US dollar wallows near three-year nadir before Powell's remarks
The US dollar fell in European trade on Wednesday against a basket of major rivals, resuming losses and approaching a three-year nadir as the US-China trade war escalates.
Fed Chair Jerome Powell is scheduled to speak today in Chicago on the economic outlook amid President Donald Trump’s aggressive tariffs, and could provide new clues on the path of US interest rates this year.
The Index
The dollar index fell 0.75% today to 99.35, with a session-high at 100.11.
On Tuesday, the index rose 0.45%, the first profit in four days away from three-year lows at 99.01.
The Trade War Escalates
On April 9, the US government told Nvidia it’ll need a license to export its chips to other countries, with a $5.5 billion charge now linked to the company’s GPU exports to China.
The H20 Nvidia chips are AI chips designed for China and adhere to US export limits, and made Nvidia earnings between $12 billion and $15 billion in 2025.
Nvidia warned that chip sales in China fell sharply last year as the competition expanded, chiefly from Huawei.
US President Donald Trump ordered an investigation into all basic metals, chips, and pharmaceutical imports, in preparation for potential tariffs, while Chinese authorities banned local airlines for shipping Boeing aeroplanes.
US Rates
Federal Reserve official Christopher Waller wanted that recession risks outweigh inflation risks, and if current average 25% tariffs continued, inflation could hit a peak of 5%.
Atlanta Fed President Raphael Bostic also warned from ongoing uncertainty due to tariffs and other policies that could push the economy into recession.
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in May stood at 17%.
The odds of such a cut in June stood at a much bigger 73%.
Gold approaches $3300 for first time ever
Gold prices rose in European trade on Wednesday on track for the second straight profit, hitting a fresh record high and approaching $3300 for the first time ever on strong haven demand as the US-China trade war escalates.
Fed Chair Jerome Powell is scheduled to speak today in Chicago on the economic outlook amid President Donald Trump’s aggressive tariffs, and could provide new clues on the path of US interest rates this year.
The Price
Gold prices rose 2% today to $3295 an ounce, a record high, with a session-low at $3229.
On Tuesday, gold rose 0.6% on Tuesday, the fourth profit in five days amid uncertainty on US President Trump’s tariff policies.
The Dollar
The dollar index fell 0.7% today to near three-year lows against a basket of major rivals, making dollar-denominated gold futures more attractive to holders of other currencies.
The losses amid a loss of confidence in the US economy, prompting investors to dump American assets and seek other havens such as gold.
The Trade War Escalates
On April 9, the US government told Nvidia it’ll need a license to export its chips to other countries, with a $5.5 billion charge now linked to the company’s GPU exports to China.
The H20 Nvidia chips are AI chips designed for China and adhere to US export limits, and made Nvidia earnings between $12 billion and $15 billion in 2025.
Nvidia warned that chip sales in China fell sharply last year as the competition expanded, chiefly from Huawei.
US President Donald Trump ordered an investigation into all basic metals, chips, and pharmaceutical imports, in preparation for potential tariffs, while Chinese authorities banned local airlines for shipping Boeing aeroplanes.
US Rates
Federal Reserve official Christopher Waller wanted that recession risks outweigh inflation risks, and if current average 25% tariffs continued, inflation could hit a peak of 5%.
Atlanta Fed President Raphael Bostic also warned from ongoing uncertainty due to tariffs and other policies that could push the economy into recession.
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut in May stood at 17%.
The odds of such a cut in June stood at a much bigger 73%.
SPDR
Gold holdings at the SPDR Gold Trust remained unchanged on Tuesday at a total of 953.15 tons, the highest since September 20, 2022.
Sterling continues to shine on trade deal prospects
Sterling rose in European trade on Wednesday against a basket of major rivals, extending gains against the dollar for the seventh straight session and hitting new six-month highs on strong prospects for a trade deal with the US.
Now traders await a bunch of important UK data this week, which would provide fresh pricing for the odds of a BOE rate cut in May.
The Price
The GBP/USD price rose 0.3% today to $1.3268, the highest since October 3, 2024, with a session-low at $1.3222.
The pound rose 0.35% on Tuesday against the greenback, the sixth profit in a row, and the longest such streak of daily gains since August 2024.
Trade Deal
In a statement released yesterday, US Vice President JD Vance said there’s a strong chance for signing a trade deal with the UK, bolstering the economic relationship between both countries.
The UK recently escaped the worst of aggressive US tariffs, reducing the pressure on its financial markets and bolstering investor confidence in UK assets.
UK Rates
Concerns about a potential global recession receded, in turn reducing the pressure on global central banks to move quickly with policy easing and rate cuts.
Speculation about reduced UK government spending and higher taxes rose after UK Treasury Secretary Rachel Reeves asserted the government’s commitment to strict financial rules..
Recently, the odds of a UK 0.25% interest rate cut in May fell from 75% to 55%.