Global trade tensions are heating up once again after President Donald Trump confirmed the implementation of tariffs on Canada, Mexico, and China, driving the price of Gold (XAU/USD) to $2,921. Market reactions to this policy have been filled with concern, and affected countries, particularly Canada, are preparing to retaliate with similar tariffs. This uncertainty has further strengthened Gold’s appeal as a safe-haven asset amidst the global economic turmoil.
GOLD
On Tuesday, Gold (XAU/USD) surged to $2,921, following a more than 1% increase the day before. This rise was prompted by President Trump’s confirmation that tariffs on Canada, Mexico, and China would remain in effect despite ongoing negotiation efforts.
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In response, Canada and China rejected the unilateral tariffs imposed by the United States. Canada is set to impose a 25% retaliatory tariff worth CAD 30 billion starting this Tuesday, with an additional CAD 125 billion in tariffs within 21 days if the US policies persist. This situation could potentially lead to a rise in Gold prices tonight.
OIL
Oil prices dipped by 1.6%, weakening after OPEC+ reaffirmed its plans to increase supply by 138,000 barrels per day starting in April. Previously, the market had speculated about a possible delay, but this decision underscores OPEC+’s commitment to maintaining market balance.
This move may alleviate pressure from President Trump, who has been urging for increased production to lower prices. However, additional supply could exacerbate price pressures if demand remains weak, leading to increased volatility in the oil market.
EURUSD
EURUSD continued to strengthen above 1.0500 during European trading, driven by optimism surrounding the peace plan for Ukraine agreed upon by European leaders and President Volodymyr Zelenskyy. Hopes for a ceasefire with Russia have generated positive sentiment for the Euro (EUR), with expectations that geopolitical stability could restore supply chains and improve the Eurozone’s economic outlook.
Additionally, the Eurozone unemployment rate fell to 6.2%, better than the 6.3% forecast, providing further support for the Euro. Stability in the labor market reflects better business growth and purchasing power, bolstering regional economic prospects and supporting a bullish trend for EURUSD.
GBPUSD
GBPUSD maintained its position above 1.2700 during Tuesday’s European trading session, continuing its upward movement since the beginning of the week. The weakening of the US Dollar has been a major factor behind this gain, as expectations grow that the Federal Reserve will adopt a more dovish stance. The US Dollar Index fell to 106.30, reflecting the Greenback’s weakness against six other major currencies.
Speculation regarding a rate cut by the Fed in June has intensified, with the probability reaching 86.9%, up from 69% in the past week, according to the CME FedWatch tool. If these expectations continue to evolve, downward pressure on the US Dollar could persist, opening opportunities for GBPUSD to maintain its upward trend in the near term.
USDJPY
USDJPY fell back below the 149.00 level after the Japanese Yen (JPY) lost most of its gains. This decline was triggered by disappointing economic data from Japan, including a rise in the unemployment rate and a decrease in corporate capital expenditures for the first time in three years. Such poor data induced selling pressure on the JPY, resulting in the currency’s weakness.
However, the outlook for further JPY weakening seems limited due to hawkish sentiment regarding the Bank of Japan’s (BoJ) policy and threats from President Trump regarding potential currency devaluation in Japan. This suggests that more buying action may be needed to confirm whether the USDJPY pair has reached a short-term low, making it a moment worth further observation.
NASDAQ
The Nasdaq remains under pressure after declining 2.6%, driven by a sharp drop in Nvidia’s stock, which fell more than 8% following President Trump’s confirmation of new tariffs on Canada and Mexico. All stocks in the ‘Magnificent 7’ faced declines, reflecting the impact of tariff policies on the technology sector.
Selling pressure continues to dominate, with the potential for further declines in technology stocks, resulting in possible volatility in the Nasdaq. If negative sentiment persists, there could be further downturns ahead, especially if tariff uncertainties and weak economic data continue to affect the markets.
