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The week is off to a shaky start. Financial markets are somewhat jittery following Trump’s comments against Jerome Powell last Thursday and the lower liquidity this Easter Monday is not helping matters. The US president’s scathing attack has raised questions concerning the sovereignty of the Federal Reserve. Can the Fed Chair be replaced at will by the government? Will the Fed remain independent? Such questions will almost certainly be forgotten soon enough, but markets are currently gripped with paranoia. Either way, Jerome Powell’s term ends in May 2026, so the president will get his wish one way or another. Rough start to the week for Dollar bulls. The DXY shot down over 1% early this morning as investors sought refuge elsewhere. The Euro was the main beneficiary of the move, climbing to $1.15 and further still, but the Swiss Franc and Japanese Yen also continued to appreciate against the Greenback. As is tradition, gold set another record high earlier today, this time striking $3,385 an ounce. The precious metal’s accolades are becoming almost mundane at this point, with two dozen all-time highs already this year. For once, Bitcoin also captured some attention, gaining around 2.5% to draw closer to $88k. Cryptocurrencies have a long way to go before they start outperforming gold, which is up almost 30% since the start of the year. In contrast, Bitcoin is down 6% over the same time frame, with the broader crypto market faring even worse. Bitcoin dominance is now up to 64%, a share not seen since 2021. For obvious reasons, there is nothing on the economic calendar today, nor even tomorrow. The remainder of the week is similarly devoid of content, with the sole exception of manufacturing PMI figures from various parts of the world on Wednesday. For those paying attention to the unfolding Fed drama, there will also be a number of speeches from several board members scattered throughout the week.
As predicted, Jerome Powell’s speech on Wednesday did indeed prove to be the only newsworthy event of the week. The Fed Chair stuck to the usual script, citing the uncertainty in economic forecasts as reason for caution and stating that there was no rush to lower interest rates. Nothing markets haven’t heard a hundred times before. While the speech itself revealed nothing new, the subsequent reaction from Donald Trump provided more than enough meat for the media to chew on. In a scathing social media post, the president launched an all-out attack against the Federal Reserve Chairman, accusing him of playing politics, being too slow in lowering interest rates and generally describing Powell’s stewardship as “terrible”. Trump later added that “Powell’s termination cannot come soon enough”. Judging by the reaction in interest rate prediction markets, it doesn’t look like the harsh comments will do anything to sway the Fed during its next meeting. Market conditions were somewhat quieter on Thursday in the lead up to Good Friday, but that did not stop gold from hitting yet another record high, this time reaching $3,357 an ounce. Interestingly, the large shipments of gold from London to New York now appear to be reversing course. The threat of tariffs on precious metals prompted COMEX to dramatically increase its holdings following the US election, culminating in record-breaking flows of bullion leaving Europe. Such threats were eliminated a couple of weeks ago however when Washington excluded the metals from the reciprocal tariff plan. COMEX inventories are now about 45 metric tonnes lighter as a result. With markets in the Western hemisphere closed until next Tuesday, there is very little of substance to move the needle either way. After several weeks of non-stop action, markets will be grateful for the respite.
Gold cannot go five minutes without setting a new record high. The precious metal wasted no time this morning in the Asian session, climbing straight to $3,283 an ounce before deliberating its next move. The flight to safety extended to the Swiss Franc, which is already up one cent versus the Dollar as of this morning. The argument in favour of safe-haven flows is still a convincing one. The 90-day pause on the new tariffs was only ever designed to be temporary and the path forward remains unclear. In a new twist, Federal Register filings revealed on Monday that the US administration is intending to conduct an investigation into semiconductor and pharmaceutical imports. The investigation, launched by the Department of Commerce, seeks to establish how imports of computer chips, as well as the machinery to fabricate them, affect the national security of the United States. Markets were all too happy to hear that electronic products would be excluded from the sweeping reciprocal tariffs, but this latest development suggests that the above imports would fall under “sector specific” tariffs. On Tuesday, a filing from Nvidia indicated that the company’s sales to China would be affected by the imposition of export licences, resulting in $5.5 billion in extra charges to the chipmaker. The uncertainty surrounding future trade arrangements, particularly in the technology sector, continues to weigh on stock markets around the world. Futures markets are low ahead of the US open later today and Asian stocks are once again on the back foot this morning. The lack of clarity is certainly doing nothing to perk up oil markets, which continue to advertise some of the lowest crude prices seen in years. Every major bank appears to have adjusted their forecasts to the downside, both in terms of demand and price. Brent Crude is back up to $64 a barrel as of this morning while West Texas continues to tread water above $60. Federal Reserve Chair Jerome Powell is set to deliver a speech this evening, in what is likely to be the only newsworthy story of the day – at least in terms of scheduled events. The Dollar Currency Index is currently unwilling to reclaim the 100 level, despite the fact that interest rate traders are once again favouring a hold during the next meeting on the 7th of May.
US futures markets were up this morning after Trump announced a temporary tariff reprieve on key technology imports. The three major indices all registered massive gains last week, with the Dow Jones climbing 4.95%, the S&P 500 gaining 5.7% and the Nasdaq Comp clocking in with an impressive 7.3% weekly candle. Of course, last week’s historic gains followed in the footsteps of historic losses the week prior. The back and forth with regards to tariffs has resulted in a similar back and forth in asset valuations, with no end to the volatility in sight. The uncertainty has resulted in huge flows into gold, which gained no less than $200 last week and hit a new all-time high of $3,245 an ounce. The precious metal was not the sole benefactor of safe-haven flows however, as evidenced by the Swiss Franc, which gained 5.6% against the Dollar last week to reach $1.22. The Greenback faced heavy headwinds all week, culminating in the DXY closing below 100 for the first time since July 2023. Asian stock markets awoke with cautious optimism this morning. The Hang Seng and Nikkei 225 indices opened higher and are now enjoying the calm before the storm that will no doubt descend upon markets later in the day. The economic calendar is looking relatively sparse this week, with the exception of a few noteworthy events. Fed Chair Powell is set to deliver a speech on Wednesday, providing some much-needed guidance on the state of the Dollar. Earlier in the day, the Bank of Canada is expected to keep rates on the Loonie steady at 2.75%, while on Thursday, markets are anticipating another 25-bps cut on the Euro interest rate. A reminder that markets in much of the western hemisphere will close for Good Friday and will remain shut until Easter Monday. The ongoing trade spat will likely continue to dominate market movements again this week and trading conditions are likely to remain perilous for a while longer.
The ongoing trade saga began a new chapter on Wednesday after president Trump announced a 90 day pause on the new tariff regime. The olive branch was extended to everyone but China, which is now facing effective duties of 145%. For all the hysteria on Wall Street, the current situation is by no means unpredictable. The developing negotiations are perfectly in-line with the president’s typical approach to such matters. For those in search of a more calming influence, it is perhaps worth paying attention to Treasury Secretary Scott Bessent – a former hedge fund manager. Bessent stated on Thursday that the United States would be in a place of “great certainty” after the pause and that many countries had already expressed their intent to fully cooperate in establishing new trade deals. Indeed, the EU has already rescinded its retaliatory tariffs following the US’ lead. Not for the first time, the continued focus on tariffs allowed an important macroeconomic development to slip under the radar. Thursday’s CPI print revealed a major slowdown in inflation in March, to the point where prices dropped compared to the previous month. Yearly inflation is now down to 2.4% and continues to approach the Fed’s 2% target rate. The latest data in theory paves the way for the Fed to cut rates on the Dollar, although the next decision is still a month away. Along with everything else, the development weighed on the Greenback, which is now looking weaker than ever against a number of currencies. The Swiss Franc has emerged as the currency of choice for safe-haven flows, climbing over 7% since Liberation Day to reach a multi-year high of $1.22 as of this morning. The Yen and Euro have also made significant gains versus the Dollar in recent sessions, enough to push the DXY below 100. Once again, gold was all too happy to seize the moment, blasting to a new record high of $3,176 an ounce yesterday. The precious metal wasted no time climbing further still this morning, pushing to $3,200 and beyond. The extreme volatility in stock markets around the world is enough to make gold look tame in comparison, further contributing to its appeal in these chaotic times.
Traders hoping for a swift return to normality will probably have to wait a little longer. Stock exchanges in particular are showing some of the most inhospitable trading conditions observed in years. Between the massive intra-day swings, huge gaps and violent reversals, current markets are no place for the fainthearted. US indices have closed lower over the past few sessions, or there about, but the sheer size of the daily candles almost makes the closes irrelevant. Asian stocks are once again on the back foot this morning, with the Nikkei 225 and Hang Seng indices struggling to find solid ground. The new tariff regime imposed by the Trump administration immediately forced many affected countries into adopting a more reconciliatory tone, with the notable exception of China. The spat between the Chinese and US governments is resulting in rapidly escalating trade tariffs, which are beginning to spill over to currency markets. The offshore Yuan fell to a new record low yesterday after the People’s Bank of China allowed USDCNH to climb above 7.40 for the first time. The onshore Yuan meanwhile is facing its lowest levels since before the 2008 peg. Gold made a valiant push to reclaim $3,000 this morning in Asia, no doubt helped by weakness in the Dollar. Bitcoin on the other hand captured no such momentum. It is not unfair to say that cryptocurrencies in general have failed to offer any alternative environment to traditional finance, instead behaving merely as a marker for general market sentiment. The so called “decoupling” will have to wait. The economic calendar is devoid of content this week, with the possible exception of the FOMC minutes later today. Given everything that has happened since the last meeting however it is hard to say just how relevant the release will prove to be. Interestingly, there has been a dramatic shift in interest rate prediction markets, with the next meeting on the 7th of May now favouring a 25-bps cut. Before the events of the past week, markets were looking at a 90% probability of a rate hold. US inflation numbers may pique interests a little tomorrow, but anything relating to the developing trade situation will obviously continue to occupy centre stage.
