The US Dollar experienced a noticeable retreat following President Donald Trump's recent tariff announcements, which have sent ripples through global markets. In response, the GBP/USD currency pair managed to hold its ground, showing resilience against the backdrop of the dollar's decline. This comes amid expectations that higher inflationary pressures in the United States might lead to relatively firmer interest rates, despite slower economic growth potentially contributing to this scenario.
The GBP/USD pair saw a rise towards 1.2400 after previously dipping to a two-week low of 1.2250. The dollar's retreat provided a temporary boost to the pound, which remained steady in the face of ongoing economic uncertainties. Meanwhile, the broader market sentiment remained risk-averse following Trump's tariff decisions, which have led to concerns about their impact on various sectors.
Gold, traditionally considered a safe-haven asset, regained its traction amid the market's cautious atmosphere. It climbed towards the record-high of $2,810, benefiting from investors' shift towards safer assets in light of global uncertainties. The risk-averse market sentiment helped propel gold's ascent, as investors looked for shelter from potential market volatility.
The announcement of tariffs has raised alarms regarding their potential impact on prices for basic goods, which are likely to see sharp increases. Construction costs are also expected to rise due to the tariffs. Notably, the auto sector faces significant challenges, with auto prices potentially rising by $3,000 according to some estimates. The intricate North American supply chains make the sector particularly vulnerable to disruptions.
Globally, stocks were lower, and bonds were firmer outside of US Treasuries as markets reacted to the tariff news. The US Dollar maintained its strength and exerted pressure on currency pairs ahead of the release of US PMI data. The EUR/USD pair remained under bearish pressure, trading below 1.0300, as investors weighed the potential economic ramifications of the tariffs.
In contrast, Japan appeared unaffected by the tariff decisions, allowing the Japanese Yen (JPY) to outperform other currencies. This highlights Japan's relative insulation from the immediate impacts of the tariff changes, providing a degree of stability amidst global financial turbulence.