In the early weeks of President Trump's administration, global markets are already feeling the ripple effects of his trade strategies. The European Union could soon find itself in Trump's crosshairs as a potential target for new tariffs, adding to existing concerns. Meanwhile, Trump's influence over China appears diminished compared to the first trade war, presenting a unique challenge. Amid these developments, the financial markets are showing signs of caution, with the risk-on environment prompting bulls to tread carefully due to an overbought Relative Strength Index (RSI).
The US Dollar (USD) is struggling to attract buyers as speculations about Federal Reserve rate cuts gain traction. This anticipation impacts major currencies, offering them unexpected support. Concerns regarding Trump's impending trade tariffs also weigh heavily on the Euro, compounded by the dovish stance of the European Central Bank (ECB). The persistent bets on Federal Reserve rate cuts continue to undermine the USD, further benefiting other currency pairs such as XAU/USD.
In the European session on Wednesday, the GBP/USD pair extended its positive momentum, trading above 1.2500. Similarly, the EUR/USD pair consolidated near its weekly high, supported by sustained USD weakness attributed to tariff uncertainty and potential Fed rate cuts. Investors are also closely monitoring the upcoming US ADP and ISM PMI data for further insights into economic conditions.
Gold prices remain attractive as a safe-haven asset amid growing concerns over Trump's trade tariffs. As the USD weakens, gold continues to draw interest from investors seeking stability. The market's attention remains fixated on developments surrounding Trump's trade policies and their implications for global economic stability.