The US Dollar is gaining strength as investors seek safe-haven assets amidst escalating trade tensions between the United States and China. In response to US-imposed tariffs, China has retaliated with countermeasures, significantly impacting market sentiment. The trade war between these two economic powerhouses has dominated the week's headlines, influencing global financial markets.
As Beijing announced retaliatory measures, including an antitrust probe into Google and a 15% tariff on U.S. coal and LNG imports, concerns over the global economic landscape have intensified. These developments come as US President Trump's tariffs on China have officially commenced, marking a new phase in the ongoing trade conflict.
Adding to the week's economic events, the Bank of England (BoE) is under scrutiny as analysts anticipate a rate cut being priced in for June. Meanwhile, the Federal Reserve hawks are bolstered by robust economic data, which has pushed back expectations for the next rate cut.
Investors are also eyeing corporate earnings with keen interest. Alphabet and Advanced Micro Devices (AMD) are set to announce their earnings today, potentially influencing market movements. Concurrently, the monthly avalanche of US jobs data is underway, beginning with job openings data that could further sway economic forecasts.
The trade tensions have also impacted commodities, with worries about Trump's tariffs and inflation concerns supporting the XAU/USD. Market participants are closely monitoring the discussions between Xi Jinping and Donald Trump regarding the 10% tariffs scheduled for this week.
In the currency markets, the AUD/USD is trading around 0.6200 in the European morning on Tuesday. Aggressive rate cut bets from the Reserve Bank of Australia (RBA) are adding pressure on the Australian Dollar. This comes as the market dynamics continue to shift in response to geopolitical and economic developments.