Macroeconomic Events
In the US, March’s nonfarm payrolls rose by 228,000, beating expectations, although the unemployment rate edged up to 4.2%. Average hourly earnings increased in line with forecasts but slowed to 3.8% year-on-year, the lowest pace since July 2024. While the labor market remains resilient, uncertainty over President Donald Trump’s tariff policies could lead to more cautious hiring ahead. Inflation eased significantly, with March CPI falling to 2.4% year-over-year, down from 2.8% in February, while core CPI slowed to 2.8%, helped by a sharp decline in energy prices. However, financial markets and policymakers are bracing for future tariff-driven price increases.
The Federal Reserve is now expected to hold interest rates steady through the first half of the year. Despite initial pressure from Trump to cut rates more quickly, Fed officials, including Governor Christopher Waller, emphasized patience, noting that tariff effects would not fully materialize until after midyear. Financial markets have adjusted expectations, now anticipating the next rate cut likely in September or October rather than in May or June.
In Europe, inflation continued to ease in March, supporting the European Central Bank’s ongoing rate cuts. However, policymakers have indicated they may slow the pace of easing as economic conditions stabilize.
Geopolitical Events
Tariff tensions dominated the geopolitical landscape. Trump initially implemented sweeping tariffs on imports from Mexico, Canada, and China, sparking fears of stagflation and damaging investor sentiment. Facing market turmoil and mounting domestic pressure, Trump walked back some tariffs on April 9, triggering a historic rally in US equity markets. However, tariffs on Chinese goods remain exceptionally high, with China showing no signs of re-engaging in negotiations. Chinese officials openly dismissed Trump’s claims of ongoing talks, highlighting deep mistrust and a hardened stance from Beijing. Analysts warned that policy unpredictability has already inflicted lasting economic and diplomatic damage, fostering a global push for strategic independence from the US.
Market Trends
Markets experienced intense volatility. After Trump temporarily reduced tariffs for some trading partners, the S&P 500 surged 9.5% in a single day — its third-largest post-World War II gain — while the Nasdaq Composite posted a 12.2% jump. Nevertheless, optimism remains fragile, with analysts cautioning that underlying economic risks persist due to ongoing uncertainty and elevated tariff rates, especially against China. Traders continue to price in multiple Fed rate cuts for late 2025, but sentiment remains highly sensitive to developments in trade policy and inflation data.
In Europe, equities initially plunged following the announcement of new 10% tariffs by President Trump, but they rebounded after the tariffs were paused for 90 days, helping restore some investor confidence.
Gold performed strongly amid heightened economic uncertainty and volatility in financial markets.
Currency Trends
The US Dollar Index fell 3.2% over the past month as concerns grew about the impact of the trade war initiated by President Trump, with fears of slowing growth, rising inflation, and diminished global confidence in the US. The euro strengthened by 4.2% against the dollar, while the US dollar also weakened against the Canadian dollar, sterling, and the Japanese yen.
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