On Saturday (February 1), U.S. President Donald Trump signed an executive order to impose comprehensive tariffs on imports from China; Canada; and Mexico, which will take effect on Tuesday (February 4). On the other hand, due to market concerns about the development of DeepSeek, a Chinese artificial intelligence startup, technology stocks experienced a sharp sell-off, which made investors nervous. Gold rose to an all-time high of $2,800, while the US dollar also climbed to a higher high. At present, the market focus has turned to the upcoming January non-farm payrolls report to see whether the US economy continues to show resilience. If the employment data is strong, it may exacerbate market concerns about inflation, which have been heated up by the potential impact of U.S. President Trump's policies.

At the beginning of this week, the major U.S. stock indexes closed lower as the market reacted to the White House's announcement of a new round of tariffs to be implemented. Coupled with market concerns about the development of DeepSeek, a Chinese artificial intelligence startup, technology stocks experienced a sharp sell-off. Despite the rebound in the technology sector, the Nasdaq Composite Index still fell 1.7% to 1,627.44 points for the week. The S&P 500 fell 1% last week, closing at 6,040.53. As for the Dow Jones Industrial Average, it rose slightly by 0.2% to 44,544.66.

Gold prices broke through the $2,800 mark for the first time before the weekend, hitting a new all-time high of $2,817. U.S. President Trump's tariff threats have heightened market concerns about global economic growth and inflationary pressures, prompting investors to rush to buy safe-haven assets. Spot gold rose to $2,800.80 an ounce, hitting a record high of $2,817.20 during the session. U.S. gold futures closed lower at $2,835 an ounce, a premium to spot gold. Gold is the asset of choice during times of economic and geopolitical turmoil and is expected to record its best monthly performance since March 2024. It has risen nearly 7% so far this month and hit new highs last year.

Silver prices rebounded sharply last week after a correction, hitting a one-and-a-half-month high of around $31.730. Silver rebounded strongly and the outlook remains strong on fears that U.S. President Trump will impose 25% tariffs on Canada and Mexico on Saturday for allowing illegal immigration and the deadly opioid fentanyl into their economies.

The U.S. dollar rose against major currencies last week, with the Canadian dollar weakening and the Mexican peso rising after the White House reiterated that President Trump will announce tariffs on Saturday. The U.S. dollar trade is one of the most over-positioned trades at the moment. It does need a catalyst to continue to move up. But the tariff threats and/or actions we will see over the weekend are what drive this story now.

The U.S. dollar index rose to 108.40, up 0.93% last week, ending a two-week losing streak.

The U.S. dollar rose 0.12% against the Canadian dollar, rebounding from a small drop after the Reuters report. The U.S. dollar remains near a five-year high of 1.451 Canadian dollars, with weekly gains close to 1.1%.

The Mexican peso rose 0.17% against the U.S. dollar to 20.728 pesos, but it had its worst weekly performance since October.

USD/JPY rose 0.54% to 155.13 yen, posting three straight weekly gains. USD/CHF rose 0.1% to 0.9016 Swiss franc, up 0.5% this week, snapping two straight weeks of losses.

EUR/USD fell 0.3% to $1.0367, down 1% for the week, its biggest drop since December 30. It is up 0.23% this month, its biggest gain since September last year.

The Australian dollar continued to edge higher before the weekend, trading around 0.6215 after briefly hitting a two-week low. The pair came under pressure as U.S. President Donald Trump reiterated plans to impose tariffs on Chinese imports.

The British pound extended its losses for a fourth day in a row as U.S. President Trump's tariff rhetoric sent ripples through financial markets. As a result, the dollar remains on the bid as economic data takes a back seat. GBP/USD is trading at 1.2400.

Last week, international oil prices fell as the market awaited the final decision of the United States on a 25% tariff on Canada and Mexico, which is expected to take effect on Saturday. Brent crude fell 2.01 to $76.001 per barrel. U.S. spot crude oil (WTI) fell 2.14% to $73.00 per barrel.

Bitcoin continued to maintain a bullish trend near $104,500 last week, breaking through and hitting a high of $106,445 during the week. Shortly after U.S. President Trump took office, the Republican camp announced that it would hold a public hearing on the strategic reserve of Bitcoin. His social media startup TMTG said it plans to enter the financial services sector, including cryptocurrencies. Federal Reserve Chairman Powell said that banks have the ability to open the door to cryptocurrencies.

The U.S. GDP data in the fourth quarter performed poorly, and the U.S. 10-year Treasury yield fell to a six-year low. The U.S. 10-year Treasury yield briefly hit a six-week low, following the trend of European bond yields after the European Central Bank cut interest rates. The 10-year U.S. Treasury yield rose slightly to 4.58%. Earlier, it hit 4.486%, the lowest since December 20.

Outlook for this week:

Trump trade conflict is coming; non-farm report; and the Fed speech become the focus

Similar to last week, global stock markets this week will still face the financial reports of technology giants and the impact of Trump's tariffs. At the same time, there are a series of economic events such as the US non-farm report and the Bank of England's interest rate decision.

After the violent shock of technology stocks last week, Amazon and Google, two of the "Big Seven", will release financial reports this week. These two are also giants in cloud computing and AI, and are expected to continue the topic of AI investment efficiency. Multinational auto giants such as Ford and Toyota will also receive more attention due to the impact of US tariffs.

At the macro level, the United States will intensively disclose employment market data this week. In addition to the non-farm employment data in January, the earlier Jolts job vacancy data and ADP employment data will also provide some clues. The latest PMI data for the United States and the eurozone will also be released next week, which will provide a reference for the current economic situation.

The market currently expects the Federal Reserve to cut interest rates twice this year, and the first rate cut will not occur in the first half of the year. Nonfarm payrolls in December were 256,000, beating expectations by a wide margin, while the unemployment rate fell to 4.1%. If this week's employment report maintains its strong signal, it will lead the market to further reduce the Fed's expectations of rate cuts. Current economist survey expectations show that nonfarm payrolls this week will be 170,000, in line with the Fed's position that "the labor market is slowing, but it is enough to support the economy."

In addition, the Bank of England will announce its interest rate decision on Thursday, and the market expects a 25 basis point cut to 4.50%. The Bank of England will also release its latest inflation and growth forecasts, which will be seen as a guide to the number of remaining rate cuts this year.

The "intraday dive" in the last two days of the US stock market last week also shows the impact of Trump's tariff issue on risk asset sentiment. Last weekend, the White House announced that Trump announced a 25% tariff on Canadian and Mexican imports, which will take effect immediately. The executive order also includes a "retaliation clause", which means that the tariff conflict has the possibility of further escalation.

Due to changes in President Trump's tariff plan and the hawkish Fed's inaction at the January 29 meeting, the US dollar has successfully resumed its weekly upward trend.

The dollar faces short-term uncertainty, especially around the weekend. The U.S. tariffs on Mexico and Canada may take effect from last Saturday, and the market will be in holiday mode. Traders cannot adjust their positions before the Asian market opens, which means that market volatility may increase significantly. After the European trading session opens, the market sentiment will gradually stabilize, and the US dollar index is expected to fluctuate between 107.50 and 109.50. Overall, the upward trend of the US dollar remains strong, but the market is also wary of volatility risks in the short term.

This week's key non-farm payrolls data and the University of Michigan's preliminary consumer confidence data. In December, the economy added 256,000 jobs, and average hourly earnings fell, but still as high as 4.0% year-on-year. Another round of strong employment and wage growth may increase market concerns about the resurgence of inflation in the coming months, especially if Trump starts the tariff game on February 1. Market participants may once again begin to doubt whether two interest rate cuts are needed this year, which may allow the US dollar to extend its recent recovery.

EUR/USD fell below 1.03400 to a weekly low of 1.0360 last week, continuing a five-day losing streak. The final HCOB manufacturing PMI for Germany and the Eurozone are expected to be released on February 3, followed by the preliminary inflation rate for the Eurozone. The final HCOB services PMI for the Eurozone and Germany will be released on February 5, as well as producer prices for the wider Eurozone. In addition, factory orders for Germany and the HCOB construction PMI for Germany and the Eurozone will be released on February 6.

GBP/USD had a volatile week, ending up slightly lower on the weekly chart. The British pound failed to extend the strong gains of the previous week due to changes in market sentiment and the dynamics of the US dollar. The final data of the S&P Global Manufacturing and Services PMI will be released on February 3 and February 5, respectively. The Bank of England meeting on February 6 will be in focus.

USD/JPY extended its bearish momentum, falling for the third consecutive week as the yen strengthened. The yen's appreciation was due to the continued market speculation of further tightening by the Bank of Japan, which put pressure on the currency pair. The Summary of the Bank of Japan's Opinion and the final Jibun Bank Manufacturing PMI will be released on February 3.

Although AUD/USD rebounded on Friday, it was not enough to save the Australian dollar from exhaustion this week, and it ended in negative territory. This marks the end of a two-week winning streak as bearish pressures finally overwhelmed a late rally. Building permits and retail sales data will be released on February 3, while trade balance results will be released on February 6.

Trump will announce a 25% tariff on Canadian and Mexican imports on Saturday, which will take effect immediately. Canada and Mexico are the two largest crude oil exporters to the United States, but it is unclear whether oil will be included in the tariffs. The market is also awaiting the OPEC+ meeting scheduled for Monday. The alliance is unlikely to change its existing plan to gradually increase production, although Trump has urged OPEC and its de facto leader Saudi Arabia to lower oil prices. The tariffs on Canadian oil may lead to higher oil prices, even if temporarily.

Gold prices hit a record high 40 times in 2024 and hit a record high again in the first month of 2025, making the gold market continue to attract attention. Overall, the downside risk of gold remains limited, and the upward momentum continues. If the gold price clearly breaks through the 2,800 mark, it will easily rise to $3,000/ounce.

Conclusion:

Tariff policy may trigger risk aversion, and the market is paying attention to the response of trading partners. In the short term, the market will pay close attention to whether Canada, Mexico and China announce countermeasures - if retaliatory tariffs occur, the market may be further pressured. Inflation outlook: Tariffs may push up the prices of US imported goods, which in turn affects the Federal Reserve's monetary policy. Market risk aversion: Stocks may suffer a sell-off, while safe-haven assets such as gold may benefit.

Overall, Trump's tariff policy may cause short-term market fluctuations. If trading partners take retaliatory measures, global market volatility may further increase.

Important events and economic data overview this week: (Sydney time)

Important events:

Monday (February 3): The Bank of Japan announced a summary of the opinions of the review committee members of the January monetary policy meeting

Tuesday (February 4): 2027 FOMC voting member, Atlanta Fed President Bostic spoke on the economic outlook

Thursday (February 6): The Bank of England announced its interest rate decision, meeting minutes and monetary policy report

Friday (February 7): ECB Vice President Guindos delivered a speech

Economic data overview:

Monday (February 3): Eurozone January SPGI manufacturing PMI final value; UK January SPGI manufacturing PMI final value; Eurozone January harmonized CPI annual rate - unadjusted initial value; US January SPGI manufacturing PMI final value; US January ISM manufacturing PMI

Tuesday (February 4): US December durable goods orders monthly rate revised value; US December factory orders monthly rate; US December JOLTs job vacancies (10,000)

Wednesday (February 5): UK January SPGI service industry PMI final value; US January ADP employment change (10,000); US December trade account (US$ billion); US January ISM non-manufacturing PMI

Thursday (February 6): Australia January AIG manufacturing performance index; Australia December goods and services trade account (AUD billion); Eurozone December retail sales monthly rate (%); US January Challenger enterprise layoffs (10,000); US week ending February 1, continued unemployment claims (10,000)

Saturday (February 8): US January non-farm payrolls change after seasonal adjustment (10,000); US January average hourly wage annual rate (%); US January unemployment rate (%); US February University of Michigan Consumer Confidence Index preliminary value; US December wholesale inventory monthly rate final value (%)

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