Currencies sensitive to risk, particularly those perceived as proxies for China within the G-10, experienced notable declines following President Trump's recent remarks. Speculation about impending tariffs on a wide range of imports, including steel and semiconductor chips, has created unease in the financial markets. The euro weakened amid concerns that the European Union may soon find itself in the tariff crosshairs.
President Trump announced considerations for imposing a 2.5% tariff rate but expressed a preference for significantly higher rates. This announcement has reignited fears that the hiatus from tariff discussions was merely temporary. The dollar surged against all major currencies in response to these developments, with the AUD/USD pair extending losses to test 0.6250 amid rising trade war fears.
Chinese tech startups are making bold moves into the AI sector, a domain long dominated by U.S. tech giants. With soaring valuations in AI, several Chinese companies have recently made their AI model offerings open source, sending ripples through the tech industry. These developments come as Chinese economic troubles and modest U.S. dollar strength further dragged the Australian dollar from its recent peak.
Bessent's strategy to allow more time for exporters and importers to respond to the tariffs could trigger an immediacy in importing and exporting activities. A "moderate-extreme" tariff position may involve a phased introduction of universal tariffs, aiming to balance economic impacts. Meanwhile, softer Japanese service-sector inflation data provided additional momentum for the USD/JPY pair's recovery.
In the commodities market, predictions of a Federal Reserve rate cut and a weaker risk tone are expected to help limit downside risks for safe-haven assets like XAU/USD. Concurrently, RBA rate cut bets and China's economic challenges continue to influence currency movements.
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The Treasury Secretary's remarks, alongside President Trump's statements, underline that tariff talks may soon dominate international trade discussions once again. As traders brace for potential market shifts, the focus remains on how these policies will impact global commerce dynamics.
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