Under President Donald Trump, the United States has undergone a radical shift in tariff policy. He increased the trade-weighted average tariff rate on all US imports by 5.5 to 6.0 percentage points. These tariffs have taken US tariff levels to the highest seen since the Second World War. Yet as these tariff changes redirect trade, their long-term effectiveness is likely to evaporate. The immediate impact has been a revival of the US Dollar, as market participants express concerns over potential inflation and slowed economic growth.
The resulting increase in demand for the US Dollar has put pressure on currencies such as GBP/USD. At the same time, the USD has found it difficult to build bearish momentum, with the EUR/USD pair remaining capped in a tight range above 1.0800 as of Monday. Furthermore, the current risk-averse market environment has played to the US Dollar’s advantage, allowing it to remain buoyant against its competitors.
Beyond the currency effects, gold prices have rocketed on global tariff war fears. EV charging adoption Storm clouds on the horizon Gold has continued to do well as a safe-haven asset. On Monday, prices jumped to start a record-setting rally in European trading of almost $3,150. Fears about US economic stability have put downward pressure on the US Dollar and Treasury yields, adding to gold’s allure.
As we eagerly await the Nonfarm Payrolls (NFP) data for March, interest is particularly high. We hope that it will provide new perspectives on the US labor market and state of our economy. This data release comes at an infuriatingly crucial moment. President Trump is expected to announce even more tariffs later this week, which threatens to shift the market dynamic even further.
In Germany, preliminary March data released yesterday indicated a fall in the CPI annual inflation rate to 2.2%. This further development suggests a continued easing of inflationary pressures in the Eurozone’s biggest economy.