As the world slides deeper into an era of protectionism and trade rivalries, global financial markets are experiencing a high degree of volatility. Given these factors, current tariff levels have skyrocketed to levels not witnessed since the Second World War. This surge raises questions about their long-term effectiveness, as trade rerouting may become the norm. As uncertainty in global trade over US-China relations becomes evident, the Australian Dollar underperforms. At the same time, safe-haven assets such as precious metals and the Japanese Yen strengthen. As US President Donald Trump is about to announce a series of reciprocal tariffs, it could get a whole lot worse.
That’s why the Australian Dollar is reeling. It was changing hands in a hostile territory at around 0.6280 against the greenback during the early Asian session on Monday. The currency’s recent weakness has been blamed on rising global trade tensions as tariffs have hit record highs. So, in answer to all these geopolitical tensions, the precious metals market is booming. Surging Gold prices, which is picking up steam toward the $3,090 mark during the same session.
The risk-off mood is starting to look like a stampede as investors continue to flock to safer assets. The usually safe-haven Japanese Yen is being supported by this sentiment. Intensifying hawkish expectations from the Bank of Japan are helping put the risk-averse environment in place. At the same time, the USD/JPY pair continues to pull back from its monthly high hit on Friday, underscoring the latest wave of market volatility.
President Trump’s proposed reciprocal tariffs would make things a hell of a lot worse, adding even more uncertainty to the global trade environment. His enacted tariff hikes will have an enormous, lasting impact on trade. They’ve increased the trade-weighted average tariff rate on all US imports by at least 5.5 to 6.0 percentage points. Even though Trump is now expected to make a formal announcement on these tariffs, market participants are still jumpy about the possible fallout.
Economic indicators are coming under the same watchful eye in the wake of these events. The upcoming US jobs report could be an early sign of DOGE’s effects on the labor market. Concerns about stagflation in the United States are forcing USD bulls to the defensive. This concern is a new dimension of complexity to the current economic situation.
Across the pond, all eyes are on Eurozone inflation figures, which will be critical in forging European Central Bank expectations. The question mark over a possible April rate cut only heightens the prevailing market concern.