New Zealand’s Business NZ Performance of Services Index (PSI) increased to 48.3 in September from the previous level of 47.5. This shift is a reflection of changes in economic activities within the country’s service sector.

In related market news, US President Donald Trump announced new tariffs on China, effective November 1. This decision is impacting markets globally, with reactions seen in currency exchanges and commodities. EUR/USD rebounded above 1.1600, aligning with the escalation in US-China trade tensions.

Market Reactions to Tariffs

Additionally, the Dow Jones Industrial Average experienced a decline due to renewed tariff discussions, while gold surged near $4,000 amid growing demand as a safe haven. Meanwhile, WTI crude oil prices fell below $60, reacting to increased trade war concerns.

Cryptocurrency markets are showing variability, with Bitcoin trading above a short-term support range. Ethereum and Ripple are near critical support levels, while Litecoin showed signs of resilience, trading around $130. It’s noteworthy that US tariffs have maintained their status as an essential instrument for public finance and foreign policy, beyond the frequent headlines.

With fresh US-China trade tensions erupting, we are seeing a classic risk-off reaction in the markets. The CBOE Volatility Index (VIX) has already surged over 35% in the past week, climbing above 28 for the first time this year. We should consider buying call options on the VIX or volatility-linked ETFs to profit from rising fear in the coming weeks.

The sharp drop in the Dow Jones suggests we should prepare for more downside in equities. Looking back at the 2018-2019 trade war period, initial tariff announcements often led to prolonged market slumps. Buying put options on the S&P 500 or Nasdaq 100 indices offers a direct way to position for a further decline.

Impact on Gold and Currency

Gold’s push toward the $4,000 mark signals a strong flight to safety that will likely continue. Geopolitical uncertainty is a powerful catalyst for the metal, and with no signs of de-escalation, this momentum is our friend. We can use long positions in gold futures or call options on gold ETFs to ride this wave.

The US dollar is weakening against the Euro and Pound as the source of this new instability is American policy. This makes the dollar a funding currency for risk rather than a true haven in this specific context. We should anticipate further strength in pairs like EUR/USD, which has already broken key resistance at 1.1600.

Fears of a global slowdown are hitting oil hard, with WTI crude breaking below the critical $60 support level. A protracted trade dispute would severely damage global demand, a fact confirmed by last month’s global manufacturing PMI data which showed new export orders falling to a two-year low. Shorting crude oil futures or buying puts on energy sector ETFs seems prudent.

Even smaller economic data points support a cautious stance. The recent New Zealand services PMI, while slightly better at 48.3, still shows a sector in contraction. This underlying weakness suggests the global economy is not prepared for another trade shock, amplifying the potential negative impact of these tariffs.

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