Trump has implemented a 10% tariff on all imports, with increased rates of 34% on China and 20% on the EU. This led to a decline in ‘risk’, benefiting the yen and gold.
The EUR/USD exchange rate initially dipped below 1.0820, but has since recovered to above 1.0910. Increased market activity is anticipated as Asian and subsequently European markets respond.
Current Market Snapshot
Currently, the USD/JPY rate stands at approximately 147.90, while gold is valued around US$3164. Further fluctuations in these markets are expected in the upcoming hours.
What we’re seeing here is a direct market response to a sharp shift in trade policy—specifically, the introduction of broad-based import tariffs. A uniform 10% levy, backed by steeper rates on targeted regions like China and the EU, has set off a chain reaction across currency and commodity markets, led by an immediate contraction in appetite for risk.
As equity holders retreat from more volatile positions, safe-haven assets such as the yen and gold have seen buying pressure. This isn’t surprising. Historically, whenever trade tensions escalate and downside risks to global trade increase, flows typically favour safer, more liquid instruments. That is exactly what has played out.
We take particular notice of the euro-dollar cross. After a sharp drop which breached levels below 1.0820, buying activity emerged, lifting it above 1.0910. This signals reactive positioning, rather than an underlying change in fundamentals. The rebound likely reflects early sentiment churn as markets digest the tariff announcement. Traders seem to be squaring positions, possibly linked to hedging imbalances from earlier in the Asia session. Given the time of day, that response is not yet fully reflective of broader macro or institutional views.
Key Levels And Technical Considerations
Meanwhile, dollar-yen remains firmly priced near 147.90. Interest rate differentials and carry trade dynamics likely continue to support this cross, but if the tariff policy starts to weigh on global growth forecasts—or if Treasury yields react sharply—dollar strength might not hold. The pair sits at an inflection point. Daily volatility could well pick up as Europe opens and New York follows through.
Gold now trades near 3,164 dollars, up meaningfully from Friday’s ranges. Flow data points to a fresh round of allocations from asset managers moving capital into neutral or defensive sectors. This kind of rally in bullion generally reflects a broader macro hedge—less about short-term inflation moves, more about policy direction and perceived geopolitical risk.
What we need to be watching right now is the pattern of inter-market flow. If selling in risk assets continues into the New York session, there is room for further strengthening in assets like gold and the yen. At the same time, euro-dollar movements should be viewed through the lens of relative central bank policy expectations, particularly whether Europe shows signs of economic recovery that could increase pressure on the ECB to shift its timing on rate decisions.
We’d approach this by monitoring option activity on both USD/JPY and gold for any skew that suggests larger participants are positioning for extended moves. Also, watch basis swaps and short-term USD funding rates for signs of stress or unexpected dislocations.
Expect price behaviour to remain reactive. Our focus should be not just on raw price levels but how trading volumes align with the shifts. Elevated volumes on breaks of key support or resistance levels will confirm that institutional momentum is building.
Each move now carries a bit more weight. Biases must be fluid and anchored in data. With tariff policy now a live issue, correlations between commodities, fixed income, and FX will not hold to their usual scripts. We’ll continue scanning futures positioning across CME and ICE to keep track of net positioning across asset classes.
