A modest strengthening of the US Dollar prompted some intraday profit-taking around the XAU/USD pair, as economic uncertainties continue to ripple through the global markets. This comes amid the backdrop of increasing risk aversion, influenced by rising trade tensions and economic uncertainties following the recent imposition of tariffs on steel and aluminum imports by US President Donald Trump. The tariffs, set at a flat 25%, have nullified previous trade agreements with key US allies, leading to a reevaluation of global economic strategies.
The Swiss Franc, widely regarded as a safe-haven currency due to Switzerland's strict banking laws that offer enhanced capital protection, has gained attention in this uncertain climate. Similarly, the Japanese Yen is poised to strengthen as risk aversion grows. The Bank of Japan (BoJ) has hinted at potential interest rate hikes, with Governor Kazuo Ueda and Deputy Governor Himino indicating possibilities if economic conditions and inflation align with the central bank's projections. Additionally, BoJ board member Naoki Tamura emphasized the necessity to raise the policy rate to at least 1% in the latter half of fiscal 2025, bolstered by stronger-than-expected wage and household spending data reinforcing a hawkish stance on monetary policy.
Meanwhile, the Euro faces challenges amid concerns over potential deflationary pressures in the Eurozone. German Chancellor Olaf Scholz has stated that the European Union (EU) could react swiftly, "within an hour," if the US imposes further tariffs on European goods. Bernd Lange, head of the European Parliament’s trade committee, suggested that the EU is willing to reconsider its 10% import tax on vehicles, possibly reducing it to align more closely with the 2.5% tariff imposed by the US.
In this environment of heightened risk aversion, major currencies such as the US Dollar, Japanese Yen, and Swiss Franc are likely to rise. Conversely, currencies like the Australian Dollar, Canadian Dollar, New Zealand Dollar, along with minor foreign exchanges such as the Ruble and South African Rand, tend to thrive in "risk-on" market conditions. However, these currencies may face challenges as risk-off sentiments prevail.
The Euro's initial support is identified at 1.0250 against the US Dollar, with the first upside barrier noted at 1.0406. This reflects a cautious optimism as the Eurozone navigates potential economic turbulence.
In another sector of economic interest, Ripple's XRP experienced a notable 3% gain on Monday. This surge was driven by the release of a list detailing potential cryptocurrency ETF filings likely to receive approval from the Securities & Exchange Commission (SEC), sparking renewed investor interest in digital assets.