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There is a short squeeze unfolding in markets today with the heavily-beaten-up shares of Tesla rising more than 10%. At times market bottoms start with squeezes and there is some optimism that tariffs won’t be too bad.

With that, the S&P 500 has extended to a session high up 1.7% and the Nasdaq is up 2.25% in a great start to the week. The Mag7 stocks are all strong and may have been held back last week by a huge options expiry block.

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

Comments from Trump

• says he will announce additional tariffs on autos, lumber and chips
• May give a lot of countries breaks on tariffs
• Tariffs for doing business with Venezuela will be on top of existing tariffs
• Not all tariffs will be included on April 2

This was after the announcement of a Hyundai investment in a steel plant and autos.

This is a pushback on the idea that tariffs won’t go beyond the reciprocal levels but the market is also liking the idea that he ‘may give a lot of countries breaks’.

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

The March Bank of America Fund Manager Survey highlighted the big re-think ongoing over the crowded trade in Mag7 and US stocks in general.

I have some of the charts below but the themes are clear:

• The US is out and the rest-of-the-world is in
• a net 39% of respondents overweight European stocks, up from 12% last month-the highest level since mid-2021
• Recession fears based on trade are high
• Growth expectations are falling in the US
• More than two thirds of respondents, or 68%, expect two or three rate cuts this year, up from 51% in February, the survey says.

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

HSBC warns that EUR/USD appears rich relative to rate differentials, with its recent rally driven more by speculative flows and positioning shifts than by traditional macro drivers such as interest rates or risk sentiment. While 2Y EU-US rate spreads have moved modestly in the euro’s favor, EUR/USD has overshot, even as those spreads have begun to narrow again. The rally now depends heavily on the swift and effective delivery of European fiscal stimulus, making it vulnerable if expectations disappoint.

Key Points:

1️⃣ EUR/USD Rally Driven by Flows, Not Fundamentals 💶💸

• HSBC’s speculative flow tracker is currently the most relevant EUR/USD driver.

• Interest rate differentials and risk appetite have taken a backseat.

2️⃣ Valuation Looks Stretched Relative to Rate Differentials 📉

• While 2Y spreads briefly moved in EUR’s favor, the FX pair has outpaced that move.

• Recent narrowing in spreads hasn’t been reflected in EUR/USD weakness—suggesting overvaluation.

3️⃣ Rally Relies on Fast Fiscal Execution ⚠️

• Swift and sizable EU fiscal stimulus is now key to justifying elevated EUR/USD levels.

• Any delays or dilution of fiscal plans could lead to sharp unwinds in speculative positions.

Conclusion:

HSBC sees EUR/USD as overextended, with its recent gains driven more by speculative positioning than solid macro support. Unless European fiscal stimulus materializes quickly and convincingly, the Euro risks a pullback, especially as rate differentials no longer justify further upside.

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

Pres. Trump is saying that:

• Will announce tariffs on autos, aluminum, and pharmaceuticals in the near future
• Tariffs will keep US taxes low.

Meanwhle, commerce Sec. US Commerce Secretary Lutnick is saying:

• April 2 tariffs announcements will launch the external revenue service

OK…. Taxes will remain low (…while prices move higher?). There is no doubt Trump has no interest in raising taxes. However, costs from tariffs will impact cost of goods. Is the spaghetti being shuffled around the plate? Who does it benefit the most? Those that spend more of income on goods and services are the one’s most likely hurt if the level of prices goes higher as a result.

Also, the White House confirmed to CNBC Javers the new 25% tariffs on countries that do business with Venezuela will be on top of other tariffs. China tariffs will therefore go to 45% on April 2.

This article was written by Greg Michalowski at www.forexlive.com.

Pres. Trump speaking at his cabinet meeting says:

• Companies are all coming back to the US.
• Investment numbers are beyond expectations.
• CHIPs Act was a disaster.

Pres. Trump is critical of the CHIPs Act. The act was a bipartisan agreement aimed at strengthening domestic manufacturing, research, and supply chains for semiconductors—the critical components powering everything from smartphones to military systems. Remember the supply chain disruption in the auto industry and its impact on prices, used car prices, inflation, etc.

🔹 Key Goals:

• Boost U.S. semiconductor manufacturing

• Reduce dependence on foreign chipmakers (especially in Asia)

• Strengthen national security

• Support scientific research and innovation

🔹 Major Provisions:

• $52.7 billion in federal funding:

  • $39 billion for manufacturing incentives

  • $13.2 billion for R&D and workforce development

  • $2 billion for legacy chips used in defense and autos

• 25% investment tax credit for companies that build or expand semiconductor facilities in the U.S.

• Funding for science agencies like NSF, DOE, and NIST to advance innovation and STEM education.

Whether it is a disaster or not is TBD as facilities are still being built by the likes of Intel and Taiwan Semiconductor.

This article was written by Greg Michalowski at www.forexlive.com.

Canada Prime Minister Carney is on the wires saying:

• He is available for a call with US Pres. Trump
• Canada will talk on “our terms as a sovereign country”
• Assumes Trump is waiting to see who wins general election before calling the winner

Carney called a snap election for April 28th. Voters will head to the polls amid a trade war with the U.S. and controversial calls from President Donald Trump for Canada to become the 51st American state. The US Pres has called April 2 Liberation Day when new tariffs will go into effect. Over the weekend, some of the fear for across the board tariffs have eased, although the WH today said that decisions on tariffs have not been decided.

Prime Minister Mark Carney replaced Justin Trudeau 9-days ago.

Carney will now faces off against Conservative leader Pierre Poilievre, whose party has been leading in national polls since mid-2023, though the latest numbers suggest a much tighter race.

This article was written by Greg Michalowski at www.forexlive.com.

OPEC+ is going to continued with the planned scheduled of bringing barrels back online, according to 3 sources cited by Reuters.

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

A big debate in markets so far this year has been whether the real economy would ‘catch down’ to slumping measures of consumer and business confidence.

That debate might be over — or at least on a break. The S&P PMIs are some of the most-comprehensive measures of business confidence and the survey of the service side bounced strongly in March despite non-stop tariff angst in the news. There are some concerns in the report like the troubling drop in optimism on the outlook to the 2nd lowest since 2022 but for now, businesses are taking a measured view.

US 10-year yields are nearing the top of the recent range and up 7 bps to 4.32%. That’s lent a strong bid to USD/JPY as it rises above 150 and to the best levels since March 2. The 92-pip rally today has topped last week’s high.

I don’t think there is any big signal in this data or the reports out of the White House on the weekend. It could all be upended with the next tweet but that’s just the landscape of trading right now.

Ultimately, we have to wait until April 2 and deal with whatever comes.

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

• Feb final services was 51.0
• Manufacturing 49.8 vs 51.7 expected
• Prior manufacturing was 52.7
• Composite PMI 53.5 vs 51.6 prior
• Services optimism about the coming year fell for a
  second successive month, and is at the second lowest since Oct 2022
• Factory optimism remained high
• Employment rose slightly in April
• Input costs
  increased at the sharpest rate for 23 months

The services PMI peaked near 57 after the election but it’s has trended lower since the tariff talk ramped up. This month, we got a nice rebound on the services side but manufacturing fell below the 50 level. Overall, the services side is a much more important component of the US economy so I take this as good news. That said, S&P says this number isn’t exactly pointing to gangbusters growth.

Chris Williamson,
Chief Business Economist at S&P Global Market
Intelligence”

“A welcome upturn in service sector activity in March has
helped propel stronger economic growth at the end of
the first quarter. However, the survey data are indicative
of the economy growing at an annualized 1.9% rate in
March and just 1.5% over the quarter as a whole, pointing
to a slowing of GDP growth compared to the end of 2024.

“Near-term risks also seem tilted to the downside.
Growth is concentrated in the service sector as
manufacturing fell back into decline after the front-
running of tariffs had temporarily boosted factory output
in the first two months of the year. Similarly, some of the
March upturn in services 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.

“Business confidence in the outlook has also 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. Most widely cited were concerns
about the impact of Federal spending cuts and tariffs.

“A key concern over tariffs is the impact on inflation, with
the March survey indicating a further sharp rise in costs
as suppliers pass tariff-related price hikes on to US
companies. Firms’ costs are now rising at the steepest
rate for nearly two years, with factories increasingly
passing these higher costs onto customers. Thankfully,
from the Federal Reserve’s perspective, services
inflation remains relatively subdued, but this reflects the
need to keep prices low amid weak demand, which will
harm profits.”

More to come

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

The Nasdaq is on a five-week losing streak but poised to rise 320 points at the open. S&P 500 futures are also up 1.2%.

It’s all about tariffs today with the White House floating a less-aggressive strategy to reporters at Bloomberg and the WSJ over the weekend.

What’s odd about the whole situation is that no one can really tell you what’s priced in around tariffs. Trump has floated all kinds of various rates and strategies so it’s not like there is some level of rational pricing going on. It’s all sentiment driven but that is where it will stand until April 2 and beyond and we find out about the scope of retaliation.

In the back of my mind is the strategy of ‘escalate to de-escalate’ and the thinking that 25% tariffs on Mexico and Canada will be ratcheted down to a level those countries can ‘tolerate’ but that might be 5%, it might 10% and there might not be any level that doesn’t lead to retaliation and unintended consequences to cross-border shippers.

For now, everyone is taking it a day at a time (or maybe an hour at a time).

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

• Prior was -0.03 (revised to -0.08)

This is a composite index, so it’s data that has already been released but it’s a useful view.

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