President Donald Trump has confirmed the implementation of 25% import tariffs on Canada, Mexico, and China, causing a notable dip in the market on Tuesday. Traders had been awaiting updates on tariffs and Federal Reserve communication for direction, but the confirmation of tariffs has dealt a significant blow to market stability. This news has sparked fears of an economic slowdown, leading to a sell-off of the US Dollar despite ongoing trade tensions.
The looming threat of a US recession has further fueled the decline in the US Dollar, as concerns over economic fallout from Trump's tariffs continue to rise. In contrast, EUR/USD saw a positive move during the European session on Tuesday, surpassing the 1.0500 mark. This uptick marks the second consecutive day of gains, driven by apprehensions about the economic impact of the new trade tariffs.
Investors had been hoping for last-minute negotiations that might delay the trade restrictions, but as the tariffs proceed as planned, the greenback struggles to gain traction. The economic outlook in the United States has worsened, making gains elusive for the US Dollar so far this week. Despite the challenging circumstances, the safe-haven dollar remains attractive amidst heightened fears over European security and increased trade protectionism.
Additionally, GBP/USD experienced renewed demand and climbed back to 1.2700 during Tuesday’s European trading hours. Meanwhile, gold prices have continued their upward trend, reaching a fresh daily high between $2,918 and $2,919 during the first half of the European session. The precious metal's ascent reflects investor anxiety over potential economic downturns and trade wars.