Trump’s Steel and Aluminum Tariffs Roil Markets (02.10.2025)

Global markets are reacting to US President Donald Trump’s new 25% steel and aluminum tariffs, strengthening the dollar and pressuring major currencies.

The euro slipped to $1.03 as the ECB’s easing stance added to its weakness, while the yen fell to 152 per dollar despite expectations of future BOJ rate hikes. GBP/USD dipped to 1.2407 as tariff fears fueled uncertainty, with China and the EU warning of retaliatory measures. Gold surged past $2,870, supported by ongoing central bank purchases, including the PBoC’s third monthly increase in reserves. Silver held steady at $32, with potential for higher volatility as Chinese markets reopen.

ECB Easing Creates Headwinds for EUR/USD

The euro slipped to around $1.03, pressured by a stronger US dollar after President Donald Trump announced new global tariffs on steel and aluminum. Expectations of a widening US-Europe interest rate gap added further pressure. Strong US jobs data supported the Fed’s decision to maintain rates, while the ECB recently cut rates and signaled more easing in March. Concerns that US tariffs could trigger deflation have increased expectations of further ECB cuts, with the deposit rate projected to fall to 1.87% by December. German Chancellor Olaf Scholz warned the EU could retaliate “within an hour” if the US imposes tariffs while EU trade committee head Bernd Lange noted the bloc might lower its 10% vehicle import tax to align with the US rate of 2.5% to avoid a trade war.

From a technical perspective, resistance levels are at 1.0400, 1.0460, and 1.0515 if the price moves higher. On the downside, support is at 1.0275, followed by 1.0220 and 1.0180.

Yen Weakens as Trump's Steel and Aluminum Tariffs Support Dollar

The Japanese yen fell to around 152 per dollar, retreating from two-month highs as the dollar strengthened after US President Donald Trump announced a 25% tariff on all steel and aluminum imports, set to take effect today. This move has heightened concerns, potentially limiting the Fed’s ability to cut rates. The yen had surged over 2% last week on expectations that the BOJ would continue raising rates. BOJ board member Naoki Tamura stated the policy rate may need to reach at least 1% in the second half of fiscal 2025. Strong wage and household spending data reinforced a more hawkish outlook for interest rates.

The key resistance level is 153.85, with a break above potentially targeting 154.90 and 156.00. On the downside, support is at 151.90, followed by 151.25 and 149.20 if the price moves lower.

PBoC Adds to Reserves, Supporting Gold Prices

Gold surged above $2,870 per ounce, nearing record highs after US Trump announced new 25% tariffs on all steel and aluminum imports. This move adds to existing metal tariffs under his broader trade policy overhaul. Meanwhile, expectations for looser monetary policy are growing, with investors predicting two Fed rate cuts in 2024 despite strong labor data, aligning with FOMC projections.

The Bank of England took a more dovish stance than expected with a rate cut last week, while the Reserve Bank of India enacted its first rate cut since the pandemic began nearly five years ago. Central bank gold purchases also supported bullion, with the People's Bank of China increasing reserves for a third month in January.

Technically, the first resistance level is 2,882, with further levels at 2,917 and 2,950 if breached. On the downside, support is at 2,830, followed by 2,790 and 2,760 if the decline continues.

GBP/USD Dips as Dollar Strengthens on Tariff Fears

GBP/USD is trading around 1.2407, while the dollar index climbed above 108.3, marking its third day of gains. China responded to Trump’s move on precious metals with retaliatory tariffs on selected US exports while German Chancellor Olaf Scholz warned the EU could retaliate “within an hour” if US tariffs target European goods. Investors now await US consumer inflation data on Wednesday, followed by jobless claims and the producer price index report on Thursday.

The first resistance level is 1.2500, with further levels at 1.2600 and 1.2650 if breached. On the downside, support is at 1.2340, followed by 1.2265 and 1.2100 if the decline continues.

Silver at $32, Volatility Expected

Silver began the week trading at $32, showing a flat start. Last week, silver benefitted from a weaker dollar index, and with the end of the holiday in China, this week’s data flow is expected to increase, potentially driving higher volatility.

Technically, the first resistance level will be 32.50 level. In case of this level’s breach, the next levels to watch would be 33.00 and 33.50. On the downside, 31.80 will be the first support level. 30.90 and 30.20 are the next levels to observe if the first support level is breached.