Global markets faced turbulence this week as renewed concerns over tariffs and weak US economic data sent shockwaves through financial sectors. Mexico emerged as the top exporter, with an impressive $466.6 billion in trade, according to recent data from the US Census Bureau. Meanwhile, Treasury Secretary Scott Bessent proposed incremental tariffs on all US imports, starting at 2.5%, further unsettling market sentiment.
The US Dollar Index (DXY) gained traction, hitting a fresh weekly high above 108.00 as investors reacted to a cautious market mood. Concerns over overvalued AI shares contributed to limited risk appetite, making the US Dollar an attractive safe-haven asset. However, the market remains wary, with immediate resistance for the Dollar Index seen at 108.50. A failure to maintain levels above 108.00 could lead to a revisitation of support near 107.50.
Adding to the market jitters, President Trump countered Secretary Bessent's proposal with a demand for significantly higher tariffs, further rattling global financial markets. Investors now turn their attention toward Wednesday's Federal Reserve decision, where a hold is widely anticipated. However, economic indicators are not painting an optimistic picture.
Consumer confidence took a hit, falling to 104.1 in January from December's 109.5, reflecting growing concerns over the economic outlook. Additionally, US Durable Goods Orders disappointed by declining 2.2% in December, missing expectations for a 0.8% increase. These figures underscore the challenges facing the US economy amid this turbulent period.
In another part of the financial spectrum, gold continues its record-breaking rally, surging to an all-time high of around $2,820 per troy ounce on Friday. The metal's ascent is driven by robust safe-haven demand as investors brace for heightened uncertainty surrounding tariff policies. This safe-haven appeal is amplified by fears of a slowdown in global economic growth and geopolitical tensions.
The RSI for the Dollar Index remains below 50, hinting at weak momentum, while the MACD shows growing flat bars, signaling sustained bearish pressure. Despite these technical indicators, the Dollar Index has shown resilience by reclaiming levels above 108.00, bolstered by renewed safe-haven demand.
Mexico's prominence as a top exporter is notable as the country, along with China and Canada, accounted for 42% of total US imports in 2024. This underscores the interconnectedness of global trade and the potential impact of tariff changes on major trading partners.
Investors are closely monitoring developments as they await the Federal Reserve's decision next week. The anticipation of a hold on interest rates offers some stability amidst the current volatility. However, market participants remain cautious given the broader economic uncertainties.