The Dollar fell significantly on Thursday, while the Euro gained ground after President Trump unveiled stricter-than-expected tariffs on US trading partners, shaking up markets.
The announcement sparked a global market downturn, with investors seeking refuge in safe-haven assets like the Yen, Swiss Franc, bonds, and gold.
President Trump announced a 10% baseline tariff on all imports to the US, with higher rates for major trading partners, escalating the trade war.
This move sparked market volatility, as investors feared it could lead to a global economic slowdown and rising inflation.
Indeed, the tariffs have added fuel to concerns about the potential long-term impact on international trade.
The Dollar index, measuring the greenback against six peers, dropped by 1.6%, reaching its lowest level since October, while the Euro rose 1.5%, hitting a six-month high, Reuters reports.
President Trump has already imposed tariffs on aluminium, steel, and automobiles, along with increased duties on all goods from China.
“Eye-watering tariffs on a country-by-country basis scream ‘negotiation tactic’, which will keep markets on edge for the foreseeable future,” according to Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors.
Meanwhile the risk-sensitive Australian Dollar increased by 0.56% to $0.63365, and the New Zealand Dollar rose by 0.9% to $0.5796.
The Japanese Yen reached a three-week high against the Dollar, rising 1.7% to 146.76 per Dollar, while the Swiss Franc hit its strongest point in five months at 0.86555 per Dollar.
“Negotiations are now going to be front of mind. This is probably the other big part of why we’re seeing some of these currencies outperform,” stated Nicholas Rees, Head Of Macro Research at Monex Europe.
“It’s very difficult actually to see how other countries make concessions that would encourage the US to lift these tariffs. And I think that’s a big underpriced risk.”
Furthermore, investors are concerned that certain US trading partners may take retaliatory actions, potentially driving prices higher.
Indeed, EU President Ursula von der Leyen called the tariffs a significant setback for the global economy and stated that the 27-member union is ready to implement countermeasures if negotiations with Washington do not succeed.