In a recent interview, Friedrich Merz, the German Chancellor-in-waiting, expressed concerns that US President Trump’s policies may accelerate the timing of the next financial crisis. He advocated for a transatlantic free-trade agreement, proposing zero percent tariffs.
Market reactions include EUR/USD declining by 0.23% to around 1.1330. AUD/USD showed minor gains, trading near 0.6300, while USD/JPY fell to approximately 142.50, reflecting a downturn in the US Dollar.
Gold and Economic Indicators
Gold prices fell from record highs of $3,245, influenced by decreased safe-haven demand. Upcoming economic data includes CPI figures for the UK, Canada, New Zealand, and Japan, along with US retail sales.
Merz’s comments, particularly about the potential for Trump-era policies to stir financial instability, come at a time when markets are already reacting to layered global cues. He highlighted a desire for deeper transatlantic trade relations — with zero tariffs — which, if taken seriously by policymakers, may eventually affect currency correlations and capital flows. The idea here is to reduce friction in trade, but such shifts usually take time to price in.
The EUR/USD dropping to roughly 1.1330 tells us there’s less demand for the euro, possibly due to investor preference for safer or better-yielding assets elsewhere. A 0.23% slide may not seem steep, but it’s enough to trigger further anxieties if supporting macro data doesn’t rebound quickly. Many of us are watching how European inflation data unfolds, especially since Merz’s remarks might nudge the conversation about Eurozone trade policy.
The Australian Dollar nudging slightly higher against the greenback to 0.6300 points to relative stability in Asia-Pac markets. But this small gain doesn’t necessarily signal conviction — more like hesitation in the absence of big headlines. A reversal here isn’t off the table, especially with CPI numbers coming in across several economies. If these releases surprise, price action could accelerate in both directions.
Currency and Market Reactions
Meanwhile, the fall in USD/JPY down to 142.50 suggests weaker sentiment towards the Dollar broadly, possibly hinting that some haven flows shifted, or that traders are now positioning more cautiously. When the yen gains like this, it often means markets are beginning to reassess perceived risks. It could be about geopolitical uncertainties or mere fatigue around rate differentials.
Gold’s retreat from its record peak of $3,245 indicates a slackening desire for traditional safety. It’s mostly about what we’re not seeing now — no immediate catalysts pushing capital toward bullion. This doesn’t suggest a collapse, but it does reflect a shift in appetite. We’re likely to reassess how this move lines up with upcoming inflation numbers, especially if they come in soft.
As for retail sales in the US and the inflation reads due from the UK, Canada, New Zealand, and Japan — these data points anchor expectations. For instance, if US retail proves resilient, it could pull forward assumptions of rate hikes or extend current policy paths, which in turn influences implied volatility across currency pairs. Keep an eye on the short-end rates curve — movements there will feed swiftly into derivatives pricing.
Traders analysing axis pairs like GBP/USD or AUD/JPY may find opportunity in the data divergence that often results from staggered CPI releases. This sort of dislocation can spark sharper movements than thematic positioning.
Between the macro calendar and mounting policy chatter, risks may skew towards sharper directional moves in short order. That’s especially true if any CPI surprise — up or down — crosses a threshold that markets aren’t currently anticipating. Smaller positions, tighter stops, and perhaps neutral deltas might be more appropriate near-term if conviction is low. We’ll need to assess not just the numbers but the reactions — because that’s where pricing anomalies can emerge.
