Today marks a significant milestone as Donald Trump is inaugurated as the 47th President of the United States. As the world watches, high-level discussions are already underway in Washington. Chinese Vice-President Han Zheng is engaging in crucial talks with US Vice-President-elect J.D. Vance and technology magnate Elon Musk. These discussions are part of a broader commitment to strengthen Sino-US relations, a goal recently emphasized by a Chinese announcement.
The international community is on high alert due to potential US tariffs, especially in the Eurozone. The likelihood of new tariffs targeting the European Union is currently pegged at a mere 8% according to betting markets, but the Eurozone and the Euro are advised to prepare for possible economic impacts. Isabel Schnabel of the European Central Bank has indicated that a trade conflict with the EU under President Trump's administration appears "very likely."
The financial markets are reacting to these developments with notable fluctuations. The 10-year US Treasury yield, which peaked at 4.81% last week, has since decreased by over 20 basis points. This movement has affected the US Dollar, attracting fresh sellers and diminishing much of Friday's gains amid speculations that the Federal Reserve may cut interest rates twice this year. The dollar has softened as the week begins, attributed to a renewed sense of optimism following reportedly positive conversations between President-elect Trump and Chinese President Xi Jinping.
Scott Bessent, the incoming Treasury Secretary, stressed the importance of tariffs as a tool to rectify unfair trade practices, boost government revenue, and serve as a powerful lever in trade negotiations. Current forecasts suggest varying probabilities for tariff impositions: 56% for China, 54% for Mexico, 45% for Canada, and a mere 8% for the European Union. Market participants are closely monitoring betting platforms like Polymarket and Kalshi to gauge these probabilities during Trump's first week in office.
As these geopolitical tensions unfold, the gold market is witnessing an uptick. The precious metal has attracted some dip-buyers at the start of the new week, building on its steady intraday ascent through the early European session. The dollar's recent rally, fueled by tariff positioning and nearing a 10% increase since late September, is now losing steam due to these developments.