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What’s happening: The euro moved higher versus the US dollar on Tuesday following news of Germany forming a coalition government.
What happened: Germany’s Christian Democratic and Christian Social Union bloc reached an agreement with the centre-left Social Democrats to form a coalition government.
Weakness in the US dollar also lent support to the EUR/USD forex pair.
Why it matters: Investors have been focusing on the trade war, after US President Donald Trump announced higher tariffs on its trading partners.
The European Commission said it had proposed zero-for-zero tariffs to the US in a bid to avert trade dispute, but the proposal had been rejected by the US. The European Union announced plans to impose 25% counter-tariffs on US goods, after Trump proposed tariffs on steel and aluminium last month.
China also reaffirmed that it would retaliate and fight till the end after Trump announced plans to impose 50% tariffs unless Beijing rolled back its retaliatory measures.
Investors are expecting higher interest rate cuts by the European Central Bank. The EBC is expected to cut rates by 25 basis points at its meeting later this month, and another two rate cuts by yearend.
On the economic data front, France’s current account deficit widened to €1.9 billion in February, from €1.3 billion in January. The region’s current account gap was the largest since April 2024, as goods account deficit widened to €6.4 billion, from €5.8 billion in the previous month.
Weakness in the US dollar provided a boost to the EUR/USD forex pair on Tuesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell over 0.4% to 102.96 on Tuesday.
The EUR/USD pair gained more than 0.5% to $1.0959 after recording losses in the previous two sessions.
The STOXX Europe 600 Index surged 2.72% to close at 486.91 on Tuesday, after recording their worst four-session plunge since the covid-19 pandemic.
What to watch: Investors await inflation data from Germany and Spain this Friday. Analysts expect Germany’s consumer price inflation to ease to 2.2% in March, which would be the lowest rate since November 2024. Spain’s annual inflation rate is expected to decline to 2.3% in March, from 3% in the previous month.
Context: Gold prices moved higher this morning as the US is set to impose a 104% tariffs on China from today.
Details: The US dollar continued to weaken amid rising trade concerns between the US and China, lending support to gold prices, as a lower greenback makes metals cheaper for foreign currency holders.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.5% to 102.41 this morning.
US President Donald Trump announced reciprocal tariffs on April 2, which fuelled economic growth concerns, forcing investors to flock towards safe-haven assets like gold.
Gold futures gained around 0.9% to trade at $3,016.60 an ounce this morning, after settling higher by around 0.5% on Tuesday. Gold, which is considered a safe-haven asset during times of financial and political uncertainty, has surged around 15% year-to-date.
In other metals trading, silver gained around 0.3% to $29.76 an ounce this morning. Copper fell 0.5% to $4.1245, platinum declined 0.2% to $909.80 and palladium lost around 0.3% to $886.50.
What to watch: Investors will continue monitoring tariff-related announcements from the Trump administration.
Minutes from the US Fed’s recent policy meeting (2200 UAE Time) will be released today, which would provide more insights into the future rate cuts.
Data on inflation rate from the US, due to be released this Thursday, will also remain in focus. The annual inflation rate in the US, which fell to 2.8% in February from 3% in the previous month, is expected to ease further to 2.6% in March.
Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.84%, 1.57% and 1.95%, respectively.
Ukraine’s President Volodymyr Zelensky confirmed for the first time that his military troops are active in the Belgorod region of Russia. The news sent the RUB/USD pair lower in forex trading this morning.
Australia’s private house approvals rose by 1% to 9,203 units in February, in-line with the preliminary reading. The figure rising for the second consecutive month lent support to the AUD/USD forex pair.
The Reserve Bank of New Zealand cut its official cash rate by 25 bps to 3.50% during its recent meeting, in-line with market estimates, sending the NZD/USD pair higher in forex trading this morning.
Brazil’s sales of new vehicles rose by 5.7% to 195,536 units in March, easing from an 8% surge in the previous month, which lent support to the BRL/USD forex pair.
The American Petroleum Institute said that US crude oil inventories declined by 1.057 million barrels during the week ending April 4, compared to a gain of 6.04 million barrels in the previous week. However, WTI crude oil prices fell this morning.
US MBA mortgage applications (1500 UAE Time), wholesale inventories (1800 UAE Time), EIA crude oil stocks change (1830 UAE Time), EIA gasoline stocks change (1830 UAE Time), EIA distillate stocks change (1830 UAE Time) and EIA heating oil stocks change (1830 UAE Time), Brazil’s bank lending (1530 UAE Time), retail sales (1600 UAE Time) and PPI (1600 UAE Time), Mexico’s inflation rate (1600 UAE Time), Russia’s GDP growth rate (2000 UAE time), as well as Argentina’s industrial production (2300 UAE Time).
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