Investors are increasingly nervous about the prospect of tariffs imposed by US President Donald Trump, triggering a massive sell-off on Friday. Riskier currencies such as the Australian dollar were also affected, while Bitcoin fell, strengthening the value of the US dollar.
On Thursday, Trump announced that 25% tariffs on goods from Mexico and Canada would take effect on March 4, along with an additional 10% duty on imports from China. The decision surprised markets that had previously expected further delays in the taxes. In response, investors sold riskier assets such as stocks and cryptocurrencies. Bitcoin fell 4.9% to around $80,000, its lowest level since November 11, while Ether fell 8.8% to a 13-month low of $2,077.
This marked the worst monthly performance for both assets since June 2022, after a big surge late last year on optimism that the Trump administration would benefit the crypto market.
The market’s next focus will be on the US consumer inflation rate, measured by the core personal consumption expenditures (PCE) index, which will be released on Friday. Core PCE is currently at 2.8%, well above the US central bank’s (Federal Reserve) target. City Index analyst Fiona Cincotta said that this inflation data could be a determining factor in the direction of the US dollar and the Fed’s interest rate cut. If inflation is higher than expected, it could reduce the likelihood of a rate cut, while a lower reading could fuel concerns of an economic slowdown and increase demand for safe-haven assets.
More risk-sensitive currencies were under pressure, with the Australian and New Zealand dollars falling 0.3% and 0.5% respectively. The pound sterling struggled to stay positive at $1.2597, while the euro rose 0.1% to $1.0405, for a monthly gain of 0.35%. Trump also threatened to impose 25% tariffs on exports of vehicles and other goods from the European Union. The US dollar rose 0.4% against the yen to 150.405, but the yen is expected to gain 3.5% this month, its best performance since July, on expectations of a rate hike by the Bank of Japan.
