Dollar recovery remains fragile as gold steadies near highs

Markets wrap up the week in a tense holding pattern, as a combination of lingering geopolitical flashpoints, stubborn inflation, and looming U.S. trade tariffs kept investors on edge. Despite yesterday’s relief rally on Wall Street, driven in part by dovish tones from the Fed, sentiment quickly shifted back to caution as global risks reasserted themselves in Friday’s session.

Dollar: Recovering, but not convincingly

The U.S. dollar attempted a modest recovery today, with the Dollar Index (DXY) up around 0.2% as of writing, hovering near 103.50. While some traders saw value after this week’s sell-off, conviction remains low. Fed decision to leave rates unchanged, combined with trimmed growth forecasts and hints of balance sheet slowdown, offered no fresh hawkish impulse. Instead, investors are now weighing how much more the dollar can weaken if inflation holds up and tariffs exacerbate trade imbalances.

Markets are especially wary of President Trump’s scheduled tariffs on Canadian and Mexican imports, set for April 2. These tariffs are viewed as politically motivated but economically risky — a move that could provoke retaliation, disrupt supply chains, and dent global trade momentum just as growth shows signs of fatigue.

Gold: Consolidating after record high

Gold remains one of the most resilient assets this week. After soaring to a record $3,057 per ounce earlier in the week, the yellow metal is consolidating near $3,035, down just 0.1% on the day. The safe-haven bid is holding firm thanks to a confluence of risks: war in Ukraine, renewed tension in the Middle East, and persistent inflation that refuses to give central banks breathing room. It could be expected that any further escalation could easily push gold above $3,100 next week, especially if equity markets correct or bond yields slide further.

Stocks: Mixed, confused, cautious

Equities are struggling to find direction. The S&P 500 is down 0.2% as of midday, Nasdaq -0.3%, while the Dow is flat. Yesterday’s post-Fed gains are now being re-evaluated through the lens of global uncertainty. In Europe, the STOXX 600 dipped 0.4%, with losses in industrials and autos offsetting modest gains in tech. In Asia, Hong Kong’s Hang Seng dropped over 1.2%, while the Nikkei 225 closed lower despite early strength from inflation-driven yield optimism.

What’s particularly notable is the divergence across sectors: risk-sensitive assets like small caps and emerging markets are underperforming, while defensive names and dividend-paying stocks are seeing renewed flows.

Japan’s inflation surprise adds pressure on BoJ

This morning, Japan released higher-than-expected inflation figures — with core CPI climbing to 2.9% YoY, well above the Bank of Japan’s 2% target. This reignited speculation that the BoJ could signal another rate hike or further taper its bond purchases. Japanese government bond yields moved higher in response, while the yen saw a modest uptick. However, traders remain cautious — this is still a central bank that’s only recently begun exiting decades of ultra-loose policy.