Markets took a hit as trade tensions escalated, with President Trump threatening 200% tariffs on European wines, rattling risk sentiment.

The S&P 500 slipped into correction territory, gold inched closer to $3,000, and the dollar gained against most major currencies except the yen, which surged on growing BOJ rate hike calls.

Here are the major drivers and moves you may have missed in the previous trading sessions:

Headlines:

• U.K. RICS House Price Balance for February: 11.0% (20.0% forecast; 22.0% previous)
• BOJ Gov. Ueda said he expects consumption to improve as import costs moderate and wage growth strengthens
• Swiss Producer & Import Prices MoM for February 2025: 0.3% m/m (0.2% m/m forecast; 0.1% m/m previous)
• Euro area Industrial Production for January 2025: 0.8% m/m (0.9% m/m forecast; -1.1% m/m previous); 0.0% y/y vs. -2.0% y/y previous)
• Bundesbank President Joachim Nagel warned that ongoing U.S. tariffs could push German economy into a recession
• Trump vows 200% tariffs on alcoholic beverages from the European Union in response to an EU plan to tax American whiskey
• U.S. PPI: 0.0% m/m in February (0.3% forecast; 0.6% previous); Core PPI at -0.1% m/m (0.3% forecast; 0.5% previous)
• U.S. initial jobless claims for the week ending March 8: 220.0k (230.0k forecast; 221.0k previous)
• Canada Building Permits MoM for January 2025: -3.2% m/m (-2.0% m/m forecast; 11.0% m/m previous)
• IEA sees global oil market surplus for 2025 as demand disappoints

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Global markets came under pressure on Thursday as global trade tensions intensified. See, Trump threatened 200% tariffs on European wines and spirits in response to the EU’s 50% levy on American whiskey. This added to an already heated trade environment, with the EU imposing €26 billion in duties and Canada rolling out C$30 billion in tariffs against the U.S.

The latest market moves suggest growing concern that escalating trade disputes could weigh on global growth, even as U.S. inflation showed signs of cooling. February’s U.S. PPI came in unexpectedly flat, but some market watchers are questioning whether continued policy uncertainty could eventually challenge the dollar’s longstanding “exorbitant privilege” in global finance.

The S&P 500 dropped 1.4%, officially entering correction territory, now down 10.1% from its February peak. European markets followed suit, with Germany’s DAX slipping 0.63% as concerns grew that U.S. tariffs could push the country toward a recession.

Investors rushed into safe havens, sending U.S. 10-year Treasury yields down to 4.27% after hitting highs at 4.35%. Gold climbed to fresh record highs near $2,988, inching closer to the symbolic $3,000 mark as recession fears mounted and U.S. growth concerns weighed on US10Y.

U.S. oil prices slipped to $66.55, down 1.7%, after the IEA warned that trade tensions were dampening demand expectations. Bitcoin also took a hit, dropping to $80,255 and shedding about $3,300 on the day.

FX Market Behavior: U.S. Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

The dollar strengthened against most of its peers, driven by several key developments throughout the day. In early Asian trading, the yen made significant gains against the dollar after Bank of Japan Governor Ueda struck an optimistic tone on consumption, citing stronger wage growth and easing import price pressures. His comments fueled speculation that the BOJ could raise rates soon, giving the yen a boost.

During European hours, Swiss PPI data caused some brief volatility before markets turned their attention to trade tensions. The turning point came when President Trump threatened a 200% tariff on European wines, sending shockwaves through currency markets.

Later in the day, the U.S. PPI report showed producer prices were flat for February (0.0% vs. 0.3% expected), catching investors off guard. The cooler inflation data initially created some volatility for the dollar, but as market concerns grew, demand for the greenback as a safe haven pushed it higher.

By the close, the dollar had strengthened against most major currencies except the yen, rising 0.34% against the euro, 0.12% against the pound, 0.14% against the Swiss franc, 0.6% against the Australian dollar, and 0.52% against the New Zealand dollar.

Upcoming Potential Catalysts on the Economic Calendar:

• Germany final CPI at 7:00 am GMT
• Germany wholesale price index at 7:00 am GMT
• U.K. monthly GDP at 7:00 am GMT
• U.K. goods trade balance at 7:00 am GMT
• U.K. index of services 3m/3m at 7:00 am GMT
• U.K. industrial production at 7:00 am GMT
• U.K. manufacturing production at 7:00 am GMT
• France final CPI at 7:45 am GMT
• Italy industrial production at 9:00 am GMT
• U.K. consumer inflation expectations at 9:30 am GMT
• Canada manufacturing sales at 12:30 pm GMT
• Canada wholesale sales at 12:30 pm GMT
• U.S. UoM consumer sentiment and inflation expectations at 2:00 pm GMT

Keep an eye on U.K. GDP and industrial data, as there’s a good chance of pound volatility depending on how those numbers land. Euro moves are likely to stay in check unless Germany’s final CPI sees an unexpected revision or France’s inflation data surprises signals deeper economic weakness.

Later in the U.S. session, the UoM consumer sentiment and inflation expectations could give the dollar a jolt, especially if they shake up Fed rate cut expectations. Oh, and don’t forget to stay on your toes for any trade-related or geopolitical headlines that could mess with risk sentiment!

Don’t forget to check out our brand new Forex Correlation Calculator when taking any trades!