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• U.S. economic outlook sees growth losing steam amid shifting policies
• Forecast inflation to remain closer to 3.0% in 2025 as tariffs increase prices along domestic supply chain & for end consumers
• Comes amid shifting policy mix that is altering economic outlook, with balance of risks to our growth forecast tilted to downside

This article was written by Eamonn Sheridan at www.forexlive.com.

Despite recent media reports suggesting a softer stance from the Trump administration on tariffs, Goldman Sachs is urging caution. The investment bank believes markets may be too optimistic—and that could lead to a nasty surprise.

According to Goldman economists, tariffs have long been a key bargaining chip for the administration, and they expect officials will want to approach upcoming trade talks from a position of strength. A recent Goldman survey found that most market participants are anticipating reciprocal tariffs of around 9% when new measures are unveiled in early April.

However, Goldman itself projects the initial rate could be twice as high, warning that such a move could catch markets off guard next week.

I don’t envy analysts trying to divine what’s to come on tariffs. I can barely keep up with the headline ping pong on the issue.

This article was written by Eamonn Sheridan at www.forexlive.com.

February month inflation data is due from Australia today. Its expected to be steady at 2.5% y/y. The Reserve Bank of Australia target band is 2 to 3%, and the Bank and government have agreed to target 2.5%.

On Tuesday evening Australian time the budget was announced in Australia. ICYMI:

• Australia brings out new tax cuts in latest federal budget announcement
• Koala-fied for a Rally – Aussie Dollar Climbs on Pre-Election Tax Cuts

The opposition party in Australia has said they’ll block the tax cut, saying its just an electoral bribe. I guess the only justifiable bribes are those offered to members of parliament?

—

The monthly CPI data from Australia does not show all components of the CPI, that’ll have to wait for the quarterly data release (late in April).

• The monthly CPI indicator does, however, provide a timelier indication of inflation using the same data collected for use in the quarterly CPI. The monthly reading includes updated prices for between 62 and 73 per cent of the weight of the quarterly CPI basket, its not the full picture.

• This snapshot from the ForexLive economic data calendar, access it here.
• The times in the left-most column are GMT.
• The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

This article was written by Eamonn Sheridan at www.forexlive.com.

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

This article was written by Eamonn Sheridan at www.forexlive.com.

The momentum of the past two days of trading didn’t entire fade but it was slower going after a poor US consumer confidence report and as we stumble one day closer to Trump’s April 2 “liberation day”.

• S&P 500 +0.15%
• Nasdaq Comp +0.5%
• DJIA flat
• Russell 2000 -0.5%
• Toronto TSX Comp +0.2%

I take some positive indications from Trump’s late day comments that Mexico and Canada “have done a lot” as a sign that tariff levels on that pair will be low on April 2 but I don’t think anyone wants to make any bets this late in the game.

This article was written by Adam Button at www.forexlive.com.

That’s a great sign for Canada and Mexico and sentiment and general as that’s a big part of the US trade puzzle.

This article was written by Adam Button at www.forexlive.com.

I got a chance to read The Atlantic report about the editor-in-chief being added to the White House group chat. It’s a fiasco but I don’t want to weigh in on the politics because there’s no investment strategy or macro takeaway from that angle.

Where I think something revealing (and useful) taking place is the world view of the people involved in the chat.

In deciding whether to strike, US Homeland Security Advisor Stephen Miller writes that Europe and Egypt need to pay:

“If Europe doesn’t remunerate, then what? If the US successfully restores
freedom of navigation at great cost there needs to be some further
economic gain extracted in return.”

This is a view of a transactional Presidency.

It’s something we’ve Trump hint at economic policy and other dealings but here it extends to military policy. That suggests it dominates both his thinking and entire administration’s motives. It highlights a sort-of protection racket.

During the early Roman empire Marcus Licinius Crassus, who was one of the wealthiest men of his time had a private fire brigade. If your building was on fire, he would arrive and negotiate extortionate fees to put it out.

Is that how foreign policy is going to work now? Or maybe even aid to American states?

For trade and the economy, this almost certainly devolves into fighting over the pie rather growing the pie.

If you’re Europe or another American ally what do you do after reading this?

“I fully share your loathing of European free-loading. It’s pathetic,” wrote defense secretary Peter Hegseth.

NATO is effectively dead.

Another takeaway is that it’s all so unprofessional and improvised. That’s going to lead to mistakes and unintended consequences. You would hope that tariff policy is being run differently but all indications are that it’s haphazard.

An ad hoc approach to major decisions suggests policy driven by immediate
leverage opportunities rather than strategic coherence, which
introduces additional systemic risks beyond just the transactional
mindset.

It won’t end well.

Finally, there are lessons in history here.

If you create a transactional system in the international order rather than a rules-based system it ends badly. The US will lean on countries and will likely exert some gains but in the long run, other countries aren’t going to lay down. They may tactically retreat and absorb some pain (which will create the illusion of gains) but the long game will be establishing their own leverage and decoupling; they will develop alternative arrangements to reduce their vulnerability.

Globalism is dying and I suspect that once it’s dead, we will all regret it. The last 30 years have been bumpy but unfathomable wealth has been created, high employment and good standards of living. That’s worth preserving.

This article was written by Adam Button at www.forexlive.com.

• I have April 2 tariffs set
• There was no classified information on Signal chat
• Tariffs will create more jobs

These are the usual talking points.

This article was written by Adam Button at www.forexlive.com.

• Says Ukraine-US talks in Riyadh were successful
• Ukraine is ready for a new meeting to work out details of a truce

Separately, Russian officials say the Zaporizhzhia nuclear plant is Russian and won’t be transferred to anyone. The plant is near the front lines and has been the subject of considerable nuclear and attack worries. It’s the largest nuclear plant in Europe but has been shut down since it was captured in 2022.

This article was written by Adam Button at www.forexlive.com.

Earlier today, I highlighted a Goldman Sachs note suggesting that market participants were expecting a 9% reciprocal tariff rate.

Now, Deutsche Bank is out with a survey of its own list of 400 investors and they estimate 50% tariffs on China and a tariff of slightly below 10% on everyone else.

However they also try to price out the market via breakevens, which they correlate to a 5% universal tariff, or a 10% universal tariff that exempts Canada and Mexico. Via they dollar, they struggle to find any tariff pricing.

What will make the tariff announcements tough to trade on is the second-order effects. Will there be retaliation? Will other countries tee up fiscal stimulus? Will the tariffs allow the US to pass a tax cut? Does China devalue?

“We
would caution against extrapolating a large follow-through beyond the day of
the announcement given all these moving parts. Ultimately, the tariff impact on
markets will boil down to the aggregate level of harm done to the US (via equities) and to the relative harm it does to the US
versus the rest of the world (via FX).”

The conclusions from Deutsche Bank is that it’s very difficult to establish what’s priced in.

“So
what is the market pricing on tariffs? It is very hard to tell,” DB writes.

This article was written by Adam Button at www.forexlive.com.

Results of the sale just after the 1 pm ET deadline.

• Prior was 4.169%
• Bid to cover 2.66 vs 2.56 prior

I thought we might see a 4-handle but the combo of the soft consumer confidence data today and worries about tariffs knocked it through the figure. If we get a tolerable tariff solution and some pickup in economic data, this could be the last sale below 4% in awhile.

This article was written by Adam Button at www.forexlive.com.

Do you like hard data or soft data?

That’s the question facing bond markets today ahead of the sale of 2-year notes at the top of the hour. There are $69 billion up for grabs and they’re rich on recent history at around 4.00% compared to last months’ sale at 4.169%.

Today, there has been a strong bid since the poor consumer confidence data but BMO notes that March is seasonally negative for 2-year sales with only one auction since 2018 stopping through compared to five tails.

“The
April 1st trade policy review is quickly approaching, and investors are
understandably wary of each incoming White House headline that could
potentially reshape the tariffs debate,” BMO writes.

This article was written by Adam Button at www.forexlive.com.