The US dollar fell sharply Tuesday after the White House announced severe 104% tariffs on China, effective Wednesday, sending USD/CNH to a record high above 7.4138. While Treasury Secretary Bessent highlighted broad willingness among other countries to negotiate tariffs, U.S. Trade Representative Greer dampened expectations for quick exemptions, fueling market anxiety.

Fed’s Caution Heightens Risk Aversion

Chicago Fed President Goolsbee warned tariffs could rapidly push costs into consumer prices, increasing market bets (56%) on a Fed rate cut by May. This policy uncertainty boosted safe-haven demand, driving significant flows into the yen and Swiss franc, with USD/CHF plunging over 1.3% near critical 2015 lows.

Euro Gains Despite ECB Uncertainty

EUR/USD rose toward the upper range of 1.0888–1.0992, supported by dollar weakness, although upward moves remain limited by widening German-U.S. yield differentials. ECB officials sent mixed messages, with Stournaras cautious on normalization delays, Holzmann resisting rate cuts, and Nagel warning on tariff-related growth risks.

Sterling Stabilizes Ahead of US-UK Talks

GBP/USD stabilized between the 55-day (1.2788) and 200-day moving averages (1.2812), awaiting clarity from UK Finance Minister Reeves' discussions with U.S. Treasury Secretary Bessent. Technical risks remain tilted bearish if the pair breaches support.

Yen Strengthens Amid Risk-Off Flows

USD/JPY broke critical support at 146.55, reaching key support near 146.20 amid rising risk aversion. Market focus shifts to BOJ Governor Ueda’s comments and Japan’s consumer confidence data, potentially influencing short-term yen direction.

Commodity Currencies Weaken Further

AUD/USD declined again amid oil’s 2% drop, driven by recession fears. NZD/USD hit multi-year lows ahead of expected RBNZ easing, highlighting ongoing commodity market pressures.

Equities, Commodities Reflect Global Anxiety

The S&P 500 fell 1.3% amid cyclical sector weakness, while copper declined 1.3%. Treasury yield curves steepened sharply (+13bps on 2s-10s), signaling intensified growth and inflation concerns.