Tariff chaos fuels market whiplash

Overnight, Asian markets mostly traded higher, except in Sydney, where a stronger-than-expected GDP print dented rate cut hopes. Hong Kong led the charge, with tech stocks driving gains—though the Hang Seng tends to move to its own beat.

China’s National People’s Congress kicks off today with hopes pinned on fresh stimulus. The 2025 GDP target has been set at 5%—believable? That’s up for debate.

European futures point to a higher open. The DAX, which was down over 3% at one stage yesterday on tariff fears, soared in early trade this morning. It has made back all of Tuesday’s losses – and more. Let’s see if that holds.

• USD under pressure: The dollar weakened while both the pound and euro added to recent gains. The euro now sits at four-month highs on German debt overhaul news, and ahead of tomorrow’s ECB interest rate decision. The Dollar Index has lost 2.4% from Friday’s close and is back to levels last seen just after Trump’s election victory in early November.
• Cable climbs: Sterling pushed past 1.28 to four-month highs, while the USDJPY continues to trade near significant dollar support around 149.00.
• Gold and silver: Gold was flat in early trade, while silver played catch-up by edging higher. Tariff headlines remain the main driver for gold as investors boost their exposure on ‘safe haven’ demand.
• Oil rebounds: Crude broke below $67 per barrel yesterday, retesting critical support levels which were repeatedly tested through the fourth quarter of 2024. $66.50 held, and oil bounced. Today’s inventory data is expected to show a modest stock build.
• Gas: Natural Gas has pulled back from the key $4.50 BTU level on profit-taking, after briefly breaking above here yesterday.

Volatility remains the name of the game in crypto. Yesterday, Ether briefly dipped below 2K, which meant it had halved in price over the last ten weeks. Bitcoin continues to play within the 85K-95K range. It feels as if the only way to ‘trade’ crypto these days is to close your eyes and hope for the best—not an ideal strategy.

The VIX spiked to 23 yesterday before easing back to around 20—but the warning lights are still flashing. Expect more turbulence.

• Data: Services PMIs print today, including the US ISM, in the afternoon. The ADP jobs number could offer clues ahead of Friday’s NFP report.
• Earnings: Abercrombie & Fitch reports pre-market.
• Geopolitics: US Commerce Secretary Howard Lutnick hinted at a possible tariff compromise with Canada and Mexico after the 25% hike took effect yesterday. Trump downplays tariff impact, calling a little disturbance “okay.” Trump makes waves again, saying the US will take control of Greenland “one way or another” while also commenting on the Panama Canal and its potential US reclamation.

Markets continue to wrestle with the fallout from tariffs, and the back-and-forth nature of recent headlines only adds to the uncertainty. Yesterday’s sharp swings showed just how fragile sentiment is, with traders reacting to every shift in rhetoric. If futures hold their post-close gains, we could see an early bounce, but staying cautious is key.

The US dollar remains under pressure, while gold, oil, and equities are all at critical technical levels. If the tariff headlines persist, expect more choppy price action across asset classes. With jobs data and central bank decisions on the horizon, the next few sessions could set the tone for the rest of the month.

Staying nimble remains the best approach in this environment—another wild session could be in store.