President Trump continues throwing curveball after curveball at market participants.
Following his return to the White House, President Trump’s decision to delay the implementation of tariffs on Canada, Mexico, and China has sparked widespread speculation regarding the potential impact on financial markets and global trade dynamics.
While many expected these measures to be implemented swiftly, the postponement seems to be a strategic move. A delay in execution gives Trump more room to negotiate on critical issues like trade imbalances, intellectual property concerns, and immigration policies. The door remains open for diplomatic talks while avoiding an immediate hit on the economy.
The delay also helps to stabilise market sentiment. Immediate tariffs could have shaken global markets, disrupted supply chains, and hit consumers with higher costs. Instead, this pause aligns with Trump’s broader economic goals, like pushing infrastructure spending, cutting taxes, and funding these plans with the newly proposed External Revenue Service.
It isn’t just the markets that are gaining from this reprieve. With Trump’s administration having a history of making questionable choices of economic advisors, the hold allows them to build a stronger team and select members to guide these strategies effectively.
However, the risks of tariffs haven’t disappeared. If these measures eventually go into effect, the fallout could be felt across key sectors like agriculture, manufacturing, and retail. Higher costs for businesses and consumers could slow down growth, and retaliatory moves from trade partners might amplify the pressure on the U.S. economy.
As we digest the implications of Trump’s tariff delay, let’s explore the charts and see how they’ve been holding up during these movements.
The U.S. dollar exhibited a mixed performance, oscillating between gains and losses as traders assessed economic releases and the potential trajectory of Federal Reserve policy. The USDX tested key support levels early in the week before rebounding, signalling that market participants remain cautious about the strength of the greenback.
The EURUSD pair saw upward momentum, briefly breaking above resistance levels, fueled by better-than-expected economic data from the Eurozone. However, the sustainability of these gains remains uncertain as market participants await further guidance from policymakers.
In the equity space, the S&P 500 and Nasdaq showed signs of consolidation after reaching new highs earlier in the month. Traders adopted a wait-and-see approach ahead of critical earnings reports and inflation data, which could provide further direction.
The Dow Jones Industrial Average, on the other hand, experienced slight downward pressure, reflecting investor caution surrounding global trade policies and corporate earnings expectations.
Commodities faced a week of pronounced swings, with crude oil prices moving in response to ongoing geopolitical tensions and fluctuations in supply estimates. WTI crude found support at the $74.50 level before recovering, with traders eyeing potential resistance levels in the coming sessions.
Gold prices hovered around their recent highs, reflecting a mix of safe-haven demand and profit-taking activity. The metal’s ability to sustain above key support zones will be critical for traders looking for further bullish momentum.
Bitcoin struggled to break out of its recent range. Traders remained focused on macroeconomic factors and regulatory developments that could influence digital asset sentiment.
Bitcoin’s price action showed resilience around key levels, but a breakout in either direction remains a possibility as market participants weigh risk appetite.
A calm Monday leaves the stage clear for the busy week ahead, with plenty of data to influence market sentiment.
Tueday’s release of the U.S. CB Consumer Confidence report is expected to capture significant market attention. Forecasted at 105.9, compared to the previous 104.7, we believe this data could influence the strength of the U.S. dollar.
In Australia, Wednesday’s focus will be on the Consumer Price Index (CPI) year-over-year report, which is expected to rise to 2.5% from the previous 2.3%. We think this data release could provide insights into inflationary pressures and the Reserve Bank of Australia’s potential policy adjustments.
The Bank of Canada’s overnight rate decision is also in the spotlight, with an expected cut to 3.00% from 3.25%. We anticipate that the market’s reaction will hinge on the central bank’s tone regarding future monetary policy direction.
Midweek attention will shift to the U.S. Federal Reserve’s FOMC statement on Thursday, with the benchmark interest rate projected to remain at 4.50%. We expect traders will closely analyse the Fed’s comments on inflation and economic growth, as any signals of potential rate adjustments could trigger volatility across currency pairs and equity indices. The Fed’s stance will likely set the tone for broader market movements in the coming weeks.
On Friday, the German Preliminary CPI is forecasted at 0.50%, doubling from the previous 0.25%. We think this data could provide a boost to the euro if inflationary pressures remain elevated, but any deviation from expectations could lead to mixed market reactions.
Additionally, the Canadian GDP month-over-month figure is expected at 42.9, up slightly from 42.5, suggesting steady economic performance.
Meanwhile, the U.S. Core PCE Price Index, a key inflation measure closely watched by the Fed, is forecasted to come in at 46.9, compared to the prior 47.0. We believe this report could influence expectations surrounding future rate decisions.
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