President Donald Trump's recent decision to impose tariffs on all imports from Colombia has reignited fears of a trade war, impacting global financial markets. This move has prompted a wave of global risk aversion, with investors seeking refuge amidst growing economic uncertainties. As a result, capital market participants are now anticipating a series of interest rate cuts in both the Eurozone and the United States, with the Federal Reserve and European Central Bank (ECB) expected to adjust rates multiple times throughout the year.
The Federal Reserve is projected to cut interest rates by 25 basis points twice this year. Meanwhile, the ECB is expected to take more aggressive measures, with four rate cuts of the same magnitude anticipated. Despite this expectation of monetary easing, the US Dollar's recent upswing has lost momentum, even amid widespread risk aversion. In particular, the EUR/USD currency pair has shown renewed strength, clinging to recovery gains below 1.0500 during Monday's European session.
Futures markets currently indicate no likelihood of another rate reduction at the Federal Reserve's meeting scheduled for this week. This expectation has shifted attention away from the meeting, as market participants focus on broader economic developments. Concurrently, the GBP/USD pair has managed to trim its losses, regaining a level of 1.2450 in Monday's European trading hours.
The recent volatility in the financial markets extends beyond traditional currency exchanges. The crypto market has also experienced significant fluctuations, with total liquidations amounting to $860.55 million in the last 24 hours. Bitcoin, which had reached a new all-time high of $109,588 the previous week, has seen a sharp decline of nearly 4%. This downturn has contributed to heightened market uncertainty and investor caution.
Gold prices have also been affected by these economic shifts. After experiencing intraday losses, gold has managed to recover significantly but continues to trade with a mild negative bias around $2,760. These movements reflect broader trends within commodity markets as investors navigate an unpredictable economic landscape.