The apprehension over an escalating trade war between the United States and countries like China has sparked significant volatility in the early European trading session on Monday (February 10, 2024).
President Donald Trump is set to announce a plan to raise import tariffs on steel and aluminum by 25% for all nations today. Market participants are eagerly awaiting details about when this policy will take effect.
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Moreover, Trump indicated that he would introduce a reciprocal policy, meaning tariffs could increase even further should other nations raise their import duties on U.S. goods. This has raised concerns about the possibility of a larger trade conflict.
GOLD
The price of Gold (XAUUSD) surged, breaking through the $2,900 mark per troy ounce for the first time in history. Compared to the trading closure last Friday, Gold has jumped over $40, or 400 pips.
The fears surrounding a larger trade conflict between the U.S. and other countries have led to a boost in demand for safe-haven assets, driving the price of Gold substantially higher.
This sentiment is likely to continue influencing Gold’s movements in tonight’s trading session.
OIL
Oil prices (CLS10) have risen in early European trading, reaching a daily peak of $71.76 per barrel after dipping to $70.82 per barrel earlier this morning.
Despite facing negative sentiment, Oil has managed to climb, possibly due to short covering as it is currently trading at a five-week low.
The risks associated with a further trade conflict could diminish global economic growth, potentially reducing Oil demand, presenting a negative sentiment that makes Oil susceptible to a reversal.
EURUSD
EURUSD has rebounded at the beginning of the European trading session, reaching a daily high of 1.03348 after earlier plummeting to 1.02810 this morning.
The rise in EURUSD comes despite investors seeking safe-haven assets, including the U.S. dollar, owing to the heightened risks from a larger trade war. This situation should typically apply pressure on EURUSD, indicating a potential reversal.
GBPUSD
Similarly, GBPUSD also reversed to 1.24206 in early European trading after experiencing a drop to 1.23693 this morning. Like EURUSD, GBPUSD continues to be affected by negative sentiments stemming from the trade war risks.
Moreover, negative sentiment has emerged from the Bank of England’s (BoE) recent decision to cut interest rates by 25 basis points to 4.5% last Thursday. Additionally, two members of the BoE board suggested that further rate cuts may be necessary soon, hinting at more reductions in the near future.
These numerous negative factors may lead to further downward pressure on GBPUSD.
USDJPY
USDJPY has increased at the outset of the European trading session, reaching a daily high of 152.536. Compared to last Friday’s close, USDJPY rose by 1.138 points (113.8 pips).
The movement in this currency pair illustrates the strength of the U.S. dollar, driven by concerns of an intensified trade conflict. Both the U.S. dollar and yen act as safe havens, but the higher interest rates in the United States compared to Japan enhances the dollar’s appeal.
This sentiment is expected to continue impacting USDJPY’s performance during tonight’s trading session.
Nasdaq
Nasdaq has bounced back to 21,730 early in the European trading session after dropping to 21,462 earlier this morning. The index is managing to rise despite the negative sentiment surrounding Trump’s import tariff increase plans.
Market players are awaiting an official announcement regarding this plan today, particularly concerning its implementation timeline and the reactions from affected countries. Thus, volatility for Nasdaq remains high during tonight’s session, with a notable potential for a reversal.
