The pound held close to a six-week high against the dollar on Tuesday, trading at $1.2721, as European leaders worked to finalise a Ukraine peace proposal ahead of talks with Washington. The dollar also lost ground after US president Donald Trump confirmed that new tariffs — 25% on imports from Canada and Mexico, and 10% on Chinese goods — would take effect as planned.
The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, lost 0.4% to 106.32, reflecting investor concerns over a potential escalation in trade tensions. Retaliatory measures from both China and Canada in response to Washington’s sweeping import levies have added to fears of a broader trade war.
Markets are now focused on upcoming US economic data, particularly February’s non-farm payrolls report due on Friday, which is expected to provide further clarity on the Federal Reserve’s monetary policy stance. The central bank is widely anticipated to hold interest rates steady at its March and May meetings, with futures markets pricing in a 77% probability of a rate cut in June, according to CME’s FedWatch tool.
The pound also found support as European leaders, alongside Ukrainian president Volodymyr Zelenskyy, moved towards a structured peace plan aimed at ending the three-year war in Ukraine. Hopes for a resolution have bolstered sentiment, with investors speculating that a truce could stabilise supply chains and support economic recovery.
Gold prices climbed on Tuesday, surpassing the $2,900 mark, as investors turned to safe-haven assets in response to escalating trade tensions following Trump’s latest round of tariffs.
Spot gold rose 1.5% to $2,911.83 per ounce, while gold futures gained 0.6% to trade at $2,918.80.
The precious metal’s rally reflects growing concerns over economic uncertainty, with Washington’s tariffs on imports from Mexico, Canada, and China fuelling fears of a global trade war. Retaliatory measures from Beijing and Ottawa have added to investors' anxiety, prompting a shift towards gold as a hedge against potential market volatility.
However, further gains could be capped by expectations that the Federal Reserve may keep interest rates higher for longer if US inflation remains elevated. Higher rates tend to weigh on non-yielding assets such as gold, reducing their appeal.
Pete Walden, managing director of BullionByPost, said:“Trump's recent announcement regarding tariffs on goods from China, global tariffs on aluminium and steel, and threats of 25% tariffs on goods from the EU has rattled markets, increasing economic uncertainty. Gold as the ultimate safe-haven asset has gained tremendously from this, as investors seek shelter from the uncertainty."
JPMorgan said they hold a long-term structural bullish view for gold with price target of close to $3,000/oz in the fourth quarter of 2025.
Oil prices have sunk to their lowest level of the year, hit by anxiety over the tariffs imposed by the US, and the retaliatory measures from Canada and China.
Brent crude futures dropped 1.4% to $70.65 per barrel, the lowest since early December, while US West Texas Intermediate (WTI) crude lost 1% to $67.66 per barrel, also a 2025 low.
The market was further weighed down by news that OPEC+ will proceed with a planned production increase in April. The group intends to unwind previous output cuts, raising supply by 138,000 barrels per day.
Joseph Dahrieh, managing principal at brokerage Tickmill, said crude oil futures continue to decline as OPEC+ boosts production and uncertainty mounts over US trade policy.
“The decision to increase output raises concerns about potential oversupply, particularly if demand growth fails to keep pace,” he said.
Geopolitical factors also add to the bearish outlook. Progress in European-led peace talks could lead to an easing of sanctions on Russia, reducing supply disruptions and potentially increasing the availability of Russian oil in global markets.
Meanwhile, the Trump administration’s tariffs on Canadian and Mexican imports, including energy products, could dampen economic activity and curb fuel demand. With global economic uncertainty persisting, analysts warn that oil prices could remain under pressure.
The International Energy Agency has warned of a supply surplus this year, while OPEC+ confirmed on Monday that it will begin increasing output in April. Saudi Aramco (2223.SR), the world’s sixth-largest company by market value, reported a 12% drop in annual profits to $106.3bn (£83.7bn) amid lower energy prices.
Warren Patterson, head of commodities strategy at ING, said oil is “under pressure on two fronts” due to US tariffs and OPEC+ supply plans. He warned that retaliatory tariffs could escalate trade tensions further, clouding the global growth and demand outlook.
In broader market movements, the FTSE 100 (^FTSE) was lower on Tuesday morning, slipping 0.7% to 8,812.33 points at the time of writing. For more details, check our live coverage here.
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