Yet President Donald Trump’s recent enactment of tariff changes that have triggered the largest global markets disruption since the 2008 financial crisis. The trade‐weighted average tariff rate on all US imports has increased by roughly 5.5 to 6.0 percentage points. That’s the highest level we’ve witnessed since the Second World War. This military escalation has created waves of geopolitical uncertainty and fueled a further risk-off sentiment across global financial markets.
Looking across the currency exchange landscape, the AUD/USD continues to trade in the consolidative price movement that currently surrounds the 0.6300 figure. Market participants are very focused on the US PCE Price Index, expected to deliver a significant punch to financial markets. The demand for safe-haven assets has grown significantly in recent weeks. On Friday as the Asian session opened, gold jumped to an all-time high, spurred by increasing global trade tensions.
Trump’s reciprocal tariffs have recently been at the center of new concerns, as uncertainty grows regarding their effect on important Japanese exports. This has all played a role into the tightening of the USD. As a result, the USD/JPY is trading close to a four-week high, above the 151.00 level. The stronger than expected Tokyo CPI increases the odds of additional Bank of Japan rate hikes. This positive turn of events will go some way to preventing further bloodshed for the JPY.
Forthcoming re-direction of agriculture-based trade as a result of raised, retaliatory tariffs will begin to reduce their short-term effectiveness. Regardless, hopes for more stimulus measures from China are offering support to the Australian dollar. These advancements speak to the growing impact of global economic competition as markets begin to find their footing amid increased trade hostility.