The increase in import tariffs by 10% on Chinese goods, imposed by the United States, took effect today. In retaliation, China has raised tariffs on liquefied natural gas, coal, crude oil, and agricultural equipment by 10% to 15%. Additionally, import tariffs on vehicles will also see an increase, all set to take effect on February 10.
Thus, the second phase of the trade war between these two nations has officially commenced, albeit on a smaller scale. Consequently, the markets have not reacted excessively. Moreover, US President Donald Trump and Chinese President Xi Jinping are expected to hold discussions in the coming days.
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In addition to the tariff hikes, China has initiated an anti-monopoly investigation targeting the American company, Google. This sentiment is likely to have an impact on trading during the US session on Tuesday (February 4, 2025). The upcoming release of the job openings and factory orders data in the US at 10:00 PM WIB could also significantly influence the market.
Here are some data from Trading Central:
- Job openings data/JOLTS (December); forecast 7.08 million vs previous 8.1 million.
- Factory orders data (month-on-month/December); forecast -0.7% vs previous -0.4%.
GOLD
Gold prices (XAUUSD) have shown volatility, fluctuating between US$ 2,807 and US$ 2,824 per troy ounce at the beginning of the European trading session. Currently, gold is hovering near its all-time high of US$ 2,830 per troy ounce, reached earlier in the week.
With the second trade war officially beginning between the US and China, there might be an increase in demand for gold as a safe haven. Furthermore, if the economic data from the US is released lower than the forecast this evening, the sentiment around gold will become increasingly positive, potentially breaking its all-time record again.
OIL
Oil prices (CLS10) declined at the start of European trading, hitting US$ 71.52 per troy ounce. Compared to Monday’s close, oil is down by US$ 0.79. The price of oil has been pressured after President Trump postponed the imposition of import tariffs on crude oil from Canada, which was supposed to take effect today.
This sentiment is likely to continue influencing oil prices during tonight’s trading.
EURUSD
The EURUSD pair exhibited a rebound at the beginning of the European session after previously dropping by 705 points (70.5 pips) to 1.02721. China’s measured and partial tariff responses have provided some relief to the market, suggesting that a large-scale trade war is not imminent.
Additionally, with expectations that Trump and Xi will engage in talks soon, there is hope that the trade conflict will not escalate. Given the EURUSD’s ability to rebound, there is potential for positive sentiment if the US economic data released this evening undershoots the forecast.
GBPUSD
Similar to EURUSD, this currency pair also cut down its losses after a drop of 697 points (69.7 pips) to 1.23789. The recovery in GBPUSD remains limited as market participants await the Bank of England’s (BoE) interest rate announcement on Thursday.
Nevertheless, if the US economic data released tonight falls short of the forecast, GBPUSD could see a positive shift in sentiment.
USDJPY
The USDJPY pair rose at the start of the European session, reaching a daily high of 155.521. Compared to Monday’s trading close, USDJPY climbed by 752 points (75.2 pips). Both the US dollar and the yen hold the status of a safe haven, leading to potentially volatile movements in this currency pair.
If the US economic data this evening is reported lower than the forecast, USDJPY might experience negative sentiment.
Nasdaq
The Nasdaq index fell more than 300 points to 21,242 at the beginning of the European trading session. Negative sentiment predominantly stemmed from China’s response to the tariff hikes. Furthermore, China’s initiation of an anti-monopoly investigation against Google adds pressure to the Nasdaq, which is closely linked with the technology sector.
This sentiment is expected to continue influencing Nasdaq movements during tonight’s trading.
