After a volatile Monday, pessimism pauses on Tuesday as traders hope for a break in the looming US tariffs, set to take effect on April 9. Trump's tariffs have drawn global criticism, with several US entities considering lawsuits over his use of emergency powers. There was also discussion of a 90-day delay in tariffs, although the White House denied it promptly.
Meanwhile, Trump's threat of adding 50% more tariffs on China, bringing the total to 104%, fuels fears of an escalating trade war. The EU, Israel, the UK, and Japan are working to avoid US tariffs but have made little progress. Moody's raised concerns over a possible recession, and central banks and the IMF also warn about the uncertainty caused by tariffs.
Despite rising inflation fears, the US job market showed improvement, reducing the likelihood of aggressive Fed rate cuts. This helped the US Dollar climb in the last two consecutive days before today’s retreat. Major currencies, gold, and the Australian, Canadian, and New Zealand dollars have regained some ground, while oil and cryptocurrencies struggle to regain buyers’ confidence. That said, the US stocks saw a wild ride, initially dropping over 5% but recovering most of the losses by the end of the day.
EURUSD posts its first gain in three days, while USDJPY slips slightly, reversing its two-day rebound from a six-month low. These moves reflect the US Dollar's pullback and the European and Japanese efforts to avoid heavy US tariffs through trade talks and concessions. However, the White House’s lack of satisfaction with these efforts keeps traders on edge, raising concerns of further losses for these currencies amid trade war and recession fears.
GBPUSD snaps two-day losing streak, helped by a weaker US Dollar and support from the 100-day and 200-day Exponential Moving Averages (EMAs). The UK’s trade talks with the US and a shift in the Bank of England’s stance are also boosting the Pound. However, concerns about a UK recession, potentially more significant rate cuts from the BoE than the Fed, and Trump’s refusal to ease tariffs are holding back further gains for the Pound.
The Australian, New Zealand, and Canadian Dollars have gained for the first time in three days, thanks to market consolidation and China’s stimulus news. However, ongoing fears about the US-China trade war and weak oil prices are limiting gains for the Canadian Dollar. Additionally, falling Aussie consumer sentiment and concerns about a bigger-than-expected rate cut by the RBNZ are putting pressure on the AUDUSD and NZDUSD.
WTI crude oil is bouncing back from a four-year low, marking its first daily gain in six days, helped by news of a drop in OPEC+ output and a weaker US Dollar. However, concerns about global energy demand slowing due to the trade war and OPEC+ potentially increasing output are limiting its recovery.
Gold is also bouncing, supported by a four-month bullish trend channel and a softer US Dollar. With this, the precious metal is benefiting from growing market uncertainty, driven by trade tensions and geopolitical risks involving Russia, the Middle East, and China.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) print mild gains while defending the previous day’s rebound from multi-week lows. However, the bullish bias lacks acceptance amid growing industry pessimism, higher outflow and broad risk-aversion due to Trump’s tariff policies. It’s worth noting that a recent change in the on-chain data due to the oversold conditions also favors a corrective bounce in Bitcoin and Ethereum, suggesting further bearish moves ahead.
Tuesday's economic calendar is light, with key highlights being the US NFIB Business Optimism Index, Canadian Ivey PMIs for March, and speeches from UK and US central bank officials. Despite this, the market could be active as it prepares for the US reciprocal tariffs set to take effect on April 9. If Trump refuses to back down, it could trigger a risk-off mood and push the US Dollar higher. However, JPY, CHF, and Gold might not see a price pullback, while EURUSD, GBPUSD, the Aussie and Kiwi Dollars, and crude oil could continue their downtrend unless there are positive market surprises. Cryptocurrencies and equities may remain bearish, and bond markets could see some volatility.
May the trading luck be with you!
