Markets took a hit after Trump announced hefty auto tariffs, leading to a slump in car stocks and rattling global market sentiments.
In the midst of all this, gold soared to an all-time high while the dollar fluctuated dramatically. Traders were reacting to the escalating trade tensions, the latest economic data, and fresh warnings from the Fed about inflation risks.
Here’s a quick rundown of the key headlines and asset price movements from the latest trading sessions:
Headlines:
- U.S. President Trump has signed off on a 25% tariff on car imports starting April 3, though parts for U.S.-made vehicles will be spared.
- Japan’s Chief Cabinet Secretary Yoshimasa Hayashi expressed concerns that these U.S. trade restrictions could significantly impact bilateral economic relations, global economies, and the multilateral trading system.
- China’s Commerce Ministry revealed on Thursday that it has filed a lawsuit with the WTO against the U.S. over the recent tariff measures.
- Industrial profits in China for February 2025 saw a year-over-year decline of 0.3%, below the forecasted 4.0%, though slightly better than January’s -3.3%.
- The U.S. saw 224,000 new jobless claims for the week ending March 22, slightly below the forecast of 225,000.
- The final U.S. GDP reading for Q4 2024 came in at 2.4%, marginally higher than the 2.3% forecast but a decline from the previous 3.1%.
- U.S. pending home sales rose 2.0% in February, better than the expected 2.9%, rebounding from a previous dip of 4.6%.
- The U.S. goods trade deficit narrowed to $147.9 billion in February, under the predicted $134.6 billion and down from $155.6 billion previously.
- The Kansas Fed Manufacturing Index improved to 1.0 in March, surprising analysts who anticipated a -14.0 reading.
Key figures in international politics responded swiftly. FOMC voting member Susan Collins stated that maintaining rates steady is the current best approach. Canada’s PM, Mark Carney, expressed his intent to retaliate against U.S. tariffs. Meanwhile, Mexico’s President Claudia Sheinbaum promised a comprehensive response, and France’s President Macron warned of a reciprocal European response.
Broad Market Price Action:
Trump’s imposition of a 25% tariff on foreign-made cars shocked major assets on Thursday. These tariffs, effective from April 3 and lasting through his term, allow interest deductions on loans for American-made cars, while American parts in foreign cars remain tariff-free.
The stock market reacted negatively, with major U.S. indices closing lower. Car manufacturers bore the brunt—General Motors dipped over 7% while Ford was down nearly 4%. Contrary to the trend, Tesla recorded a minor gain, thanks to its largely U.S.-based manufacturing.
European stocks didn’t fare any better, particularly in Germany where the auto industry is significant.
As investors rushed to safe havens, gold prices jumped to a record $3,060 per ounce before settling slightly at $3,056. Some analysts project gold might reach $4,200 by the end of the year if trade tensions escalate. Bitcoin saw some volatility but hovered around the $87,000 mark.
Oil prices nudged upward to approximately $69.85 per barrel, and government bond yields rose, with the 10-year Treasury yield hitting a one-month peak at 4.40% before dipping to 4.36%, buoyed by stronger-than-expected U.S. GDP and home sales data.
Susan Collins of the Federal Reserve cautioned that tariffs will likely make U.S. consumer goods more expensive in the short run, adding complexity to the central bank’s task of managing inflation and economic growth.
FX Market Behavior: U.S. Dollar vs. Majors:
The U.S. dollar experienced quite the rollercoaster as traders digested Trump’s auto tariff news alongside various economic releases. Initially, in Asian trading, the dollar fell in response to the new tariffs on foreign vehicles but found its footing as European markets evaluated the full impact of these measures.
A slew of robust U.S. economic data triggered a rebound for the dollar, except against the Swiss franc. Notably, the final Q4 GDP exceeded expectations, and jobless claims remained low, strengthening the dollar. However, it took a hit near the London close, likely as traders speculated on potential retaliatory tariffs from major trade partners.
Fed official Susan Collins’ remarks suggesting tariffs could drive inflation higher in the short term added another layer of complexity, keeping dollar traders on edge.
Upcoming Potential Catalysts on the Economic Calendar:
- U.K. retail sales, current account, final GDP, and goods trade balance will be out at 7:00 am GMT.
- Germany will release its GfK consumer climate data at 7:00 am GMT.
- France’s consumer spending and prelim CPI will be available from 7:45 am GMT.
- Switzerland’s KOF economic barometer and Spain’s flash CPI will be disclosed at 8:00 am GMT.
- Germany’s unemployment figures follow at 8:55 am GMT.
- Canada’s monthly GDP data will arrive at 12:30 pm GMT.
- Critical U.S. core PCE data, the Fed’s favored inflation measure, is due at 12:30 pm GMT, along with personal income and spending data.
- Germany’s Bundesbank President Nagel will speak at 1:00 pm GMT.
- In the U.S., revised University of Michigan consumer sentiment and inflation expectations are set for release, alongside speeches from FOMC members.
Central bank watchers and investors will have a busy day ahead, looking for clues on future policy adjustments. The market is also eager for the core PCE release at 12:30 pm GMT—this could be a game-changer for the dollar and equity markets. And don’t forget, our newly launched Forex Correlation Calculator could be a handy tool for your trading strategies!
