People are probably sick of hearing about tariffs at this point, but they have once again been the main driver behind market movements over the past couple of days. On Wednesday, Donald Trump hurled another spanner into the works by announcing 25% tariffs on all foreign-made vehicles. To put the figure in context, the EU already imposes a 10% tariff on American vehicles, compared to 2.5% on European cars going the other way. The president also warned that the EU and Canada could face further tariffs if they work together to cause economic harm to the US.
US stocks took the news badly. The Nasdaq Composite shed 2% following the announcement and fell another half percent on Thursday. Despite some minor volatility, the Dollar avoided overreacting to the most recent developments, with the DXY remaining in the mid-104 range. The Mexican Peso on the other hand, which is not part of the Dollar Currency Index, fell 1% against the Greenback yesterday.
Gold emerged from the commotion as the clear victor. The precious metal clinched another record high yesterday and is currently pushing further still, to highs of $3,077 this morning in Asia. The safe-haven flows spread to silver, which rose to $34.40 by Thursday night, although the move does not appear to have carried any momentum into today’s session. The recent exuberance in copper markets also appears to have faded for the time being. Staying with commodities for a while longer, oil prices have swelled on supply concerns in recent weeks, allowing Brent Crude to rise above $74 for the first time this month, while WTI is as near as makes no difference $70 a barrel.
Currency traders have their eyes glued to the latest PCE Price Index set to be published later today. The index serves as a crucial weather vane for US inflation trends and is particularly important to the Federal Reserve. While tariff drama and various geopolitical developments will always have an impact on the Dollar, monetary policy remains paramount to the Greenback’s future.
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