US President Donald Trump's recent decision to impose tariffs on all imports from Colombia has reignited concerns about a potential trade war. The move has sent shockwaves through global markets, triggering a fresh wave of risk-aversion trading. As investors grapple with the implications of this decision, capital market participants are increasingly anticipating a series of interest rate cuts this year in both the Eurozone and the United States.
In response to mounting economic uncertainties, the US Federal Reserve is expected to implement two interest rate cuts of 25 basis points each. Meanwhile, the European Central Bank (ECB) is anticipated to make four interest rate cuts as it navigates the challenging economic landscape. These monetary policy adjustments are viewed as crucial measures to mitigate potential fallout from the escalating trade tensions.
Despite the heightened risk aversion, the US Dollar's recent upswing lost momentum. GBP/USD managed to trim losses and regain ground at 1.2450 during the European session on Monday. Similarly, EUR/USD clung to recovery gains below 1.0500, buoyed by fresh demand amid a fading US Dollar recovery. However, expectations of ECB rate cuts have limited the pair's rebound potential.
Global stock markets experienced significant sell-offs as investors remained cautious about President Trump's tariff plans. The EUR/USD pair also found support from an upbeat German IFO survey, indicating positive sentiment in Europe's largest economy. Nevertheless, the looming rate cuts by the ECB have tempered some of the optimism surrounding the pair's performance.
In the cryptocurrency market, Bitcoin experienced a sharp decline, falling nearly 4% after reaching a new all-time high of $109,588 the previous week. The cryptocurrency's volatility remains a focal point for investors amid broader market uncertainties.
It is important to note that neither the author nor FXStreet are registered investment advisors, and this article is not intended to provide investment advice. Readers are encouraged to conduct their own research and consult with professional advisors before making any investment decisions.