Gold rises to record highs and stock markets decline everywhere as President Trump threatens military action against Iran, as markets also await new US tariffs on Wednesday.
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Markets start this week unquestionably in risk-off mode, meaning there is probably money to be made by traders. The standout asset is Gold, which has continued its strong bullish trend of the last 15 months as it breaks out to new all-time high prices above $3,125. Trend and momentum traders will be looking to trade long here. Stock markets are in serious decline everywhere, with NASDAQ 100 futures currently trading at a 6-month low price while the S&P 500 Index is close to 6-month lows. The US 2-year treasury yield is also trading at a fresh 6-month low. The sour sentiment has two immediate causes:
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President Trump has promised to implement new tariffs this Wednesday 2nd April, with markets expecting a 25% tariff on all imports of automobiles, pharmaceuticals, and on almost all imports from Canada and Mexico and possibly the European Union as well. This is weakening the US Dollar, so is unusual for a risk-off period in that sense in the way it affects the Forex market.
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President Trump threatened to bomb Iran and US forces are currently well positioned to do so, with a strong offensive US military buildup on the island of Diego Garcia which is almost certainly safe from any Iranian counter capability. Trump is demanding that Iran begin serious negotiations over its nuclear program, but so far Iran has signaled it is not prepared for direct negotiations.
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In the Forex market, since Tokyo opened today, the strongest major currency is the Japanese Yen, while the weakest is the US Dollar, putting the USD/JPY currency pair in focus. The Japanese Yen and Gold are the major beneficiaries of the current risk-off sentiment due to the US Dollar’s relative weakness because of the tariff issue.
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There will be a release of German Preliminary CPI (inflation) data today, which could affect the Euro.