After a tumultuous start to the week, the EUR/USD currency pair experienced a notable rebound, erasing a significant portion of its initial losses on Monday. However, the European morning session on Tuesday presented challenges as the pair hovered slightly below the 1.0300 mark. Meanwhile, the US Dollar demonstrated considerable strength against the Euro, driven by a complex interplay of market forces.
The global economic landscape is fraught with uncertainty as China's retaliatory measures against US tariffs inject volatility into the markets. On Monday, China announced additional counter-tariffs, including 10% levies on crude oil, farm equipment, and certain automobiles. These developments have heightened risk sentiment and contributed to fluctuations in currency and commodity markets worldwide.
In the foreign exchange arena, aggressive rate cut bets by the Reserve Bank of Australia (RBA) exerted downward pressure on the Australian Dollar. This move reflects growing concerns about economic resilience amid escalating tariff tensions. Meanwhile, rebounding US bond yields and a modest uptick in the US Dollar have capped gains for commodities, including gold.
Gold (XAU/USD) remains in a consolidation phase, holding above $2,810 in early trading on Tuesday. The precious metal is buoyed by fears surrounding US tariffs and inflation concerns. On Monday, gold reached an all-time high of $2,830 before retracing some of its daily gains during the American trading session.
The British Pound (GBP/USD) found support from an improving risk mood in the American session on Monday, posting daily gains. Market participants appear to be adjusting to the new reality of heightened trade tensions, with Tuesday's trading sessions showing signs of stabilization following Monday's wild fluctuations spurred by headlines around US President Donald Trump's tariff policy.
In addition to crude oil, farm equipment, and automobiles, China's Commerce Ministry announced plans to impose 15% tariffs on US coal and liquified natural gas (LNG) imports. These measures are designed to counterbalance US tariffs and underscore the ongoing trade tensions between the two economic powerhouses.
The USD Index, a measure of the US Dollar's value against a basket of major currencies, initially reversed its direction but ended Monday virtually unchanged. This reflects the market's struggle to digest the implications of the latest tariff announcements and their potential impact on global trade dynamics.