Your FX Update

The current situation is reminiscent of the Cold War, but with a twist. The two superpowers of that era couldn't use nuclear weapons without risking mutual destruction. Similarly, the tariffs imposed by the United States have a significant economic impact. International and bilateral trade exchanges mean that commercial partners can also adopt the same approach.

After granting a one-month extension to Mexico and Canada, China has retaliated as well. Will China receive a similar extension? The announced tariffs on US exports are measured. The targeted goods for a 10-15% tariff include coal, LNG, oil, farming machinery, and high-displacement vehicles. In total, about US$15 billion worth of goods are subject to tariffs, representing 9% of China's total imports from the US (US$164 billion). This measured response will take effect on February 10th , leaving room for renegotiation.

As expected, the Dollar has suffered due to this American stance, which provokes but also retreats.

We have been asked several times recently about the connection between US tariffs and the Dollar. The main logic is that the US consumer prices are expected to rise sharply in the coming months, while tariffs are likely to slow economic growth. This solidifies the Federal Reserve's 'on hold' stance, with the direction of the next move to be determined by the balance of growth, inflation, and market reaction.

In an environment marked by a strong Dollar in 2024, gold has still managed to find its way and continue to rise. This is a testimony for a real appetite and strong diversification from investors , not just solely for Hedging purpose. After reaching a new historical high last week, the precious metal continued its ascent, almost reaching 2850 yesterday and 2865 this morning. All the stars seem to be aligned: seasonality, Chinese New Year, and the USD declining amid American hesitation on tariffs. We are on track for the 3000 level before year end and may be more…..

• Gather premium if you are Long :  Sell CALL XAUUSD   / 1Month  / strike : 2940 / premium : 40 USD (Spot 2865)