Global markets remain under pressure mid-week as President Trump’s controversial tariffs officially take effect, sparking fresh fears of a worldwide economic slowdown. The most eye-catching measure—a 104% tariff on Chinese goods—has rattled risk sentiment, especially in the absence of a last-minute US-China deal. Instead, the White House doubled down, stating its intention to pursue country-specific trade agreements with the new tariffs as leverage. While Japan and France prepare for urgent trade talks in Washington, China has shown no willingness to negotiate under pressure.
The fallout is already visible. Germany’s Economic Institute cut its 2025 growth forecast, and Fitch warned that while the tariffs may offer short-term fiscal gains, they risk doing more harm than good in the long run. Meanwhile, Trump’s move to restore some foreign aid and expectations of Fed rate cuts have offered little support to sentiment.
Against this backdrop, the US Dollar remains on the back foot amid concerns over domestic growth and policy uncertainty, allowing EURUSD and GBPUSD to hold firmer ground while USDJPY remains weak. AUDUSD flirts with its lowest level since March 2020, while NZDUSD trades at a five-year low following the RBNZ’s rate cut. Safe-haven flows support the Swiss Franc and Gold, while the Canadian Dollar suffers as oil prices plunge to levels last seen in early 2021. Equities and cryptocurrencies also remain under pressure, with rising yields doing little to offset the broader wave of risk aversion.
EURUSD and GBPUSD extend gains despite mounting economic and political challenges. The Euro stays firm even as the German Economic Institute slashes its 2025 GDP growth forecast and the European Commission gears up for potential retaliation or negotiations over US tariffs. GBPUSD mirrors the Euro's strength, brushing aside unchanged UK tariff status, recession fears, and dovish BoE signals, including comments from BoE’s Lombardelli warning about the economic drag from tariffs.
Meanwhile, USDJPY edges closer to a six-month low as risk-off sentiment boosts demand for the Japanese Yen. Weighing further on the pair are cautious remarks from BoJ Governor Kazuo Ueda, who emphasized the need to evaluate the broader tariff impact before policy action. Hopes of successful Japan-US trade talks and lingering hawkish BoJ expectations add to the downside pressure on USDJPY.
AUDUSD initially justified risk-barometer status while falling to the lowest level since March 2020 amid rising geopolitical and trade tensions. However, the broad-based US Dollar weakness and increasing scope of witnessing the Aussie-US trade deal allowed the Antipodean to print mild gains of late.
On the other hand, USDCAD snaps a two-day winning streak while ignoring crude oil’s slump to the lowest level since early 2021 amid broadly softer USD. It’s worth noting that the risk aversion joins bitter US-Canada ties and the dovish BoC bias to propel the USDCAD prices, but the USMCA deal defends the Canadian exporters.
NZDUSD dropped to the lowest level since March 2020 after the RBNZ announced a 0.25% rate cut, matching market expectations, and said, “As the extent and effect of tariff policies become clearer, the committee has scope to lower the OCR further as appropriate.” Also exerting downside pressure on the Kiwi pair is the Pacific nation’s trade ties with China and fears of a global economic slowdown due to Trump tariffs.
Gold gains ground as market uncertainty, a softer US Dollar, and a bullish chart setup support the rebound. Strong demand from China, haven appeal, and India’s rate cuts add to the metal's strength.
In contrast, WTI Crude Oil sinks to its lowest since early 2021, marking a seven-day losing streak. This comes despite a surprise inventory draw, rising geopolitical tensions, and lower OPEC+ output. Traders remain cautious on demand outlook amid tariff worries and expected supply increases from OPEC+.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) remain under pressure, unable to capitalize on a weaker US Dollar. Broader economic pessimism keeps risk appetite low, overshadowing Trump-linked optimism and news of the US Justice Department shutting down its crypto enforcement unit.
Markets remain cautious as global players await reactions to Trump’s tariff threats. While diplomatic efforts could trigger a mild risk-on mood, fears of a global slowdown and geopolitical strains keep sentiment fragile. Even if dovish FOMC minutes are likely to weigh on the US Dollar, a strong rebound in major currencies or commodities appears difficult unless the White House softens its stance—something not widely expected. Meanwhile, upcoming speeches from ECB and BoE officials may stir some action in the Euro and Pound.
May the trading luck be with you!
