The global financial markets have entered a tentative phase, with the US Dollar showing signs of retreat as geopolitical developments continue to unfold. On Monday, the currency's performance was hindered by a growing risk appetite and potential truce in the Ukraine conflict. Meanwhile, Mexico emerged as the top exporter with $466.6 billion, according to data from the US Census Bureau.
In a significant announcement, former President Donald Trump reiterated plans to impose an additional 10% tariff on Chinese imports starting Tuesday. This move forms part of a broader focus on tariffs against Mexico, China, and Canada. The 25% tariffs on Canada and Mexico are set to be enacted next Tuesday, following the expiration of a one-month delay.
Investor sentiment has been affected by these developments, with the US Dollar struggling to find demand at the start of the week. Traders are closely monitoring geopolitical tensions as they assess their potential impact on market dynamics.
In the currency markets, the GBP/USD pair defended minor bids near 1.2600 during the European session on Monday. Simultaneously, the EUR/USD traded modestly higher, above 1.0400, as the European session commenced. The preliminary February inflation data from the Eurozone is expected to feature prominently in the economic calendar on Monday. Analysts forecast that the Harmonized Index of Consumer Prices (HICP) in the Euro area will rise by 2.6% year-on-year in February.
The AUD/USD pair experienced losses for six consecutive trading days, recording a decline of over 2% in the previous week. This decline reflects broader market volatility amid ongoing geopolitical uncertainties.
In commodity markets, gold registered a loss of more than 2.5%, closing the week in negative territory for the first time since late December. The precious metal's performance has been influenced by shifting investor expectations regarding monetary policy.
Traders are currently pricing in the possibility that the Federal Reserve may cut interest rates by a quarter of a percentage point twice by the end of this year. This prospect adds another layer of complexity to already volatile market conditions.
It is important to note that Mexico, China, and Canada accounted for 42% of total US imports in 2024. This highlights the significance of these countries in US trade dynamics and underscores the potential impact of tariff implementations.
Investors and market participants are advised to remain vigilant as geopolitical developments continue to evolve. It is crucial to stay informed about economic indicators and policy announcements that may influence market trajectories.