Adding to the storm front is the US dollar, which has recently grown weak, ripping through the foreign exchange market. Consequently, the EUR/USD pair has skyrocketed steeply owing to multiple economic reasons. As of Monday afternoon, the EUR/USD pair had jumped about 1.5%. It is currently just below the 1.1600 level where it recently hit its highest level since November 2021. This increase arrives with heightened fears over an intensifying US-China trade war and the integrity of the Federal Reserve’s independence itself.
The US dollar is crashing — down to three-year lows. This decrease is largely due to anxiety over the effects of the escalating trade war between the United States and China. The Trump administration’s recent decision to impose new export controls on Nvidia’s H20 chips to China has further fueled market uncertainty. News reports have surfaced that China has instructed its airlines not to take deliveries of new Boeing jets. They are further pressured not to buy aircraft-related goods from US firms.
Here’s how the US should respond to these rising tensions. Specifically, they are required to set tariffs on Chinese-built and owned vessels that call into US ports. These short term developments have played into a still cautious trading environment and weighed heavily on trader sentiment.
Despite this adversity, China’s economy proved to be quite resilient. 5.4% YoY Q1 GDP growth, above an already optimistic consensus of 5.2%. As of last month, exports to the US had jumped by 9.1%. They only increased an average of 1.1% in January and February combined. This surprising strength in exports represents the remarkable resilience of China’s economy to respond and flourish under pressure from the outside.
The long-term effects of President Trump’s tariff policy on trader sentiment are still very much in play. Analysts are unanimous in their view that these tariffs have sown chaos. This growing instability is driving the rapidly accelerating decline in the value of the US dollar. Those same market participants are hanging on every US economic data point available. Recently, that data showed a stunning 12.4% YoY increase in exports.
Looking across the overall currency market, the strength of the GBP/USD currency pair was notable, with a gain back up to 1.3400 again in European trading on Monday. In contrast, the USD/CNY closed last week unchanged near the key 7.3000 level, a sign of stabilizing, if still mixed, market sentiment.
Speculation about a US-China deal keeps cropping up. According to a clear majority of reports, China is largely waiting for the Trump administration to take certain steps before agreeing to discussions. Observers note that “that includes showing more respect by controlling the disparaging remarks by Trump’s cabinet members, a more consistent US position, a willingness to address China’s concerns on US sanctions and Taiwan as well as US appointing a point person for negotiation talks who has Trump’s support.”
“That said, we think the prospect of US-China negotiation remains on the table,” a source reported, highlighting that further steps from the Trump administration could pave the way for dialogue.
Beyond currency fluctuations, the crypto bear market lifted itself sufficiently enough to see an increase in trading activity. Bitcoin (BTC), Ethereum (ETH), and XRP all held strong, building on last week’s momentum. Their recent gains reflect an outpouring of new interest from excited investors.
Even with some encouraging signs embedded within China’s economic data, the strain is showing in almost every sector of the economy. “That said, housing recovery remained weak as major activities indicators all posted negative growth in March whereas home prices were still on decline,” noted an industry expert.