Markets across Asia remained on edge Tuesday as escalating U.S.-China trade tensions triggered moves in currencies and weighed on investor confidence.

China vowed to "resolutely take countermeasures" after U.S. President Donald Trump threatened to impose an additional 50% tariff on Chinese goods. Beijing warned it would "fight until the end" if Washington presses ahead, further intensifying fears of a global trade war.

In response to market instability, China's state-owned investment arms, including Central Huijin, announced increased equity purchases to help shore up confidence. The People’s Bank of China (PBoC) pledged lending support to Huijin if needed, reinforcing its role as a market “stabiliser.”

Meanwhile, China’s yuan slid to its lowest level since 2023, with the offshore yuan touching a two-month low. The PBoC has allowed a near-linear depreciation in the onshore yuan, CNY, in recent days, breaking the symbolic 7.2 level—long seen as a line in the sand—signaling a policy shift and sending a message to Washington.

In the U.S., Federal Reserve official Chicago Fed President Austan Goolsbee expressed growing concern that escalating tariffs could reignite inflation and disrupt supply chains, echoing conditions last seen during the 2021–22 inflation surge. While hard economic data remains resilient, Goolsbee said rising uncertainty is clouding the outlook.

In Australia, the tariff shock has started to bite into the data. The Westpac-Melbourne Institute consumer sentiment index fell 6% in April, its sharpest drop in nearly two years, retreating from a three-year high. Households cited growing concern over the economic outlook and personal finances.

Business conditions remained largely steady in March, according to NAB, although the survey was conducted before the latest tariff developments. Deutsche Bank now expects the Reserve Bank of Australia to deliver a 50 basis point rate cut in May, up from its earlier forecast of 25 bps, in anticipation of mounting economic headwinds.

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EUR/USD has been a more, bouncing from late US time lows circa 1.0900 to highs around 1.0980. GBP, AUD, NZD and CAD have all also shown some strength, USD/JPY yen backed off from 148.00 to be under 147.40 as I post.

eurusd 08 April 2025 wrap 2
Source: Forex Live