General Market Analysis – 03/04/25

US Markets Calm Before the Tariff Storm Hit – Nasdaq up 0.9%

US markets experienced a choppy day’s trading ahead of President Trump’s tariff update yesterday, with stocks ultimately finishing higher by the close, but that looks set to change later today after the President announced sweeping tariffs of 10% across the board and a raft of reciprocal tariffs to individual countries. The Dow closed up 0.56%, the S&P up 0.67%, and the Nasdaq up 0.87%. Treasury yields and the dollar both dropped, the 2-year down 2.3 basis points to 3.858%, the 10-year down 3.8 basis points to 4.131%, while the DXY dipped 0.38% to 103.81. Oil prices pushed higher, Brent up 0.62% to $74.95 and WTI up 0.70% to $71.71, whilst haven flows continued to push gold higher, up 0.92% by the close at $3,139.27.

Reciprocal Tariffs to Provide Cross Currency Trades

FX traders have woken up to a huge tariff update this morning, and many are looking at President Trump’s convenient display chart for some good cross-currency trading opportunities. The US has identified a number of countries for some hefty tariffs, and currencies should react strongly to these measures over the coming days and weeks, with many traders looking at cross trades to take the volatility of the dollar out of the equation. Many Asian countries were targeted for hard reciprocal tariffs, with the headline probably being China, which now faces total tariffs of 54%. Other South East Asian countries were also targeted hard, and traders will be cherry-picking some choice crosses in the sessions ahead, looking to target short positions in those with the higher tariff impact.

Tariff Reaction Set to Dominate Data Calendar Today

Donald Trump’s tariff update from the Rose Garden at the White House is set to dominate market sentiment and moves today, although there are some key data releases that traders will look at in the middle of the maelstrom. There is little on the calendar in the Asian session, and given that it is having first crack at reacting to the sweeping tariff update, that may not be a bad thing. The European session does, however, have key CPI data (exp. 0.1% m/m increase) due out of Switzerland, and franc traders will be paying close attention to that print. The New York session also sees some key data releases, with the Weekly Unemployment Claims data (exp. 225K), the Final Services PMI (exp. 54.1), and the ISM Services PMI (exp. 53.0) all due out early in the session. However, in the current environment, expect tariff reaction to dominate for most of the session.

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