Support
The U.S. dollar rose as yields diverged
Market sentiment took a hit as Donald Trump announced 25% tariffs on Canadian and Mexican imports and 10% tariffs on Chinese goods, reigniting trade war concerns
The EUR/USD pair continued its downward trend
WTI crude oil could see upward momentum
Australia’s retail sales declined by just 0.1%
Australia
Retail sales in Australia outperformed expectations, declining by just 0.1% month-over-month, significantly better than the anticipated -0.7% drop and following a 0.8% increase in the previous period. Meanwhile, building permits showed modest growth of 0.7%, slightly below the 1% forecast, but a strong recovery from the prior -3.6% contraction.
Japan
Minutes from the Bank of Japan's latest meeting revealed policymakers’ concerns over inflation trends, emphasizing that domestic inflation surpassing 2% for the fourth consecutive year has reinforced higher inflation expectations. Officials reiterated their readiness to raise rates if forthcoming economic data support such a move. They also highlighted potential wage growth in spring negotiations and the yen's prolonged depreciation as key inflationary risks.
US Market
Investor sentiment took a sharp hit after Donald Trump pledged to impose 25% tariffs on Canadian and Mexican imports and a 10% tariff on Chinese goods, reigniting fears of a global trade war.
While Mexico has yet to announce a response, Canada has retaliated with 25% tariffs on C$155 billion worth of U.S. goods, including wine, beer, food, and appliances. Meanwhile, China has signaled plans for countermeasures, fueling concerns that persistent trade restrictions could lead to structurally higher inflation, complicating the Federal Reserve’s efforts to ease monetary policy.
U.S. Dollar
The U.S. Dollar surged nearly 1%, driven by a flight to safety, despite a mixed response in bond markets; as 2-year Treasury yields climbed 5 basis points, surpassing 4.24% - 10-year Treasury yields edged lower to 4.51%
The move reflects concerns that tariffs could fuel inflation more acutely in the short term, rather than over an extended period.
EUR/USD
The EUR/USD pair extended its downward trajectory, trading near 1.0230 during the Asian session. Technical analysis suggests the bearish momentum remains intact, with the pair confined within a descending channel pattern.
Commodities
Gold
Gold prices pared some of their steep Asian session losses, currently hovering around $2,785. The resurgence of the U.S. dollar, has pulled gold further away from its all-time peak of $2,817, recorded on Friday.
However, expectations that the Federal Reserve may implement two rate cuts by the end of 2025, coupled with uncertainty surrounding Trump’s trade policies, are lending support to gold as a safe-haven asset. Traders are now awaiting key U.S. macroeconomic data, including the ISM Manufacturing PMI, for further market direction.
WTI Crude Oil
Oil prices could see upward pressure as Trump’s tariffs on Canada and Mexico introduce potential supply disruptions.
- Canadian energy exports will face a 10% duty
- Mexican energy shipments will be subjected to the full 25% tariff
Meanwhile, OPEC+ is unlikely to adjust its output strategy, with expectations pointing to a continuation of its gradual supply expansion plan when the group meets on Monday.
