Gold prices have picked up fresh bids above $2,850 as the US inflation week kicks off, setting the stage for what appears to be a volatile period in global markets. The economic landscape is being significantly influenced by former President Donald Trump’s second term, which has commenced with decisive actions impacting markets and global policymakers. Trump aims to bolster the US economy and American producers through the implementation of tariffs, a strategy that has already begun reshaping international trade dynamics.
In a recent development, Trump has announced new 25% tariffs on all steel and aluminum imports into the United States. This move has sent ripples through the global trade community, as countries scramble to assess the impact on their economies. The tariffs are part of Trump's broader strategy to protect domestic industries and maintain economic growth within the country. However, this decision has also escalated trade war fears, causing fluctuations in currency and commodity markets.
The announcement has had immediate effects on currency trading, with USD/JPY trading near 152.00, maintaining a bid tone in response to the tariff threats. Analysts note that while hawkish expectations from the Bank of Japan (BoJ) and increasing Japanese yields are capping the pair's upside potential, a cautious risk tone further limits gains. Meanwhile, the US Dollar remains firm amid these trade tensions, acting as a safe haven for investors.
Australian Trade Minister Don Farrell is actively seeking an exemption from these tariffs, similar to the one Australia secured in 2018 during Trump's previous presidency. Farrell has emphasized the importance of Australian steel and aluminum exports to the United States, stating:
"Australian steel and aluminium is creating thousands of good-paying American jobs, and are key for our shared defence interests.” – Australian Trade Minister Don Farrell
This plea underscores the interconnected nature of global trade and defense alliances, as Australia seeks to protect its economic interests while contributing to American industrial growth.
The broader trade landscape is also shifting, with Mexico emerging as the top exporter to the US in 2024. According to the US Census Bureau, Mexico exported $466.6 billion worth of goods to the United States. Alongside China and Canada, these countries accounted for 42% of total US imports last year. This underscores the significance of North American trade relations amidst the changing tariff policies.
The commodity markets have also felt the impact of these developments. While gold prices have initially surged, there is speculation that further gains could be constrained by renewed demand for the US Dollar as a safe haven asset. In parallel, the cryptocurrency market has experienced notable declines. Ethereum and Ripple prices fell more than 7% last week, breaching key support levels. Bitcoin also continues to trade below $96,000 following a downturn in value from the previous week.
In the forex market, AUD/USD is trimming losses and trading near 0.6265 as of writing. This adjustment reflects Australia's efforts to navigate the challenging terrain of currency fluctuations and trade policy changes under Trump's administration.