Escalating U.S.- China Trade Tensions Shake Global Markets

• Escalating trade tension between the U.S. and China boost demand for safe-haven assets like gold, Yen and Swiss Franc.

• Risky assets face headwinds on global trade risk, and the Dow closed 1000 points lower.

• The U.S. dollar dipped to a fresh low as the market lost confidence in the U.S. economy.

Market Summary

Markets remain under heavy pressure as U.S.-China trade tensions intensify, with both sides continuing to escalate tariff measures. China's announcement of an 84% tariff on U.S. imports, coupled with reports that Washington is set to raise its tariffs to 125%, has rattled investor sentiment and triggered a broad risk-off move across global financial markets.

As a result, demand for safe-haven assets surged, with gold rallying to a fresh all-time high above the $3,200 mark. Meanwhile, safe-haven currencies like the Japanese Yen and Swiss Franc climbed to new highs, reflecting mounting concerns over the trajectory of global trade and economic growth.

Risk assets were sharply lower, led by equities—the Dow Jones Industrial Average plunged over 1,000 points, as investors fled risk amid rising geopolitical and economic uncertainty. The U.S. dollar also came under pressure, after the Trump administration announced a 90-day tariff pause for countries that have not retaliated against the U.S.—a move viewed by markets as inconsistent and damaging to investor confidence.

The Dollar Index slumped to its lowest level since July 2023, signaling broad skepticism toward the administrations trade strategy and its potential impact on U.S. economic stability. With both Washington and Beijing showing little sign of softening their stances, the market is likely to remain on edge, with safe-haven demand expected to stay elevated in the near term.

Current rate hike bets on 7th May Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (85%) VS -25 bps (15%)

Market Movements

DOLLAR_INDX, H4

The Dollar Index fell sharply, breaking below the 100 mark for the first time since July 2023, as mounting trade tensions and disappointing U.S. economic data pressured the greenback. Uncertainty over President Trump‘s tariff escalation plans and their potential economic impact weighed on investor sentiment. The dollar’s selloff accelerated following a weaker-than-expected U.S. CPI report, which further eroded confidence in the economic outlook.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum. However, RSI is at 30, suggesting the index might enter oversold territory.

Resistance level: 102.95, 106.80

Support level: 100.15, 95.85

XAU/USD, H4

Gold prices rebounded strongly, driven by the weaker dollar and rising concerns over global growth prospects. The combination of worsening inflation and heightened U.S.-China trade war fears fueled renewed safe-haven demand. Additionally, increasing speculation over potential Federal Reserve rate cuts boosted golds appeal as a hedge against both inflationary and geopolitical risks.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 72, suggesting the commodity might enter overbought territory.

Resistance level: 3225.00, 3295.00

Support level: 3170.00, 3130.00

GBP/USD，H4

The GBP/USD pair saw choppy price action in the recent session, largely driven by shifting sentiment around the U.S. dollar. The greenback initially rebounded on technical grounds and was briefly supported by rumors of a potential 90-day tariff pause from the Trump administration—moves that momentarily eased global trade fears. However, the dollar later reversed gains and sank to fresh lows following a softer-than-expected U.S. CPI reading, which reignited concerns over the health of the U.S. economy. Looking ahead, UK GDP data is expected to take centre stage today. A stronger-than-expected print could offer a lift to the Pound, potentially fueling further upside for the GBP/USD pair.

The GBP/USD pair has gained for the past four sessions from its recent low level, suggesting a bullish bias for the pair. The RSI is heading toward the overbought zone, while the MACD is about to cross above the zero line, suggesting that bullish momentum is forming.

Resistance level: 1.3085, 1.3180

Support level: 1.2945, 1.2875