Trade war concerns push gold to $2,890

U.S. Market

President Trump’s trade policy updates are set to dominate the week, with new reciprocal tariffs aimed at matching those of other nations. These tariffs, likely to be unveiled Tuesday or Wednesday, have already sparked responses: the EU has warned of a swift retaliation, while Canada, the top U.S. aluminum supplier, expressed concerns about disruptions in supply chains. Additionally, China’s plans to restrict exports of rare earth minerals, critical for tech products like smartphones and renewable energy infrastructure, could weigh on the technology sector early this week.

Currencies

• The U.S. dollar saw a modest gain of 0.2%, buoyed by expectations of a slower pace of Federal Reserve rate cuts in light of tariff-induced inflation risks.
• Meanwhile, the Japanese yen weakened by 0.4%, despite hawkish remarks from the Bank of Japan, dropping to 151.98.
• The Chinese yuan slid past 7.3 per dollar, hitting its lowest point in three weeks.
• EUR/USD remained under pressure, trading just above 1.0300 in early European hours, struggling against the stronger U.S. dollar.

Trump’s proposed tariffs have added to the headwinds for the Euro. Traders are focused on the release of the Eurozone Sentix data and remarks from ECB President Christine Lagarde later this week for potential catalysts in the currency market.

Commodities

Gold (XAU/USD) spiked to the $2,890 mark during the Asian trading session, driven by the uncertainty surrounding Trump's new tariff measures. Fears of a global trade war and potential inflationary pressures from protectionist policies have provided gold with its safe-haven appeal. However, strong U.S. job data and inflationary concerns may limit further gains, especially with the dollar gaining strength. With the gold market at overbought levels, traders may become more cautious in placing new bullish bets unless fresh U.S. economic data is released.

WTI rose for the second consecutive day, fueled by concerns about potential disruptions to Iran’s oil supply. However, these gains are capped by fears that the ongoing trade tensions and tariff measures may slow global economic growth, limiting fuel demand. Additionally, the stronger U.S. dollar continues to provide resistance to oil prices.