Tariffs Spark Market Turmoil: Dollar Rise

• Trump imposes fresh tariffs, sparking inflation fears and potential Fed policy shifts.

• Dollar strengthens as trade tensions fuel expectations of a lower U.S. budget deficit.

• Global markets tumble, with stocks and crypto facing heavy selling amid risk aversion.

Market Summary

Tariffs have once again become a focal point, injecting fresh uncertainty into global markets. Over the weekend, former U.S. President Donald Trump issued an executive order imposing 25% tariffs on imports from Canada and Mexico, along with a 10% levy on Chinese goods. The White House signaled that these measures could take effect as early as Tuesday, heightening market concerns.

Economists caution that these tariffs may exacerbate inflationary pressures, potentially prompting the Federal Reserve to slow the pace of interest rate cuts this year. Fed officials remain wary, citing an uncertain economic outlook weighed down by trade policy risks. Adding to the complexity, economic data showed the personal consumption expenditures (PCE) price index climbed 0.3% in December, marking a 2.6% year-on-year increase—suggesting persistent inflation that could delay Fed rate adjustments.

The Dollar Index strengthened as investors speculated that the tariffs might help narrow the U.S. budget deficit while simultaneously fueling inflationary pressures that support the greenback. Meanwhile, currencies of affected nations, including the Canadian dollar, Mexican peso, and Chinese yuan, declined.

Uncertainty surrounding tariffs also spurred a risk-off sentiment across global markets. Investors offloaded risk assets, triggering a sharp downturn in U.S. equities and cryptocurrencies as capital shifted toward traditional safe havens such as the U.S. dollar.

Current rate hike bets on 19th March Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (100.0%) VS -25 bps (0%)

Market Movements

DOLLAR_INDX, H4

The U.S. Dollar Index, which tracks the greenback against six major currencies, surged sharply as markets anticipated that President Trump's newly imposed tariffs would reduce the U.S. budget deficit while adding inflationary pressures. The executive order signed over the weekend introduced 25% levies on imports from Canada and Mexico and a 10% duty on Chinese goods. This move has heightened trade tensions, with investors closely monitoring potential retaliatory measures.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 77, suggesting the index might enter overbought territory.

Resistance level: 109.90, 111.60

Support level: 109.00, 107.95

XAU/USD, H4

Gold prices tumbled as the dollar's sharp rally exerted downward pressure on the dollar-denominated metal. The greenback‘s strength, driven by tariff-related inflation expectations, overshadowed gold’s safe-haven appeal. Investors remain cautious, with focus shifting to potential responses from Canada, Mexico, and China, which could trigger further volatility across financial markets.

Gold prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 49, suggesting the commodity might extend its losses after breakout since the RSI retreated from overbought territory.

Resistance level: 2830.00, 2845.00

Support level: 2775.00, 2740.00

EUR/USD，H4

EUR/USD extended its losses, plunging to a three-week low during early Asian trading as the dollar surged on tariff-driven risk aversion. Trump‘s tariffs fueled a flight to safe-haven assets, strengthening the USD while weighing on the euro. The European Central Bank’s (ECB) recent 25 bps rate cut and signals of further easing have reinforced bearish sentiment around the shared currency, exacerbating the EUR/USD decline.

The EUR/USD is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum. However, RSI is at 25, suggesting the pair might enter oversold territory.

Resistance level: 1.0355, 1.0535

Support level: 1.0195, 1.0100

USD/CAD，H4

The Canadian dollar plunged as Trump‘s tariff decision directly targeted Canada, Mexico, and China. The U.S. move against its key trading partners sent shockwaves through forex markets, further pressuring the Canadian dollar. Additionally, stabilizing U.S. inflation data supported the dollar’s rally, exacerbating CADs losses.

USD/CAD is trading higher following the prior breakout above the previous resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 78, suggesting the pair might enter overbought territory.

Resistance level: 1.4815, 1.4960

Support level: 1.4700, 1.4620