The Euro witnessed a favorable upswing on Tuesday as Germany's Greens projected a spending deal within the week. This development provided a boost to the Euro, driving the EUR/USD to trade at fresh multi-month highs, surpassing 1.0900 during the American session. Meanwhile, the US Dollar faced mounting pressure amid concerns over President Donald Trump's trade policies, which have sparked fears of a potential recession in the United States.
In a significant move, President Trump announced via his Truth Social account an increase in tariffs on aluminum and steel imports from Canada, raising them from 25% to 50%. This decision added to the existing tensions between the two nations. Trump stated that these tariffs would take effect on March 12, citing Canada's high farm tariffs on US dairy products as a condition for their removal. Furthermore, he threatened additional duties on cars starting April 2. The Canadian Dollar, however, proved resilient, showing strength against the Australian Dollar.
Amid these developments, gold exhibited a notable recovery. Following a decline on Monday, gold reversed its direction and traded above $2,910 on Tuesday. This shift came as investors expressed concerns about the economic fallout from Trump's tariffs, causing the US Dollar to remain under pressure and providing support to XAU/USD.
Euro Gains Momentum
Germany's Greens offered optimistic predictions about a spending deal this week, injecting confidence into the Euro. As a result, the EUR/USD pair surged to new multi-month highs, climbing above 1.0900 in the American session. This development highlighted the currency's resilience amid ongoing economic uncertainties across Europe.
The Euro's upward trajectory was further bolstered by market sentiment favoring European currencies over the US Dollar. Investors showed a preference for the stability and potential growth prospects associated with the Eurozone, adding to its appeal.
In contrast, the US Dollar struggled to regain its footing due to growing concerns over the Trump administration's trade policies. These policies have raised fears of a possible recession in the US economy, placing additional pressure on the currency.
Gold Makes a Comeback
Gold experienced a turnaround on Tuesday following Monday's decline. Trading above $2,910, gold found support as investors sought refuge in the precious metal amid escalating trade tensions and concerns over the US economic outlook.
The uncertainty surrounding President Trump's tariff measures contributed to this shift in market dynamics. As fears of economic repercussions took hold, gold emerged as a safe-haven asset for wary investors looking to mitigate potential risks.
Moreover, XAU/USD received support from the continued pressure on the US Dollar. Persistent fears of a recession kept the currency under strain, enhancing gold's attractiveness as an alternative investment avenue.
Tariff Tensions Escalate
President Trump's announcement of increased tariffs on Canadian aluminum and steel imports added fuel to an already tense trade environment. By raising these tariffs to 50%, Trump aimed to address what he perceived as unfair trade practices by Canada. He emphasized that Canada's farm tariffs of 250% to 390% on various US dairy products needed to be addressed before any tariff removal could be considered.
Trump also declared his intention to impose a national emergency on electricity in New York, Michigan, and Minnesota following Ontario's premier decision to implement 25% tariffs on electricity. This move underscored the escalating tensions between the neighboring countries.
In response to the tariff announcement, the USD/CAD rallied from 1.4410 to 1.4477 before surpassing the psychological threshold of 1.4500. Buyers are now eyeing March's peak at 1.4542 as they navigate this evolving trade landscape.