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The post Ex-Dividend 1/4/2025 first appeared on IC Markets | Official Blog.

In case you missed it, we had a WSJ report overnight saying the Trump was weighing broader and higher tariffs with hikes potentially as high as 20%.

This weighed on an already negative sentiment that was triggered by last Friday’s final University of Michigan consumer sentiment survey where the data showed an even worse picture with long term inflation expectations being revised even higher.

It’s all about the US reciprocal tariffs plan now. We have a couple of important US data tomorrow but the focus remains on the tariffs plan as that will shape the future expectations the most.

We can see in the snapshot above the classic risk-off environment with commodity currencies selling off while USD, CHF and especially the JPY outperform.

We have a similar story in other risk assets with the US indices trading near the lows of the day and bitcoin threatening new lows.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior +1.6%
• HICP +2.1% vs +1.8% y/y expected
• Prior +1.7%

Slight delay in the release by the source. Core annual inflation remains unchanged though at 1.7%, so the ECB can take some comfort from that despite a jump in the headline readings.

This article was written by Justin Low at www.forexlive.com.

It’s a big moment in French politics, so do keep an eye out for this. Le Pen is the far right party leader and is the frontrunner in opinion polls ahead of the next presidential vote. If she is made ineligible, then this would see the far right grasp on the political scene turn into quite a mess. So far, the court hasn’t made it clear if she will be eligible to run or not.

For some context, this was a pending trial as Le Pen is accused of diverting more than €3 million of European Parliament funds to pay French-based staff instead. Even with the guilty verdict though, Le Pen is surely to file a constitutional appeal – especially if she is deemed ineligible to run for presidency.

This article was written by Justin Low at www.forexlive.com.

The first quarter of 2025 has been defined by a rise in growth fears and inflation expectations leading to hightened stagflationary risks. The culprit is of course Trump’s tariffs policy.

Bitcoin has been often cited as a hedge against inflation but the actual drivers of the cryptocurrency show a different perspective. Bitcoin is just another risk asset like stocks and it’s not a coincidence that it’s been selling off alongside the stock market.

The main driver of the stock market is growth expectations. If you have positive growth expectations, you can also expect higher earnings in the future which is what a stock price reflects. These growth expectations are also reflected in the credit spreads. Credit spreads refer to the difference in yields between corporate bonds
and risk-free U.S. Treasuries of the same maturity. They reflect the
additional risk investors demand for holding corporate debt.

A
widening spread means corporate bond yields are rising relative to
Treasuries, signaling that investors see greater default risk. This often happens when economic uncertainty grows, making it more expensive for companies to borrow. It can indicate a slowdown, weaker corporate profits, and potential recession risks. If credit spreads narrow, it suggests improving economic confidence, as investors demand less premium for riskier debt.

Bitcoin has been much more correlated with the stock market and credit spreads rather than gold. Of course, correlations are not perfect and sometimes we can have short term divergences or changes in magnitude because of idiosyncratic drivers, but in the bigger picture they help a trader know what actually moves the asset. If you don’t know what moves your asset, you will have a hard time trading it.

If we take the S&P 500 chart against bitcoin’s one below, we can see the correlation. As mentioned above, it’s not perfectly tight because of idiosyncratic drivers like the one keeping bitcoin down in the summer of 2024 because of the German government selling and Mt Gox repayments. In the bigger picture though, it shows that growth expectations and risk sentiment are the main drivers.

Speaking of gold. The precious metal is up more than 18% just in the first quarter, while bitcoin is down 12%. Clearly something doesn’t add up. There were short term periods when both of them were correlated but it was more of a coincidence. In fact, gold is mainly driven by real yields. When they rise, gold falls and when they fall, gold rises.

As you can see in the chart below, gold and real yields have had a very tight correlation. Since 2022, many have been saying that the correlation has broken down. It’s a half truth. The correlation is still there, it’s the magnitude that changed. Now gold rises much more when real yields fall, and falls much less when real yields rise. Again, there are idiosyncratic drivers at play.

Generally, real yields fall when markets expect better growth ahead with the central bank cutting rates. This generally sees inflation expectations rising faster than nominal yields. It’s a good environment for gold and risk assets.

Right now though, we have inflation expectations rising while growth forecasts get revised lower. This is stagflationary expectations. This is when real yields fall in a bad environment. Gold rises but risk assets fall.

In the chart above, we can see that in the last year, gold has been rising steadily and had periods of underperformance when real yields rose like in May-July and October-December.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 66.2k
• Net consumer credit £1.4 billion vs £1.2 billion expected
• Prior £1.7 billion

Individual net borrowing of mortgage debt fell in February by £0.9 billion, down to £3.3 billion. That follows a £0.8 billion increase in January. But the annual growth of net mortgage lending was little changed, seen at 1.9%. Besides that, the annual growth for consumer credit was steady on the month – seen at 6.4%.

This article was written by Justin Low at www.forexlive.com.

The other German state releases around the same time:

• Hesse CPI +2.4% vs +2.3% y/y prior
• Brandenburg CPI +2.3% vs +2.3% y/y prior
• Saxony CPI +2.5% vs +2.3% y/y prior
• North Rhine Westphalia CPI +1.9% vs +1.9% y/y prior
• Baden Wuerttemberg CPI +2.2% vs +2.5% y/y prior

The numbers aren’t as soft as expected. At the balance, this means we should see the national reading later come in at around 2.3% to 2.4%. That will beat the supposed estimate of 2.2%. But of course as always, the core reading will matter more.

This article was written by Justin Low at www.forexlive.com.

• Domestic sight deposits CHF 441.7 bn vs CHF 440.4 bn prior

Swiss sight deposits rose back a little in the past week, keeping with a slight bounce in March. But overall, it’s still not all too much changed over the last few months. The trend as per below:

This article was written by Justin Low at www.forexlive.com.

The Japanese Yen rallied across the board last Friday as the final University of Michigan survey showed consumer sentiment slumping more than expected and the long term inflation expectations got revised even higher.

That was the catalyst that reignited stagflationary fears and triggered renewed risk-off flows. Moreover, overnight we got the WSJ report saying that Trump was weighing broader and higher tariffs with potential hikes of up to 20%. This added fuel to the negative sentiment.

The main driver of major FX pairs is yield differentials. The US 10 year yield fell off a cliff as traders expect the Federal Reserve to cut amid slowing growth and potential recession with the stock market continuing to selling off.

In the USDJPY chart below we can see how the US 10 year yield (red line) dragged the pair lower.

The question now is what comes next? Well, nobody knows at the moment. Right now, the markets want to err on the defensive side going into the US reciprocal tariffs plan unveiling on Wednesday. That’s the day that will define the next direction as it will shape future expectations.

Better than expected news should trigger a relief rally as traders will pare back their rate cuts expectations. Conversely, bad news will likely lead to another selloff in the pair with the 140.00 handle coming into sight.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The week will begin slowly on Monday, with no significant scheduled economic events for the FX market.

On Tuesday, the highlight will be the RBA monetary policy announcement, along with the final manufacturing PMI for both the eurozone and the U.S. Additionally, the U.S. will release the JOLTS job openings report.

On Wednesday, the U.S. will report the ADP non-farm employment change, but the focus will be on President Trump’s expected tariffs announcements on what he has dubbed as Liberation Day.

Thursday will bring inflation data from Switzerland, while the U.S. will release unemployment claims and the ISM services PMI.

On Friday, the U.S. will release key labor market data, including average hourly earnings m/m, non-farm employment change, and the unemployment rate. In Canada, attention will also turn to the employment change and unemployment rate.

Later in the day, Fed Chair Powell is expected to speak about the economic outlook at the Society for Advancing Business Editing and Writing Annual Conference in Arlington, with audience questions expected. Throughout the week, several FOMC members are also expected to deliver remarks.

At this week’s meeting, the RBA is expected to keep rates on hold. Lately, inflation data has started to cool down, and labor market indicators suggest a balance between demand and supply. Analysts from Westpac argue that the international environment is unlikely to have a significant impact on Australian inflation at this time.

The RBA is not expected to maintain the hawkish tone seen at the last meeting. The market still anticipates further rate cuts, with the next one expected in May.

Inflation data for the eurozone has also started to cool down recently but remains above the ECB’s desired target and is expected to stay elevated for the foreseeable future. The consensus for this week’s data is a headline inflation rate of 2.2% and a core CPI of 2.5%.

In terms of monetary policy, the ECB is expected to continue with at least 2 rate cuts until the end of the year. However, the expected increase in defense spending and the uncertainties surrounding tariffs is likely to make the Bank more cautious.

In the U.S., the consensus for the ISM manufacturing PMI is 49.6, down from the previous 50.3. Expectations suggest the manufacturing sector will slip below 50 into contractionary territory, largely due to new tariffs on steel, aluminum, and non-USMCA-compliant goods, which are expected to put additional pressure on the sector. Delivery times have lengthened, and input costs have risen as manufacturers rush to place orders ahead of potential tariff impacts.

For the ISM services PMI, which will be released on Thursday, the consensus is 53.0, slightly lower than the previous 53.5. This decline suggests a slower pace of expansion in the services sector.

According to analysts from Wells Fargo, the weakening manufacturing activity is expected to put pressure on goods-related service industries, including transportation and wholesale. Furthermore, tariff-related uncertainty may disrupt pricing, forecasting, and purchasing behaviors, potentially inflating artificial demand and leading to a slowdown in future orders.

On Wednesday, the Trump administration is expected to announce global tariffs that would apply to virtually all U.S. trading partners, in addition to those announced for autos last week. Retaliation remains a concern, as some countries, including China, have indicated they will match U.S. tariffs. Meanwhile, the EU is reportedly considering concessions to avoid or reduce tariffs.

In the U.S., the consensus for average hourly earnings m/m is 0.3% vs. 0.3% prior. The non-farm employment change is expected to slow to 139K from the prior 151K, while the unemployment rate is likely to remain steady at 4.1%.

A notable slowdown is anticipated in non-farm employment growth, with analysts attributing much of this weakness to federal employment cuts. According to Wells Fargo, government payrolls are expected to shrink by 15K as hiring freezes and layoffs intensified ahead of the survey period.

The private sector outlook is also concerning. Small business hiring plans have returned to pre-election levels, job postings are declining, and regional Fed surveys indicate a sharp slowdown in service-sector employment. Although initial jobless claims remain stable, the February surge in Challenger job cut announcements, the highest since 2020, suggests businesses are struggling to lower headcounts just through natural employee departures, Wells Fargo said.

However, some factors may help offset these declines. Seasonal hiring in the leisure and hospitality sectors is expected to increase as weather conditions improve, while employment in healthcare and social assistance is likely to remain resilient.

In Canada, the consensus for employment change is 9.9K, up from the previous 1.1K, while the unemployment rate is expected to rise from 6.6% to 6.7%.

While growth in the job market seems to be slowing down, it comes after a 76K surge in January. Job postings on indeed.com in the second half of March suggest a softening in hiring demand according to analysts from RBC.

Labor supply growth is expected to face increasing constraints due to slower population expansion, pointing to a more subdued employment outlook in the coming months.

This article was written by Gina Constantin at www.forexlive.com.

UPCOMING
EVENTS:

• Monday: German CPI.
• Tuesday: Japan Unemployment Rate, Japan Tankan Index,
  China Caixin Manufacturing PMI, RBA Policy Decision, Swiss Manufacturing
  PMI, Eurozone CPI, Canada Manufacturing PMI, US ISM Manufacturing PMI, US
  Job Openings.
• Wednesday: US ADP, US Tariffs implementation
• Thursday: China Caixin Services PMI, ECB Meeting Minutes,
  Swiss CPI, Eurozone PPI, US Challenger Job Cuts, US Jobless Claims, Canada
  Services PMI, US ISM Services PMI.
• Friday: Swiss Unemployment Rate, Canada Employment
  Report, US NFP, Fed Chair Powell speech.

Tuesday

The RBA is
expected to keep the Cash Rate unchanged at 4.10%. As a reminder, the central
bank cut interest rates by 25 bps at the last meeting but delivered a more
hawkish than expected guidance. Since then, the monthly CPI data showed further improvement and the employment report disappointed. We’ve also got the Australian
government announcing unexpected tax cuts which could hinder RBA’s progress.

The Eurozone CPI
Y/Y is expected at 2.3% vs. 2.3% prior, while the Core CPI Y/Y is seen at 2.5%
vs. 2.6% prior. We’ve got soft French and Spanish inflation figures last Friday which saw the market increasing the bets
for another 25 bps rate cut at the April’s meeting to 90%+ probability with a
total of 70 bps of easing priced by year-end.

The US ISM
Manufacturing PMI is expected at 49.5 vs. 50.3 prior. The S&P Global survey
showed the Manufacturing sector falling back into contraction. The agency noted
that “business confidence in the outlook darkened, souring further from the
buoyant mood seen at the start of the year to one of the gloomiest readings
seen over the past three years, largely caused by growing worries over negative
impacts from recent policy initiatives from the new administration”. The most
widely cited were concerns about the impact of Federal spending cuts and
tariffs.

The US Job
Openings is expected at 7.632M vs. 7.740M prior. The last report showed an
increase in job openings with a decline in the layoffs rate and a steady hires
rate. It’s a labour market were it’s hard to find a job but there’s also low
risk of losing one. Nonetheless, that was January data so it didn’t incorporate
the recent developments in the Trump’s policies.

Wednesday

The US ADP is
expected at 105K vs. 77K prior. The last report was softer than expected with
the agency noting that “policy uncertainty and a slowdown in consumer spending
might have led to layoffs or a slowdown in hiring”. Their data, combined with
other recent indicators, suggests a hiring hesitancy among employers as they
assess the economic climate ahead.

On Wednesday the
US will unveil the reciprocal tariffs plan. There’s been lots of noise around
this event with discordant reports. Nobody defined the
general expectations though. Adam did the work though and came up with a
comprehensive analysis here.
The consensus seems to be 9-10% reciprocal tariff rate and 50% on China. This
is going to be the main event of the week and we will likely see huge moves
following the release.

Thursday

The Switzerland
CPI Y/Y is expected at 0.5% vs. 0.3% prior, while the M/M figure is seen at
0.0% vs. 0.6% prior. As a reminder, the SNB cut interest rates by 25 bps at the last meeting revising inflation
expectations downward for this year but bumping up those for 2026. The market
thinks the central bank is done with its easing cycle with just 7 bps of easing
priced in by year-end.

The US Jobless
Claims continue to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing
Claims continue to hover around cycle highs.

This week Initial
Claims are expected at 225K vs. 224K prior, while Continuing Claims are seen at
1862K vs. 1856K prior.

The US ISM
Services PMI is expected at 53.0 vs. 53.5 prior. The S&P Global survey saw
the Services sector rebounding strongly in March to 54.3 vs. 50.8 prior. The
agency noted though that “some of the March upturn was reportedly due to
business picking up after adverse weather conditions had dampened activity
across many states in January and February, which could prove a temporary
bounce.” The focus will likely be on the employment and price components.

Friday

The Canadian
Employment report is expected to show 12K jobs added in March vs. 1.1K in
February and the Unemployment Rate to tick higher to 6.7% vs. 6.6% prior.
Overall, I don’t think the data will matter much this week as everything will
hinge on the US tariffs announcement. In fact, I can see a bad report getting
faded if the tariffs news will be positive and vice versa in case the tariffs
release disappoints.

The US NFP is
expected to show 140K jobs added in March vs. 151K in February and the
Unemployment Rate to remain unchanged at 4.1%. The Average Hourly Earnings Y/Y
is expected at 3.9% vs. 4.0% prior, while the M/M measure is seen at 0.3% vs.
0.3% prior. The Average Weekly Hours are seen at 34.2 vs. 34.1 prior.

The Fed is seeing
the labour market remaining solid and not being a source of inflationary
pressures. That seems to still be the case with jobless claims not showing any
worrying signs.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Eurostoxx -1.1%
• Germany DAX -1.0%
• France CAC 40 -1.1%
• UK FTSE -1.0%
• Spain IBEX -0.8%
• Italy FTSE MIB -1.4%

This comes as US futures are also under heavy pressure, with S&P 500 futures down 0.8% currently. The prospect of Trump tariffs ahead of Liberation Day on 2 April is still the main source of worries in broader markets at the moment. And he will certainly be banging on the war drums over the next two days in the run up. So, expect more volatility to come until then.

This article was written by Justin Low at www.forexlive.com.