Hello traders, and welcome to volatile Monday, which opened with significant market gaps. For those who didn’t follow the news over the weekend, today's moves might come as a surprise. Let’s dive into what’s driving this morning’s market action, starting with the macro calendar.
Earlier today, we received Australian retail sales data, which came in at -0.1%, slightly better than expected. However, attention is shifting to U.S. ISM Manufacturing PMI, due later today, with expectations set at 49.3. Despite the importance of these reports, macroeconomic data will likely take a backseat to the trade war developments dominating headlines.
Over the weekend, Donald Trump escalated trade tensions by signing an order imposing new tariffs. The measures include 25% tariffs on imports from Mexico and Canada, along with 10% tariffs on goods from China. Additionally, energy exports from Canada will face a reduced 10% tariff. In a further blow, Trump has also threatened the European Union with similar tariffs, intensifying global trade concerns.
These developments have triggered a clear market reaction. Let’s start with indices, which are flashing red at the start of February. Major indices are down between 1% and 2%, reflecting fears of the economic impact of these new tariffs.
In the currency market, the euro is struggling, along with other European currencies—particularly those from emerging markets like the Hungarian forint and Czech koruna. On the flip side, safe-haven currencies such as the American dollar and Japanese yen are gaining strength, as traders seek stability amid heightened uncertainty.
Moving to commodities, metals are under pressure due to a stronger dollar, which reduces demand for dollar-denominated assets. However, oil is on the rise, reacting positively to the increased tariffs and potential disruptions to global trade and energy exports.
This market volatility is a hallmark of the Trump administration, where surprises like these are frequent. If you're a trader who thrives on volatility and momentum, today's environment is tailor-made for you. With the markets adjusting to these developments, there’s no shortage of opportunities or risks to manage.
As the day unfolds, traders will be watching for further market reactions and any additional comments from Trump or other officials that could influence sentiment. Stay sharp, as it promises to be a dynamic trading session ahead.