Amid growing concerns over US President Donald Trump's tariff threats, global financial markets are witnessing heightened risk aversion. As the USD gains strength, the GBP/USD pair is trading substantially lower, hovering near 1.2250 on Tuesday. The uptick in the US Dollar demand comes as investors seek safety amid geopolitical uncertainties. In contrast, the gold market is experiencing a surge, driven by the same flight to safety as fears of looming tariffs grip investors.
Data from the UK adds to the market's anxiety, showing that the ILO Unemployment Rate slightly increased to 4.4% for the three months leading up to November. This has further pressured the British Pound, contributing to its decline against the strengthening US Dollar. Moreover, bets on additional Federal Reserve rate cuts are impacting US bond yields, providing another layer of complexity to the current market dynamics.
UOB Group's Senior Economist Alvin Liew notes that President Trump's rhetoric and policies are central to current market movements. Trump's initial day in office was marked by a focus on energy policies and immigration, notably border security. Markets found some relief in the absence of immediate concrete tariff measures on Trump's first day, although his pledge to prioritize America's interests continues to influence market sentiment.
"Trump also lived up to his promise, kicking off his presidency right at the start with a flurry of executive orders, memoranda and proclamations, repealing many of the Biden administration mandates and executing his ‘America First’ policies.” – UOB Group’s Senior Economist Alvin Liew
With Trump's assertive stance on tariffs and economic policies, investors are increasingly turning to gold as a safe-haven asset. The yellow metal's positive traction is further supported by expectations of more interest rate cuts by the Federal Reserve. These potential rate cuts are also weighing on US bond yields, complicating the investment landscape.
While the GBP/USD pair struggles, the EUR/USD pair remains entrenched in negative territory, trading below 1.0400 during Tuesday's European session. This reflects broader market concerns as investors brace for potential policy shifts and economic impacts stemming from President Trump's administration.
It is important to note that neither the author nor FXStreet are registered investment advisors. The views expressed in this article reflect the author's perspective and do not constitute investment advice nor do they represent FXStreet's official policy or position.