As of Thursday afternoon, the US Dollar Index (DXY) was down 0.19%, hovering just above 104.35. This drop came just days after US President Donald Trump threatened to levy huge tariffs on Europe and Canada. Here’s what Trump said on Truth Social. He argued that if these countries coordinated efforts to tank the United States’ economy, it would have grave economic impacts.
In his statement, Trump emphasized potential protective measures, indicating the possibility of “large scale Tariffs, far larger than currently planned” as a safeguard for the United States against economic adversities.
“If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both in order to protect the best friend that each of those two countries has ever had.” – Donald Trump
Currency Markets React
In reaction to the surging dollar, the EUR/USD currency pair regained losses from their more than three-week nadir. During Thursday’s Asian session it hit down to 1.0735-1.0730 where it showed willingness to strengthen thus far. The US Dollar will be under extreme duress. This is largely due to falling Treasury yields, with 2- and 10-year Treasury yields at 4.0% and 4.34%, respectively.
Likewise, the GBP/USD currency pair rebounded from losses suffered in the prior session. It rose to just under 1.2910 during the Asian Thursday session. This latest development is just one example of larger market reactions to the cascading economic effects caused by the Trump administration’s unpredictable trade policies.
Safe-Haven Assets and Cryptocurrencies
Against this backdrop of uncertainty, safe-haven assets such as gold have returned to the positive favor. When trade tensions escalate, the world’s investors rush to the safest havens. On Thursday, everyone wanted to buy gold.
Cryptocurrencies responded to these market dynamics. At the time of writing on Thursday, Cardano trades at around $0.74. It has been a powerful comeback, up more than 4% just this week. This key indicator trend is a sign of a bullish mood among cryptocurrency investors in the face of economic uncertainty.
Broader Economic Implications
The potential imposition of tariffs by President Trump could have wide-ranging implications for global trade relations. President’s threats show just how tenuous are the new international economic order’s balancing act. They further introduce the prospect of greater currency market volatility.
Treasury yields are still on the wane, exerting downward pressure on the US Dollar. This lag is affecting all but the most volatile currency pairs, and increasingly defining investor behavior across other asset classes.