The United States Dollar (USD) has turned weaker at the start of European trading on Monday (July 14, 2024), following a brief period of gains earlier. This move indicates that market participants are weighing the potential negative impact on the US economy should trade tensions escalate again.
As previously mentioned in the Macro Overview, US President Donald Trump has raised import tariffs on countries that have not yet reached a trade agreement. This time, products from the European Union and Mexico are facing a 30% tariff. Prior to this, Canada, Japan, and South Korea were subjected to a 35% tariff.
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Currently, these countries are prioritizing negotiations rather than retaliating with increased tariffs. Trump’s import tariff policy is set to take effect on August 1, providing a window for discussions until the end of this month.
This sentiment is expected to influence market movements throughout today’s trading.
GOLD
Gold (XAUUSD) prices surged at the beginning of European trading, reaching a daily high of $3,374.89 per troy ounce. Compared to Friday’s closing prices, Gold has risen nearly $20 or 200 pips.
As of last Friday, Gold has shown an upward trend for three consecutive days, marking its highest point in three weeks. The increase began after Trump announced new tariffs on countries that failed to reach a trade agreement by July 9.
Concerns over escalating trade tensions have bolstered demand for Gold as a safe haven. This sentiment is likely to continue to impact Gold prices in today’s trading.
OIL
Oil (CLS10) prices rebounded to $69.62 per barrel at the start of European trading, recovering from a drop to $68.39 per barrel earlier.
The rise in Oil prices is driven by demand concerns that outpace supply, also influenced by the potential for the United States to impose sanctions on Russia’s energy sector, which provides a positive sentiment for Oil that will likely affect trading tonight.
EURUSD
EURUSD rebounded to 1.16977 at the start of European trading after dipping to 1.16542 earlier. As mentioned, market players are reflecting on the impact of trade tensions on the US economy, causing the dollar to weaken.
This sentiment is expected to continue influencing trading tonight. The US dollar may face further pressure, which could provide a positive outlook for EURUSD. This is especially true if trade tensions escalate along with the recent tax cuts and spending laws already in play, presenting risks for the US economy.
GBPUSD
GBPUSD reversed to 1.35041 after previously touching 1.34513. The weakening dollar enabled GBPUSD to recover, although negative sentiment from the slowdown in the UK economy still looms large.
The UK’s economic growth (GDP) has contracted for two consecutive months in April and May, indicating a downturn in the UK economy for the second quarter and raising expectations that the Bank of England (BoE) may cut interest rates soon.
This negative sentiment will likely continue to overshadow GBPUSD trading tonight.
USDJPY
USDJPY has been moving sideways within a range of 146.850 – 147.571 as European trading commences. The Yen is currently under pressure following President Trump’s imposition of a 35% tariff on imports from Japan last week, which will take effect on August 1.
Moreover, trade discussions between the two countries remain stalled, sustaining positive sentiment for USDJPY in tonight’s trading.
Nasdaq
The Nasdaq index trimmed its losses after dropping to 22,804 earlier. Renewed trade war fears have led to profit-taking activities impacting the Nasdaq.
In the absence of significant economic data releases from the US and considering its proximity to previous highs, further profit-taking could continue in tonight’s trading.
