Markets Buckle Under Pressure of Looming Trade War. Gold Hits New All-Time Highs Amid Risk Aversion. Currency Market Remains Calm. Polish Inflation Nears 5%
“Liberation Day”
Just last week, some investors and analysts were still trying to paint a rosier picture. They believed in a potential de-escalation of the trade war—one that has become a flagship policy of the U.S. President, not only in terms of the economy but as a general political tool. Today, however, neither official statements nor leaks from the White House leave room for illusions. A broad package of tariffs is set to take effect on April 2, and Donald Trump has declared they will target all countries (including Poland, perhaps, though it has only minimal direct trade with the U.S.). In its usual restrained style, the American administration has started referring to the day the tariffs are introduced as “Liberation Day.” One thing’s certain: capital has been “liberated” from the stock markets.
A Brave New World of Tariffs
Technically, many stock markets haven’t yet entered full-blown bear territory, but the correction is clearly accelerating. The main culprit is uncertainty about the effects of the trade war, which is about to take on a global scope. It’s worth remembering that many countries have already announced retaliatory measures—fuel for further escalation. Unfortunately, it also sounds like a recipe for slower economic growth around the world.
The risk-off sentiment was clearly visible in the last trading session of March. Asian markets fell sharply, with Tokyo’s Nikkei plunging 4% under pressure. Disappointing retail sales (+1.4% year-on-year) and weekend talks between representatives of China, South Korea, and Japan failed to provide support. The three largest Asian economies are looking to strengthen trade ties in the face of the U.S.’s aggressive stance. Sadly, verbal promises alone are not enough at this point.
Key European markets are awash in red, with losses ranging from -1.3% (Amsterdam) to -1.9% (Milan). Following the lead of global markets, Warsaw’s WIG20 index has already dropped by over 2%. The Wall Street open shows little sign of an optimistic rebound.
Gold, on the other hand, is heading in the opposite direction. Buoyed by risk aversion, it has become one of the best-performing assets of the year—up 19% since January. On Monday, an ounce of the precious metal was trading above $3,120.
Forex Awaits Its Turn
Unlike the stock markets, the currency market remains relatively calm. But it’s unlikely to stay that way for long, especially with fresh discussions about three potential U.S. interest rate cuts by year-end. Futures contracts are pricing in an 80% chance of the first cut happening as early as June.
For now, the EUR/USD exchange rate remains above $1.08—hovering near a key benchmark level, much like most major currency pairs. The forex lull extends to the Polish złoty as well. In theory, today’s inflation data might have worked against it.
The preliminary March reading showed a 4.9% year-on-year rise in prices—matching the previous month’s pace and beating forecasts of 5.1%. Still, it can be argued that this publication doesn’t change the outlook for Poland’s monetary policy path. Hence, PLN’s position is primarily shaped by external factors. As of 3 PM, the EUR/PLN exchange rate is hovering near 4.18 PLN, USD/PLN is approaching 3.87 PLN, and CHF/PLN is around 4.39 PLN.
Author: Adam Fuchs, Currency Analyst at Walutomat.pl
Source: Manager Plus
