to retain their employees for as long as possible. However, employees who lose their jobs find it difficult to get a new job.

“Thursday’s release of Initial Jobless Claims will provide an early indication of the labor market’s health, particularly in response to any economic headwinds. This metric is critical for gauging short-term shifts in employment and consumer confidence. The day also spotlights a broad spectrum of stocks,” Markets Today indicated.

US Employment

The January employment report is due on Friday, February 7. It is expected to sum up US economic data on the labor market for the last month. Economists expect January’s employment report will show payrolls dropped to 175,000 after recording 256,000 in December.

The Friday data will come after core personal consumption expenditures (PCE) prices rose to 2.6% in December. This PCE inflation rate met expectations of the Dow Jones economic estimate, while the Fed’s target inflation goal remains 2%.

Ahead of these US economic data, BTC is trading at $93,895, a 6.31% drop since Monday’s session opened.