Markets rally on tariff hopes, ECB in focus

David Morrison

SENIOR MARKET ANALYST

06 Mar 2025

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Wednesday’s trading session was wild and choppy, but in the end, the bulls took control as hopes of tariff concessions boosted sentiment. There was a one-month delay in auto-related tariffs, but there have been no other concessions so far, and US stock index futures were lower in early trade on Thursday.

Overnight, Asian markets moved higher, led by a 3.3% spike in Hong Kong’s Hang Seng. Australia’s ASX 200 was a notable laggard, ending the overnight session down 0.6%. 

European stock indices opened in positive territory, with the DAX once again leading the charge. This follows yesterday’s announcement that Germany is waving goodbye to fiscal restraint and set to borrow $860 billion. The UK’s FTSE 100 lost ground, weighed down by dividends and a 3.5% drop in HSBC.

Currencies shift as dollar weakens

The US dollar continues to come under heavy selling pressure. The USDJPY broke below 148.50, a key level that traders have been watching closely. The pair is now trading at levels last seen in early October last year as the dollar recovered after the unwinding of the yen carry-trade. 

Sterling was a touch weaker against the dollar this morning, having charged above 1.2800 during a strong rally yesterday. The euro has also surged in price against the dollar since the beginning of this week and is now testing resistance around 1.08, despite expectations of a 25-basis point rate cut from the ECB later today. 

While the move has been well-telegraphed, traders will closely watch the accompanying press conference for any signals on future monetary policy direction. Any hints that this could be the final cut in the current cycle could give the euro additional support. But it’s the US dollar which is the focus for now, as investors worry about the effect of tariffs on the outlook for US economic growth.

Gold, oil, and crypto: Mixed signals

Gold and silver were sharply lower this morning. Both metals have been on a tear this week as investors rushed to take advantage of their long-running rallies in a move to divert funds into 'safe-haven' assets. But gold and silver have ceded some ground this morning in what looks like a bout of profit-taking. 

Gold has pulled back below $2,900 but remains in sight of the all-time high hit at the beginning of last week.

Oil prices were steadier in early trade this morning. Crude oil has sold off relentlessly this week, compounding losses suffered since mid-January. Yesterday, the front-month WTI came within a few cents of $66 per barrel, marking its lowest level since early September. 

The area around here has previously been held as support, going back to December 2021, prior to the Russian invasion of Ukraine. However, concerns remain over the fundamental backdrop, as another large stock build yesterday reinforced the ongoing imbalance between ample supply and weak demand.

Cryptos have also steadied this morning. Bitcoin was back above $90,000 and Ether has pushed further above $2,000. Volatility has always been an issue for cryptocurrencies, and that looks set to continue as volatility has picked up sharply in US equities. 

Traders have increased their exposure to the sector following the Trump administration’s stated aim to create a strategic crypto reserve.

Volatility and key events ahead

  • VIX is just under 21—a level that keeps markets on alert.
  • The Euro Summit begins with the focus on policy direction.
  • After last week’s spike to 242,000, US Weekly Jobless Claims are expected to moderate a touch to 234,000.  Yesterday’s ADP report came in weak.
  • Fed speakers are scheduled, adding to the policy mix.
  • Earnings reports are expected from HP, Macy’s, Costco, and Broadcom.

Tariff uncertainty still looms

Tariff relief provided an initial boost to markets. However uncertainty remains high as there has been no further follow-through after the one-month delay for automakers. China’s firm stance against further escalation and the potential need for additional stimulus if the trade war worsens all contribute to an increasingly unpredictable outlook.

Market outlook

Markets are bracing for the European Central Bank’s rate decision, with a 25-basis point cut widely expected. 

The real focus will be on the press conference as traders look for clues on future policy direction. A signal that this could be the last cut in the cycle may push the euro even higher, while a more cautious stance could provide some relief for the struggling dollar.

Beyond central bank policy, tariff developments remain the key risk. Markets welcomed the possibility of relief, but ongoing back-and-forth measures continue to fuel uncertainty.

Can oil hold support around $66? And can the current rally in cryptos maintain its momentum?  With economic data, earnings, and geopolitical risks still in play, market sentiment remains fragile, and sharp moves both up and down are likely to persist.


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