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12/02/2025 - 07:15 UTCThe US dollar weakened against most major currencies on Tuesday, with the dollar index (USDX) ending the session almost 0.38% lower as the US is preparing to impose retaliatory tariffs on any country that taxes American imports, a move that could escalate the global trade war. Trump said on Monday he was also looking at separate tariffs on cars, semiconductors and pharmaceuticals.
In other news, Fed Chair Powell reiterated his stance that there's no rush to cut interest rates during his Capitol Hill testimony. His remarks caused the 10-year Treasury yield to climb by roughly 4 basis points. He noted that the economy is “strong overall and has made significant progress” toward the Fed’s goals over the past two years, while the labor market conditions have cooled from their formerly overheated state and inflation “has moved much closer to our 2 percent longer-run goal.”
Wall Street saw modest gains on Tuesday, with all three major indices closing in the green. However, the Federal Reserve's indication that they are not in a hurry to lower interest rates, amidst concerns that tariffs could drive inflation, limited those gains.
In corporate news, Coca-Cola shares jumped almost 5% after the company exceeded fourth-quarter profit and revenue expectations, driven by strong demand for its beverages and price increases. Shopify's stock also rose 3% following better-than-anticipated holiday quarter sales, fueled by robust consumer spending and the introduction of AI features. This positive news overshadowed their less optimistic first-quarter profit forecast.
Oil prices gained for a second consecutive session on Tuesday, with the two main benchmarks WTI and Brent up by 0.99% and 0.91% respectively as an industry report showed an increase in U.S. crude stockpiles and as tariff concerns continue to weigh on sentiment.
The focus for Wednesday turns to US inflation data for January. Predictions suggest a slowdown in consumer price growth compared to December. This could influence the Federal Reserve's interest rate decisions. In the week ahead, some price action could be seen upon PPI data due on Thursday, and Retail Sales due on Friday.
The EUR/USD snapped a three-day losing streak, rebounding above 1.0350 as investors moved away from the safe-haven US Dollar amid a broad-market sentiment shift. Traders are largely disregarding US President Donald Trump’s latest tariff threats, while Federal Reserve Chair Jerome Powell reaffirmed the Fed’s commitment to a data-dependent approach despite ongoing trade policy uncertainties.
Powell emphasized the importance of assessing the impact of tariffs based on economic data.
The US Consumer Price Index (CPI) will be the primary market driver on Wednesday, with headline inflation expected to hold steady at 2.9% year-over-year, while core CPI is projected to ease slightly to 3.1% from the previous 3.2%.
Gold prices edged lower on Tuesday, slipping 0.65% after briefly reaching a record high of $2,943 earlier in the day. Rising tensions from the ongoing trade war, fueled by US President Donald Trump’s new tariffs, initially drove gold to fresh all-time highs before retreating.
The broader market sentiment remains unchanged following Trump's decision to impose 25% tariffs on steel and aluminum imports into the United States. While bullion prices initially climbed in response, traders moved to secure profits ahead of Federal Reserve Chair Jerome Powell’s testimony before the US Senate.
Oil prices climbed to a two-week high on Tuesday as concerns over Russian and Iranian supply disruptions and escalating Middle East tensions overshadowed fears that new trade tariffs could fuel inflation and slow global growth.
The rally was driven by US sanctions on Iranian and Russian oil, which have significantly disrupted exports to major buyers China and India.
Geopolitical risks in the Middle East added to the market's unease. Israeli Prime Minister Benjamin Netanyahu warned that a fragile Gaza ceasefire could collapse if Hamas does not release Israeli hostages by Saturday.
Market participants are also awaiting US oil inventory data, with the EIA data set to release its report on Wednesday.
The US 500 closed slightly higher on Tuesday, though gains were limited as Federal Reserve Chair Jerome Powell signaled that the central bank is in no rush to cut interest rates, while investors assessed the potential inflationary impact of President Donald Trump’s latest tariffs.
Powell, addressing the Senate Banking Committee, reiterated that the Fed sees no immediate need to adjust monetary policy, emphasizing that interest rates are already less restrictive and the economy remains strong.
Trump followed through on his tariff threats late Monday, signing executive orders imposing 25% tariffs on steel and aluminum imports with no exceptions.
Investors are closely monitoring whether Trump will follow through on his separate threat to impose reciprocal tariffs, which could escalate international trade tensions.
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