That’s the backdrop as we head into an incredibly important next few US economic announcements. All of these developments are going to have a major effect on the financial markets. On July 19, 2023, US President Donald Trump announced a third round of tariffs. First, he slapped a punitive 25% tariff on every imported car coming into this country. This reckless action has raised global tensions, as foreign countries such as Canada and members of the European Union have announced plans to retaliate. The overall sentiment on the market is bearish. After a highly successful week of announcements this past week, a super strong ISM Manufacturing PMI for March, JOLTS Job Openings and Nonfarm Payrolls are coming next.
The PCE Price Index, the Federal Reserve’s preferred inflation measure, held firm at 2.5% y-o-y in February. Originally crafted to measure the cost-of-living, this index has become the go-to measure of inflation. Data from the US Bureau of Economic Analysis showed that core PCE inflation roared back more than expected in February. This result is indicative of increasing inflationary pressures.
Of all the market moves on Friday, gold was the star of the show. It was then that prices shot up to their highest ever, hitting $3,086! The Relative Strength Index (RSI) has turned overbought, which is defined as RSI above 70 and is approaching its most extreme reading of 80. At the same time the US dollar weakened and US real yields slided, adding to the supporting factors for gold prices.
April 2 Tariff Announcement Sparks Global Tensions
Just yesterday, President Trump’s announcement of a 25% tariff on imported cars sent shockwaves through global markets. This latest targeted decision is meant to defend affected domestic industries. Caught in the crossfire of heated trade tensions, the Act has, in turn, raised alarm over deepening trade conflicts. Industry from both Canada and the EU are preparing for a vigorous fight against this announcement. Their retaliation plans would only serve to escalate tensions on international trade relations.
Market participants are closely monitoring these developments as they could lead to disruptions in global supply chains and impact economic growth. The pessimistic market mood mirrors these concerns as traders prepare for a possible response from countries impacted by the measures.
Key Economic Indicators to Watch
Thursday brings a half-dozen key economic indicators. Don’t miss them, they are going to provide all sorts of terrific context on where the US economy stands today. Even more attention will be paid to the ISM Manufacturing PMI for March – looking for clues about the strength of the manufacturing sector’s underperformance. A robust print might be a sign of more stimulus-fueled resilience in the face of trade war. Conversely, a weak print could heighten fears of a coming recession.
The JOLTS Job Openings report and Nonfarm Payrolls data will both provide a pretty solid window into labor market conditions. Strong job growth would go a long way in reassuring consumers and investors about continuing expansion. A big miss would stoke the flames of any slowdown concerns.
The PCE Price Index, which was holding firm at 2.5% in February, is another very important measure of inflation. The core PCE inflation’s larger-than-expected increase points to the reestablishment of inflationary pressures across the economy. This increase in inflation matters in a big way, because it’s affecting the Federal Reserve’s decisions on monetary policy.
Gold Surges Amid Market Uncertainty
With markets as volatile as they’ve ever been, gold has proven itself to be the safe haven investors can turn to with certainty. The price of gold jumped aggressively on Friday, exploding to a new record high of $3,086. Five reasons explain why gold prices have skyrocketed. The weakening US dollar and falling US real yields are pushing this inflation higher.
The Relative Strength Index (RSI) for gold has entered extreme overbought territory. It’s now well above 70 and quickly approaching an all-time high of 80. It is possible that gold is currently overvalued. This phenomenon illustrates just how deeply investors are craving the precious metal.
The Federal Reserve’s preferred inflation gauge, the core PCE, just ticked up. This increase adds to worries that inflationary pressures are on the rise. In times of high inflation when purchasing power is declining, investors flock to gold as the ultimate hedge against currency devaluation.