The trade conflict appears set to escalate once again, particularly between the United States (US) and China. The reciprocal tariffs enforced by US President Donald Trump came into effect on Wednesday, local time. Some countries affected by these tariffs, like South Korea and Japan, are reportedly beginning negotiations with the US, and Trump has expressed optimism regarding the potential for a favorable agreement.
At the same time, Trump has announced plans to increase import tariffs from China to 104%. This decision follows China’s announcement last Friday that it would raise tariffs on all products imported from the US by 34%, effective from April 10.
Recommended
Recommended
Recommended
Recommended
The trade war between the two nations is likely to escalate further, as China shows no signs of backing down in response to the increases.
GOLD
The price of Gold (XAUUSD) initially saw a rise of over $40 or 400 pips, but then reversed course and stagnated at $2,981 per troy ounce during Tuesday’s trading. This movement mirrored US stock index trends, prompting many investors to liquidate their Gold positions to realize profits and cushion losses in the stock market or other affected assets facing margin calls.
Nevertheless, amid the intensifying US-China trade tensions, Gold prices climbed back to approximately $3,012 per troy ounce today. Furthermore, the People’s Bank of China reported renewed purchases of Gold for foreign reserves in March, indicating that central banks globally continue to acquire Gold despite its high price. This sentiment will likely influence Gold transactions in the European trading session.
OIL
The broadening trade dispute has resulted in ongoing selling pressure on Oil (CLS10), which dropped to $56.68 per barrel this morning, marking its lowest level since January 2021.
The escalating trade war poses risks to global economic growth, which could decrease Oil demand, further pressuring prices that have already been negatively impacted by OPEC+’s plans to increase output by 400,000 barrels per day.
This sentiment will continue to affect Oil movement during the European trading session.
EURUSD
EURUSD recorded an increase of 526 points (52.6 pips) to reach 1.09555 during Tuesday’s trading. By midday today, EURUSD surged an additional 110 pips to 1.10657. The currency pair received a positive boost following Trump’s statement expressing a willingness to negotiate a trade deal with the European Union, provided it helps address the large trade deficit.
Additionally, news of a coalition government forming in Germany has bolstered EURUSD’s performance, as such a coalition would expedite and facilitate executing fiscal reforms. This sentiment is expected to impact EURUSD’s movement in the European trading session.
GBPUSD
GBPUSD also surged in today’s trading, reaching 1.28535. Compared to Tuesday’s closing, GBPUSD jumped 922 points.
The prospect of the European Union reaching a trade deal with the US has positively influenced GBPUSD.
USDJPY
USDJPY fell by 1.602 points (160.2 pips) and continued to drop by another 166 pips today to 144.577, approaching its lowest point in six months. The high volatility for this currency pair is attributed to both the US dollar and yen being considered safe havens.
However, the risks of an economic slowdown in the United States may open the door for the Federal Reserve to cut interest rates more swiftly, generating negative sentiment for USDJPY.
Nasdaq
The Nasdaq initially surged by 726 index points yesterday before reversing and plummeting by 402 index points, closing the session at 17,226. The escalation of the US-China trade war caused the Nasdaq to further decline by 476 index points to 16,750.
According to Bloomberg, a Chinese Foreign Ministry official stated that China is unfazed by Trump’s plan to raise import tariffs to 104%, asserting that intimidation, threats, and coercion are not the right ways to engage with China.
In light of this, there is a possibility that China will retaliate against the US, potentially exacerbating the trade war, which creates a negative sentiment for the Nasdaq.
