The global financial markets experienced significant volatility at the start of trading on Monday (February 3, 2025), reacting to President Donald Trump’s recent decision to increase import tariffs.
On Saturday, Trump signed an executive order raising tariffs on imports from Canada and Mexico by 25% and from China by 10%, effective February 4. Shortly after, Canadian Prime Minister Justin Trudeau retaliated by imposing a 25% tariff on imports from the United States. Similar responses from Mexico and China are anticipated.
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Interestingly, sources from the White House cited by Bloomberg indicate that the executive order includes provisions for tariffs to be raised further if retaliation occurs from affected countries.
This sets the stage for a potential second round of trade wars, which could intensify. This sentiment is likely to impact market movements during the European session.
GOLD
The price of Gold (XAUUSD) reached an all-time high of $2,817.04 per troy ounce last Friday. However, on Monday, Gold exhibited volatility due to its elevated position and a strengthening US dollar, leading to profit-taking and a decline to $2,772.15 per troy ounce.
Given the heightened risk of a broader trade war, Gold is expected to gain further attractiveness as a safe haven asset. This sentiment is likely to positively influence Gold prices, as evident from its recovery from earlier declines today.
OIL
Oil prices surged to $75.15 per barrel this morning before retracting to $73.47 per barrel, displaying volatility within this range. The initial spike was attributed to Trump’s implementation of a 10% import tariff on Canadian energy sector products.
The increase in tariffs for this sector is less severe compared to others, as Trump aims to avoid soaring domestic fuel prices that could trigger inflation. Nevertheless, the tariff hike is still providing a positive sentiment for Oil.
EURUSD
The EURUSD pair plummeted immediately following the market opening today. It hit a daily low of 1.02104, dropping 1.490 points (nearly 150 pips).
The decline in EURUSD is largely motivated by the potential for the European Union to face similar import tariff increases, as Trump has previously indicated. The EU has also asserted its intention to raise tariffs on US goods.
This situation has contributed to negative sentiment that may continue to weigh on EURUSD.
GBPUSD
GBPUSD fell by 1.416 points (141.6 pips) to 1.22491 in today’s trading session. The looming trade war risks have elevated the demand for the US dollar as a safe haven asset, thus putting downward pressure on GBPUSD.
Furthermore, there are concerns that the UK economy could deteriorate in the event of a trade war. This negative sentiment is expected to persist in the European trading session.
USDJPY
USDJPY dropped to 154.779 right at the market opening today, then quickly rebounded to 155.881. This volatility stems from both the US dollar and yen being regarded as safe haven assets.
However, the US dollar might have an advantage, as rising import tariffs could accelerate inflation in the US, possibly prompting the Federal Reserve to be cautious about lowering interest rates. Therefore, positive sentiments are likely to prevail.
Nasdaq
The Nasdaq index fell to 20,950 at the start of trading today. Compared to Friday’s close, Nasdaq declined by over 600 index points.
The fear of a renewed trade war has prompted a sell-off in stock indexes, including Nasdaq. Canada has already retaliated with a 25% tariff on US imports, and if Mexico and China follow suit, Nasdaq is expected to face continued pressure during the European trading session.
