US President Trump’s new 25% tariff on cars and trucks made outside the US, alongside rising inflation concerns, strong US data, and mixed comments from the Fed, dampened market sentiment. This worsened fears of a trade war and higher inflation. The EU also faced concerns about potential tariffs, food shortages in the event of war, and rising inflation reports. Despite this, risk sentiment improved on Thursday, helped by positive China news and a market recovery after a down day.
Trump's tariff announcement, though partly softened by a one-month exemption on auto parts, rattled markets with fears of escalating trade wars. These concerns, combined with US data showing stronger inflation and hawkish Fed remarks, boosted the US Dollar. The Dollar Index (DXY) hit a three-week high, but improved China economic news and support for commodities led to a retreat in the DXY and boosted commodities and risk currencies like the AUD and NZD.
EURUSD and GBPUSD bounced back from three-week lows, while USDJPY showed slight losses. Further, AUDUSD and NZDUSD add to weekly gains, whereas USDCAD remains under pressure after declining in the last three consecutive days. That said, Crude Oil struggled near early March highs, and Gold recovered from an 11-month support. Moving on, Bitcoin and Ethereum saw their first daily loss in three days, while equities pared their weekly gains.
EURUSD ends a six-day losing streak, recovering from a three-week low as markets consolidate ahead of key events, including the US Q4 GDP, ECB President Lagarde’s speech and February Core PCE Price Index. Positive headlines about a potential Ukraine-Russia ceasefire and China-driven optimism also helped lift the Euro. However, concerns from the European Commission advising citizens to stockpile food and fears of trade wars and supply chain issues weighed on the currency pair before today’s bounce.
GBPUSD rebounds from a 13-day low, ignoring concerns from the UK Spring budget and weak inflation data. The Pound fell the previous day due to a risk-off mood, soft UK CPI, and an unimpressive budget presentation. However, today’s recovery seems tied to market consolidation, brushing off the dovish outlook for the Bank of England (BoE).
USDJPY benefits from a pullback in the US Dollar, paring its weekly gains. The pair largely ignores rising inflation concerns, focusing instead on Japan’s warning about the economic impact of US tariffs.
AUDUSD recovers from the previous day's dip, while NZDUSD follows suit, boosted by China-driven optimism and easing Ukraine-Russia concerns. USDCAD remains under pressure for the fourth day as hopes rise for a resolution to US trade tariffs and WTI Crude Oil prices, Canada’s key export, head for weekly gains. However, dovish stances from the central banks of Australia, New Zealand, and Canada, along with political uncertainty in Ottawa, challenge the recent gains of these riskier currencies.
Hopes of rising China gold demand, fueled by the inclusion of insurance companies in the Shanghai Gold Exchange, along with uncertainty over US tariffs and politics, continue to support gold buyers, despite the DXY's potential for a weekly gain. An 11-month-old resistance level and the 10-day EMA also help prop up gold prices and attract buyers.
Meanwhile, Crude Oil retreats from a three-week high, ending a three-day winning streak, despite a surprise drop in US weekly oil inventories and a pullback in the US Dollar weigh on prices.
GameStop's plan to issue $1.3 billion in convertible notes to buy Bitcoin, along with cautious optimism ahead of Liberation Day, supported Bitcoin (BTCUSD) and Ethereum (ETHUSD) in their first daily gains in three days. However, both cryptocurrencies remain under weekly pressure amid fading optimism surrounding Trump.
Thursday is set to be active with market reactions to China news, consolidation in tariff concerns, the final US Q4 GDP reading, weekly Jobless Claims, and multiple speeches from central bankers across the UK, Europe, and the US. This could spark a potential market turnaround as US growth fears escalate, which might push the US Dollar lower and support Gold, EURUSD, and GBPUSD. USDJPY could trim its weekly gains, while the Antipodeans may continue their upward momentum. Crude Oil could rise due to US inventory draw and fewer executions of Trump’s "drill baby drill" policy. Cryptocurrencies may not benefit from a USD pullback, but equities might reverse the previous day’s losses. Additionally, Friday's US Core PCE Price Index, the Fed’s preferred inflation gauge, could either confirm inflation concerns and boost the US Dollar by challenging the dovish Fed bias.
May the trading luck be with you!
