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US Markets Rally as Investors Look to Fed – Nasdaq up 2.7%

US stock indices rallied well in trading yesterday as investors looked to the Fed for earlier rate cuts and earnings results delivered a mixed bag. Tech stocks led the way after Alphabet delivered a solid earnings report, with the Nasdaq closing up 2.74%. The S&P added 2.03% on the day, while the Dow gained 1.23%. The dollar dropped after the previous day’s optimistic rally, with the DXY down 0.44% to 99.31, whilst Treasury yields fell on Fed comments hinting at a June cut—the 2-year off 7.4 basis points to 3.797% and the benchmark 10-year down 6.7 basis points to 4.315%. Oil prices moved higher on the back of the weaker greenback, with Brent up 0.64% to $66.54 and WTI up 0.84% to $62.79. Gold rallied 1.84% to $3,348.23 after its loss on the previous day.

Markets Poised for Moves Either Side

Markets seem to have hit a nervous patch in the last few days, with the initial euphoria from potential tariff reprieves replaced by tension about the details and timing of any moves. Investors are now craving certainty from the US administration on what tariffs will be implemented, with most now almost hoping for another ‘Trump Board Session’, similar to Liberation Day, where we are told exactly what the real tariffs will be. Many products are now trading in a ‘volatile limbo’ state, with flows still moving markets strongly due to recent volatility. However, most moves are lacking clear conviction, as the market still lacks certainty, but expect new trends to emerge in the near future when we do get more details on trade deals—with lower tariffs and more certainty likely to lead to more relief rallies.

Data and Geopolitics to Dominate into the Weekend

It looks like being another lively end to the week as traders face data updates throughout the trading day and remain glued to news screens for any fresh updates on global trade. The Asian session is due to start on the front foot after a good day on Wall Street, and focus will be on Japanese markets early in the day when key Tokyo CPI data is released—expected to show a hefty 3.2% year-on-year increase. The European session also looks busy, with UK Retail Sales data due out (exp. -0.3% m/m) and SNB Chairman Martin Schlegel due to speak. The New York session will see initial focus north of the border for Canadian Retail Sales numbers (exp. -0.4% m/m and Core -0.1% m/m) before dropping back south for any updates on tariffs and the University of Michigan revised data updates.

The post General Market Analysis – 25/04/25 first appeared on IC Markets | Official Blog.

• China said to weigh exempting some US goods from tariffs as costs rise
• Japan April Tokyo CPI ex-fresh food +3.4% vs +3.2% expected
• Japan’s Ishiba: Decided on a package of measures to deal with US tariffs
• Japanese finance minister Kato met with Scott Bessent today
• Ueda: Uncertainty regarding global economy rising, must scrutinize impact on business
• UK April GfK consumer confidence -23 vs -22 expected
• Malaysia trade minister: We’re open to negotiate with the US on reducing trade deficit
• PBOC Governor: All parties expressed concern about negative impact of trade frictions
• China fin min: Current world economic growth momentum is insufficient
• South Korea industry min: Reached common ground on shipbuilding co-operation with US
• Fed’s Kashkari: I’m worried about layoffs but not seeing them yet

Markets:

• WTI crude oil up 30-cents to $63.09
• US 10-year yields up 1 bps to 4.31%
• S&P 500 futures up 0.5%
• Gold down $21 to $3327
• USD leads, JPY lags

It’s a holiday in Australia and New Zealand today so trading in those two currencies was dampened but it wasn’t elsewhere.

The US dollar was drifting higher early in the day after underperforming in an optimistic environment in New York trade. However late in the day the China tariff news gave the US dollar and extra lift as it could be cracking the door open to a bigger tariff deal between the US and China. USD/JPY rallied 60 pips on the news and EUR/USD fell by 30 pips.

The list in the report for exemptions is very short and you could argue that exemptions lay the groundwork for keeping broader tariffs on for longer, but that’s not the way the market is taking it at all.

Gold started the session strongly higher but is now at the lows of the day as tariff fears unwind. The positive movement is building optimism about a deal into the weekend and that could continue even if the news flow on Friday is light.

The market is continuing to come to the conclusion that the tariffs are such an own-goal that they will inevitably be removed. I think back to this post from Trump late on Sunday.

He’s not exactly saying “it’s Main Street’s turn” here and it underscores the idea (hope?) that there is still a Trump put.

In any case, the US dollar gains are extending at the moment and the

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

I’m not sure if these two reports are related but there is one that highlights that several Chinese tech companies confirmed that 8 tariff codes related to semiconductors and circuits are now exempt from additional tariffs. That report cites Caijing.

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

Here is a chart from Craig Fuller at FreightWaves — a freight data company. It shows last year’s trend in outbound freight (green) and overlays this year. It shows a 15% decline since February and ongoing deterioration, with the index 10% below a year ago.

“The freight data is warning about for the direction of the goods economy if things aren’t resolved soon,” Fuller writes.

The White House is watching these numbers and Bessent highlighted container ship orders in his recent comments. Generally, this data set leads hard economic data by 4-8 weeks.

Also note that the first tariffed cargoes arriving in the US from China are just landing now as the tariffs weren’t applied to freight on water.

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

Canadian retail sales are due on Friday and expected to show a 0.4% m/m for the February reading but the real test will be the advance March reading, which doesn’t have a consensus estimate.

The best clue we have is from the RBC report on its card data.

We saw signs that Canadians are pulling back on purchasing discretionary goods, although broader spending trends remained resilient in March compared to the dramatic pullback in consumer confidence measures.

The data showed that overall spending edged lower in March but the bank warned that cardholder data doesn’t capture auto sales, which other data sets indicated were strong. Their overall index fell to 152.3 from 152.5.

The puzzle that market participants are trying to solve is the divergence between weakening survey data and resilience in hard numbers. Generally, the surveys precede drops in hard data but not always, particularly when there is confusion, angst or anger about policies. Much of this is often dismissed as partisanship in the United States but it’s hardly a US-only phenomenon as Canadian consumer sentiment has also plunged recently.

Canadian consumer confidence plunged to a record low, but that crater wasn’t mirrored in our cardholder spending data—at least not by the same magnitude.

They note that Canadian consumer confidence fell 16% in March but spending was down just 0.1%.

Within the data, RBC notes that goods spending is weak but services data is resilient and that’s backed up by restaurant reservation data from OpenTable, which was 18% above year-ago levels at the end of March into early April.

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

• Open to negotiate on non-tariff barriers, explore bilateral trade agreement, strengthen tech safeguards and security
• Will explore alternative ways to address US concerns
• Will ensure mutually beneficial trade flows between Malaysia and US continue

These are fairly boilerplate comments but highlight a willingness to negotiate, which is true of most countries.

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

The Japanese yen and euro have both chalked up impressive year-to-date gains of around 12% against the US dollar, Bank of America argues that the yen’s rise is more flimsy.

BofA notes:

• The yen’s rally has been disproportionately driven by speculative positioning
• The euro’s rise has been more persistent than JPY’s across daily market regimes
• German fiscal expansion is a unique euro driver
• Structural outflows from Japan have fallen off the market radar

They note that a currency deal between the US and Japan is a tail risk but that’s something that Kato downplayed earlier today.

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

Here is a good chart from Deutsche Bank that highlights several actual recessions and several times where a decession looked likely and how far the SP 500 fell in those situations.

Looking at it, the market has fallen far enough already to indicate the market is concerned about a recession but if we were to actually get a recession, it could fall much further below the April lows. I’d highlight additional downside even in a shallow recession as valuations are high coming in.

Deutsche Bank writes:

“The hard data over the coming days will be crucial. Investors have been
reluctant to fully price in a recession because we don’t have enough evidence that
one is likely. But if that changes and we start to see contractionary numbers (e.g. a
negative payrolls print), that would lead to a fresh reassessment that could open the
way for a fresh selloff. That risk is particularly acute precisely because markets
haven’t witnessed a recession-like selloff so far. So history clearly demonstrates
that if we did get an actual recession, then there’s still a lot of scope for risk assets
to see further downside.”

They also looked at high-yield credit spreads, the yield curve and oil prices all paint the same picture. The one that worries me the most is high-yield spreads as some people have made the case to me that those could blow out. The chart below is good because it doesn’t show serious risk but if it does blow out, there is a long way to go and those borrowing costs could lead to some real pain.

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

We might be seeing a US dollar catch-up trade in Asia.

The dollar struggled in Thursday’s US session even as stocks rallied and Treasury yields fell. It was a breakdown of the recent Buy America/Sell America correlation but today in Asia we’re seeing signs that it’s being re-asserted, albeit delayed.

The dollar is 30-45 pips stronger today against the Euro, yen, pound and Swiss franc and at the best levels in Asia so far. The gains in USD/JPY come despite a hotter Tokyo CPI report.

One of the themes going into the weekend is likely to be optimism about a US trade deal announcement: Perhaps with India or more broadly. That should be a tailwind for the ‘Buy America’ trade, though stocks have been rallying on that for three days already.

There could also be some help from the stock market with S&P 500 futures up 0.4%, led by a 4.8% rise in shares of Alphabet following earnings.

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

• Tariff wars and trade wars have further affected economic and financial stability
• All parties should further improve the international economic and financial system by strengthening multi-lateral cooperation
• All parties should pool more resources for Africa’s development

There isn’t really anything notable here on the trade war.

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

• First reading above 3% since July 2023
• Prior was +2.4%
• Overall CPI 3.5% vs 2.9% prior
• Ex food and energy 2.0% y/y vs 1.1% prior
• Ex food and energy +0.7% m/m vs +0.4% prior

USD/JPY was trading higher by 27 pips to 142.90 ahead of the report. This is a yen positive (i.e. USD/JPY negative) but there has been little reaction in the aftermath. Ueda earlier highlighted a goal of returning to sustainable 2% inflation and expressed worries about the trade war.

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

• Prior was -19

The UK GfK Consumer Confidence Index tracks how confident people feel about the economy and their personal finances. GfK is a German market research firm that conducts the monthly survey.

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