In the initial weeks of President Trump’s administration, significant economic shifts are emerging, particularly concerning trade dynamics. The European Union is potentially on the brink of becoming Trump's next target for tariffs, a move that has global markets on edge. Meanwhile, Trump's leverage over China appears diminished compared to the initial trade war, adding complexity to international trade relations. These developments are contributing to various market reactions, including the struggles of the Australian dollar and fluctuations in gold prices.
The AUD/USD is experiencing challenges, failing to capitalize on a slight recovery from its multi-year lows. Despite a three-day-old recovery attempt, the currency pair remains below the 0.6300 mark. A combination of factors is contributing to this stagnation, including fears surrounding the US-China trade war and speculation that the Reserve Bank of Australia might cut rates later this month. Additionally, Australia's recent dismal Goods Trade Balance data has further dampened prospects for the Aussie.
In the commodities market, gold prices are experiencing a cautious bull sentiment. Although trading below the record highs reached on Wednesday, the precious metal is still benefitting from several factors. The risk-on mood prevalent in the market is affecting gold prices, while concerns about the economic fallout from potential trade tariffs provide a supportive environment for bullion. Furthermore, declines in US bond yields and Fed rate cuts are offering additional tailwinds for gold.
Simultaneously, the USD is experiencing a decline, further contributing to the positive outlook for bullion. This development is part of a broader economic landscape shaped by President Trump's early policies and their implications on global trade and economic stability.