The GBP/USD currency pair found itself under pressure on Tuesday, trading in negative territory at approximately 1.2350. This development comes as the United States, under the leadership of President Donald Trump, implemented a substantial 25% import duty on steel and aluminum. The new tariffs, which took effect late Monday night, have further complicated the potential for a rebound in the GBP/USD pair. Market analysts speculate that spot prices may eventually test the psychological threshold of 0.6000, with the April 2020 swing low hovering around the 0.5980 zone.
Despite the introduction of these levies, global stock markets appeared to dismiss concerns surrounding a potential trade war on Monday. However, China has already responded with retaliatory measures, imposing tariffs on a variety of US goods, including automobiles and soybeans. This escalation in trade tensions between two of the world's largest economies is reminiscent of a trade war, defined as an economic conflict characterized by extreme protectionism.
Meanwhile, the AUD/USD pair continues to trade below the 0.6300 mark for the fifth consecutive day. A modest strength in the US Dollar (USD) is contributing to capping this currency pair's upward movement. The Reserve Bank of Australia (RBA) is anticipated to cut interest rates in the coming week, further influencing the dynamics of the AUD/USD exchange rate. Additionally, ongoing US-China trade tensions are serving as a significant headwind for the Australian Dollar (AUD).
In light of these developments, bulls in the market are awaiting sustained strength above the 0.6300 mark before considering fresh bets on the AUD/USD pair. The current sideways consolidative price move suggests that investors remain cautious amid global economic uncertainties.
The imposition of a 25% levy on steel and aluminum imports marks a significant shift in US trade policy under President Trump. The decision aims to protect domestic industries but has already elicited strong responses from international trading partners. China's swift retaliatory action underscores the complexities and potential ramifications of such protectionist measures.
As global markets digest these changes, the GBP/USD and AUD/USD pairs are closely monitored by traders and investors alike. The potential drop to key psychological levels could trigger further volatility in currency markets. It is important to note that neither the author nor FXStreet are registered investment advisors, and individuals should seek professional financial advice before making investment decisions.