Business
Euro Rises to Two-Month High Amid Tariff Delay and Ukraine Peace Talks
The euro surged to its highest level in nearly two months on Monday, bolstered by US President Donald Trump’s decision to postpone reciprocal tariffs and his push for peace talks in Ukraine. However, analysts caution that the common currency’s rebound may be short-lived amid lingering economic and geopolitical uncertainties.
Euro Gains as Inflation Concerns Ease
The EUR/USD pair climbed to nearly 1.05 in the early Asian trading session, reaching levels last seen on December 18 and briefly touched again in late January. The euro’s rally is largely attributed to Trump’s unexpected tariff delay and renewed optimism surrounding a potential ceasefire in Ukraine.
Market sentiment improved last week after Trump announced a delay in his proposed reciprocal tariffs, a move that eased concerns over inflationary pressures. While the US president has frequently used tariff threats as a negotiation tool, he has so far only implemented a 10% levy on Chinese goods, leaving markets hopeful that further duties might be scaled back or scrapped.
Adding to the optimism, crude oil prices dropped sharply following Trump’s phone conversation with Russian President Vladimir Putin. The discussion, which Trump described as “lengthy and highly productive”, fueled speculation that negotiations might include easing restrictions on Russian oil exports. If that were to happen, inflationary pressures could subside further, strengthening the euro while weakening the US dollar.
The improved outlook for European markets has led traders to favor the euro and British pound, according to Michael McCarthy, Chief Commercial Officer at Moomoo Australia. “Markets are seeing this as a ‘double win’ trade—peace prospects in Ukraine are boosting sentiment toward the European economy, while waning post-election optimism in the US is pulling the dollar down,” he said.
Concerns Over Sustainability of Euro’s Rally
Despite the temporary boost, market analysts warn that the euro’s gains could be short-lived as both Trump’s tariff policy and Ukraine peace negotiations remain highly uncertain.
Just days after announcing the tariff delay, Trump revealed plans to introduce new levies on automobiles starting April 2, targeting key US trading partners—particularly the European Union. The sweeping reciprocal tariffs remain under review by the US Commerce Department, with a final decision expected by April 1. Should these tariffs be implemented aggressively, they could undermine confidence in the euro and push the currency lower once again.
Similarly, while talks of a Ukraine peace deal have sparked optimism, the complexity of ceasefire negotiations means a resolution could take months, if not longer. A key meeting in Paris on Monday, hosted by French President Emmanuel Macron, will see EU leaders—including German Chancellor Olaf Scholz and Italian Prime Minister Giorgia Meloni—discuss a joint military defense spending package. UK Prime Minister Keir Starmer is also expected to participate, aiming to strengthen European defense capabilities in post-war Ukraine.
However, Trump has insisted that the EU take greater responsibility for its own security, which could pressure European governments to increase military spending—potentially leading to higher debt levels that could weigh on the euro.
Upcoming German Elections Add to Uncertainty
Another looming factor that could impact the euro is Germany’s snap elections, set to take place in less than a week. Political uncertainty in Europe’s largest economy has historically pressured the euro, and a volatile election outcome could further weaken investor confidence in the currency.
Despite the euro’s current strength, some analysts remain bullish on the US dollar, pointing to America’s strong economic performance compared to Europe’s fragile recovery.
“My stance remains bullish USD,” wrote Michael Brown, a senior research strategist at Pepperstone in London, in a client note. “Ongoing US economic outperformance should see both the dollar and US stocks continue to climb, albeit in a volatile manner,” he added.
With tariff decisions pending, geopolitical tensions still unresolved, and European economic challenges persisting, the euro’s rally may struggle to hold in the coming weeks.
Business
Gold Looks to 2026 After a Record-Breaking Year Marked by Geopolitical Tension and Strong Central Bank Demand
Gold enters 2026 after one of the strongest years in its modern history, rising more than 60% in 2025 and setting over 50 record highs. The surge placed the metal ahead of all major asset classes and delivered its best performance since 1979. Now, investors are assessing whether gold can extend its momentum over the next year or whether the market is nearing a turning point.
Analysts say the 2025 rally was the product of several overlapping global forces. Persistent geopolitical risks, trade uncertainty, a softening US dollar, and expectations of lower interest rates all helped drive demand. Central banks also played a decisive role by continuing to absorb large volumes of gold, keeping official-sector buying well above pre-pandemic levels.
Data from the World Gold Council (WGC) highlights how these factors contributed to the metal’s rise. Geopolitical tensions alone added roughly 12 percentage points to year-to-date performance, while a weaker dollar and modestly lower rates provided another 10 points. Economic expansion and investor positioning also offered meaningful support.
Looking ahead, the WGC expects many of the same pressures to influence the market in 2026. But it cautions that gold begins the year from a very different starting point. Prices have already factored in broad expectations of steady global growth, moderate rate cuts, and a stable dollar. With real interest rates no longer falling sharply and momentum cooling, the Council describes gold as fairly valued at current levels.
In its central outlook, the WGC projects gold trading in a narrow band next year, with returns likely ranging between a 5% decline and a 5% gain. The group notes that investor sentiment is balanced rather than defensive, reducing the likelihood of outsized moves unless economic conditions shift significantly.
Three alternative scenarios could force a deviation from this baseline. In a mild economic slowdown marked by extra US rate cuts, gold could rise 5% to 15% as investors position more cautiously. A deeper recession could push gains even higher, with the WGC estimating a potential 15% to 30% jump driven by aggressive policy easing and renewed safe-haven flows. On the other hand, if pro-growth policies from the Trump administration lift yields and strengthen the dollar, gold could fall 5% to 20% as opportunity costs rise.
Despite the WGC’s measured tone, major Wall Street institutions remain bullish. J.P. Morgan Private Bank expects prices to climb to between $5,200 and $5,300 per ounce, while Goldman Sachs forecasts around $4,900. Deutsche Bank and Morgan Stanley also see room for appreciation, though both acknowledge possible volatility in the coming months.
Much of this optimism is tied to ongoing demand from central banks, especially in emerging markets, and the belief that many global investors remain underexposed to gold. Softening real yields and persistent geopolitical uncertainty are also seen as supportive.
At the same time, risks could hinder further gains. A stronger US economy, renewed inflation pressures, or reduced central bank buying could weigh on the market. Rising supply from recycled gold, particularly in India where the metal is widely used as collateral, may also place pressure on prices.
While a repeat of 2025’s dramatic rise appears unlikely, analysts agree that gold enters the new year from a position of strength. Its reputation as a hedge during unpredictable times remains firmly intact, keeping it central to many investors’ long-term strategies.
China’s strengthening export momentum is emerging as a significant threat to Europe’s economic outlook, with Goldman Sachs cautioning that major EU economies could face notable GDP losses as Beijing doubles down on an export-led recovery strategy. The investment bank has cut its eurozone growth forecasts, warning that Europe is increasingly exposed to rising global trade competition at a time of limited policy flexibility.
Giovanni Pierdomenico, an economist at Goldman Sachs, said the euro area is “particularly exposed” to the impact of increased Chinese goods supply, which risks widening the region’s growing trade deficit with China and undermining its already weakened competitive position. The bank estimates that stronger Chinese export competition will reduce eurozone GDP by about 0.5% by the end of 2029.
Germany is projected to face the heaviest hit, with real GDP expected to be 0.9% lower over the next four years due to pressure from Chinese exports. Italy is forecast to see a 0.6% impact, while France and Spain are each expected to register declines of around 0.4%.
Goldman analysts point to a sharp shift in global market dynamics: in the past five years, eurozone exporters have lost as much as four percentage points of market share to Chinese firms across major global markets. The bank estimates that for every one-dollar increase in Chinese exports, European exports typically fall between twenty and thirty cents, illustrating the scale of substitution taking place. This trend, analysts say, is steadily eroding Europe’s competitive edge.
European policymakers have announced a series of measures aimed at strengthening strategic resilience, including the Critical Raw Materials Act and the AI Continent Action Plan. But Goldman Sachs remains doubtful that these initiatives will be enough to counter China’s export dominance. Analyst Filippo Taddei notes that the EU’s response is constrained by structural vulnerabilities — particularly its heavy reliance on China for key components and raw materials.
Goldman warns that while selective action against certain Chinese products is possible, broader restrictions could disrupt supply chains central to Europe’s industrial activity. At the same time, the bank highlights that many EU programmes intended to shore up competitiveness remain underfunded relative to their ambitions.
Defence is the only sector where Europe has committed substantial financial resources, with the Readiness 2030 programme backed by €150 billion in loans under the Security Action for Europe scheme. Even this effort, however, relies on Chinese supplies of rare earth elements essential for advanced military systems.
The bank concludes that without a more unified and assertive industrial strategy, Europe risks losing further ground in global markets it once dominated. Policymakers now face difficult decisions over how to reinforce Europe’s industrial base while managing its dependence on Chinese inputs — and how long the region can rely on fiscal support and consumer strength to cushion its economy against mounting external pressures.
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