Market's react to escalating trade tensions. Market Update: April 11, 2025

Market's react to escalating trade tensions. Moneta Markets Daily Global Market Update: April 11, 2025

Financial markets are reacting to escalating US-China trade tensions, with gold and silver performing well as safe-haven assets. The US Dollar appears to be under pressure, reflected in the Dollar Index at around 100.40, following softer-than-expected US inflation data that has increased speculation of Federal Reserve rate cuts. This weakening USD is supporting currency pairs like NZD/USD, which is holding steady above 0.5750, while USD/CAD shows a bearish outlook below 1.4000. The Australian Dollar is facing headwinds from trade war impacts, despite potential relief from restarting EU trade talks.

Gold continues to soar

Gold (XAU/USD) is trading close to fresh all-time highs near $3,220 per ounce in early European trading on Friday, likely driven by deepening trade tensions between the US and China. The US has imposed tariffs on Chinese goods now reaching 145%, with China retaliating by raising tariffs on 84% of American imports and adding six US firms, including defense and aerospace companies like Shield AI and Sierra Nevada, to its trade blacklist, while introducing export controls on others such as American Photonics and BRINC Drones. This escalation is heightening global economic uncertainty, supporting gold’s status as a safe-haven asset.

 US Dollar Index (DXY) Movements

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of six major currencies, continues its decline for the second consecutive session, hovering around 100.40 during Friday’s Asian trading hours. The technical analysis of the daily chart suggests a sustained bearish trend, with the index testing the lower boundary of a prevailing descending channel. Despite the downward pressure, the 14-day Relative Strength Index (RSI) remains below 30, signaling the potential for an imminent upward correction. Furthermore, the DXY is trading well below its nine-day Exponential Moving Average (EMA), indicating weak short-term momentum.

On the downside, immediate support is seen at the psychological level of 100.00, followed by 99.76—the lowest level since April 2022—with additional support near the 99.00 mark. To the upside, a move toward the nine-day EMA at 102.34 could be on the cards. A decisive break above this level may enhance short-term bullish momentum and pave the way for a test of the key resistance zone near the upper boundary of the descending channel at the monthly high of 104.37, followed by 104.59. USD weakness is influencing several currency pairs

USD/CAD

The pair is trading around 1.3965, below the key 1.4000 level, with a bearish outlook intact below the 100-day EMA. The 14-day RSI at 32.60 supports sellers in the near term, indicating downward momentum. Initial support is at 1.3842 (November 7, 2024 low), with further levels at 1.3750 (October 16, 2024 low) and 1.3480 (October 1, 2024 low). On the bright side, the first upside barrier for USD/CAD is located at the 1.4000 psychological level. Any follow-through buying above this level could pave the way to 1.4113 (April 10 high) and 1.4225 (100-day EMA) if buying pressure returns. The Canadian Dollar (CAD) is influenced by oil prices, which are struggling, adding to the pair’s bearish sentiment.

 AUD/USD

The Australian Dollar is losing ground, likely pressured by the US increasing tariffs on Chinese goods to 145%, raising concerns for Australia given its strong trade ties with China. However, there is some positive news, with reports that Australia is set to restart trade negotiations with the European Union, potentially offering support. Specific levels are not provided, but the AUD remains vulnerable amid elevated market volatility, likely trading lower.

 NZD/USD

The pair is holding positive ground around 0.5770, after reaching a daily high of 0.5800 during Asian trading hours. This resilience is bolstered by broad USD weakness amid trade war worries, with the Trump administration hitting China with new tariffs of 145%. Despite a 90-day pause on tariffs for other countries except China, the NZD benefits from the USD’s decline. The Reserve Bank of New Zealand (RBNZ) cut its benchmark interest rate by 25 basis points at its April meeting, with analysts anticipating a deeper 50 bps cut and markets factoring in up to 100 bps in further easing by 2025, which might cap the NZD’s upside in the near term.

 Broader Market Context

The intensification of the US-China trade war is fostering a risk-off environment, benefiting safe-haven assets like gold and silver. China has raised tariffs on 84% of American imports and added six US firms, including defense and aerospace companies like Shield AI and Sierra Nevada, to its trade blacklist, while introducing export controls on others such as American Photonics and BRINC Drones. This escalation is heightening global economic uncertainty, with potential implications for growth and financial stability.

US economic data continues to play a pivotal role, with the softer CPI suggesting cooling inflation, potentially paving the way for Fed rate cuts. However, tariff-induced inflation risks remain, adding complexity to the outlook. Central bank actions are also influencing markets, with the Fed under scrutiny for possible rate cuts and the RBNZ already easing, while other central banks’ responses will depend on their domestic conditions.

Looking Ahead: Key Data and Events

Investors are bracing for the release of the US March Producer Price Index (PPI) and the advanced Michigan Consumer Sentiment later today. The PPI data is expected to provide further insights into producer inflation, potentially influencing Fed policy expectations, while consumer sentiment will gauge confidence amid economic uncertainties. Additionally, any updates on US-China trade negotiations or retaliatory measures could significantly impact market dynamics, keeping volatility elevated.