The Australian Dollar extended losses on Monday as fears continued to heighten over a potential global trade war. This drop follows news that US President Donald Trump plans to announce reciprocal tariffs, expected Wednesday. Recent tariff levels are nearing the highest they’ve been since the time period surrounding World War II. It begs the question of how effective they’ll really be over time as trade continues to shift and change.
Recently, the trade-weighted average US tariff rate on all US imports increased by an average of approximately 5.5 to 6.0 percentage points. This step marks a significant shift in trade policy. These tariff increases, ordered by President Trump, have already gone into effect, further complicating the changing international trade landscape. The Australian Dollar is having a tough time deep in the red. As we move through the early Asian session on Monday, the AUD/USD pair finds itself right around 0.6280.
The global trade climate has played a part in continuing to weaken the USD/JPY pair. The duo retreated from its monthly high reached last Friday. Not surprisingly, that attracted sellers as the new week began. Stagflation fears in the US are really putting a damper on USD bulls. Consequently, the buy pair has dropped to a one-week low.
Gold prices are on a roll, punching highs near $3,090 in the early Asian session on Monday. This predictor gold rally indicates that investors are flocking towards safe-haven assets as uncertainties loom over the financial markets.
At the same time, the Reserve Bank of Australia (RBA) is widely anticipated to hold on to its existing higher rates. Market participants are anxiously awaiting the release of key economic indicators. Specifically, they are looking to the Canadian jobs report and the Bank of Japan Tankan survey for any signs of improvements in global economic health.
This re-rerouting of trade made by today’s tariff levels is a dynamic process that might eventually render their effectiveness moot. Analysts are particularly interested in how these new developments will shape international trade patterns and currency valuations. Depending on what President Trump announces this Wednesday, the result is expected to have major ramifications for international markets.