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Both the dollar and risk trades are getting hit on the headlines here as China continues to go blow for blow with Trump on the tariffs front. But at this point, does the number really matter? The latest increase sees the additional tariffs go up to 125%, from 84% previously. This will go into effect from 12 April.

Well, whether 125% or 200%, the understanding is that US-China trade relations are officially on ice. There’s just no longer any relevance to trade and I would assume businesses on both sides will also seize trade operations until this blows over. It’s all just a number at this point.

As mentioned earlier, the main thing is still watching to see who will blink first between Trump, China, or the Fed. And right now, China is clearly saying that it isn’t going to be them.

30-year yields in the US are now up to 4.91% on the day. Is Trump going to blink again as he did on Wednesday? Or is the Fed going to come to the rescue of the bond market?

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

• Eurostoxx +1.0%
• Germany DAX +1.0%
• France CAC 40 +1.0%
• UK FTSE +0.7%
• Spain IBEX +0.5%
• Italy FTSE MIB +0.7%

European indices missed out on the surging rally on Wednesday and so had to play some catching up yesterday. But then, there was a more negative market mood weighing as well on Thursday itself. And now coming into today, there is a slight reprieve again so all of that is playing into the balance for stocks in the region. S&P 500 futures are seen up 0.6%, continuing to swing around a bit as the session gets underway. In the bigger picture, there’s still no major progress on the US-China trade front for now at least.

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

• Prior +3.0%
• HICP +2.2% vs +2.2% y/y prelim
• Prior +2.9%

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

• No matter the changes to external environment, China will strengthen its confidence
• To maintain determination and concentrate on doing its own thing
• China and Europe should stick to partnership and adhere to open cooperation
• China and Europe should fulfil international responsibilities, jointly maintain international trade order

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

There’s no new development to the trade war just yet, so this looks to be just a bit of a breather again for now. After having pared some of the historic gains on Wednesday, we’re seeing stocks hold a calmer mood going into the final day of the week. All that being said, the coast isn’t clear yet as there are still quite a number of potential pitfalls in the path ahead.

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

• Prior +2.3%
• HICP +2.3% vs +2.3% y/y prelim
• Prior +2.6%

Core annual inflation was revised to 2.6% as compared to 2.5% from the initial estimate, though still down from 2.7% in February.

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

• Prior -0.1%
• Services % vs +0.1% m/m expected
• Prior +0.1%
• Industrial output % vs 0.0% m/m expected
• Prior -0.9%
• Manufacturing output % vs +0.2% m/m expected
• Prior -1.1%
• Construction output % vs 0.0% expected
• Prior -0.2%

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

The situation last week of course was not helped by China announcing 34% retaliatory tariffs against the US here. Ah, just 34%? Good times. 10-year Treasury yields were also sitting at 3.88% then, and now they’re at 4.45%. If anything, it goes to show what a wild one week it has been in markets.

Anyway, S&P 500 futures are more or less flat at the moment ahead of European trading. Market players are continuing to digest the impact of Trump’s tariffs and how bad things might get between US and China.

The long story short is that there’s nothing good that is set to come out of tariffs, even if they stay as they are now. An accurate estimate of the impact of the tariffs is tough to gauge but as things stand, the global economy is still set to get hit hard. Not least with the surge in tariffs between the US and China. Just look at this chart:

Going back to stocks and market sentiment today, it’s also important to look at the situation in the bond market.

The pain there got Trump to blink earlier this week but that hasn’t helped. 30-year yields are back at 4.90% again today. So, something’s gotta give.

It is either Trump, China, or the Fed that has to blink again next now. And if neither of them do, we can expect another rout in markets later in the day when traders and investors realise they won’t be bailed out ahead of the weekend.

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

The dollar’s status as the reserve currency and usual safe haven have been heavily undermined amid the whole tariffs saga. Even with the basis trade imploding and yields shooting higher while stocks crashed, there has been hardly any love for the dollar at all. That speaks volumes to the sort of shift in hierarchy in the market. As we look to close out the week, the dollar continues to come under pressure with EUR/USD breaking out to its highest in over three years:

Meanwhile, USD/JPY is also dropping further with a near 1% decline today to near 143.00 at the moment. And you have GBP/USD rebounding strongly on the week to reclaim the 1.3000 mark currently. Even amid the negative risk rhetoric and China worries, AUD/USD is poised to erase a large chunk of last week’s decline as it moves back above 0.6200 at the moment.

While the bond market is going to be the crucial spot to watch before we wrap things up this week, the dollar’s demise is also something that should not be overlooked.

With the greenback falling out of favour and China also fighting back with weakening its own currency in this trade war, gold remains the ultimate beneficiary in the meantime.

The precious metal is up over 1% again today as it surges above $3,200 to a fresh record high. That brief dip back under $3,000 has proven to be quite the bargain.

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

Despite a decent 30-year bond auction yesterday, yields are continuing to surge as broader market dislocations are persisting. 30-year yields in the US shot to a high of 4.95% earlier but is still up around 3 bps near 4.90% currently. That follows from the jump overnight in erasing the decline from late Wednesday, when Trump announced a pause on tariffs. On the week itself, 30-year yields are poised for their largest jump since 1982.

There are obviously a lot of moving parts in play as to why Treasuries are being sold off heavily. But even if the auction didn’t say so, the main worry is that there is still some form of funding stress in the market. Leveraged funds coming under big pressure is not the sort of thing that breeds confidence, particularly in this fragile market state.

And that is one thing to be wary about in case there are any leaks as to who is feeling the squeeze in all this and if they are able to ride out the turbulence. Otherwise, it is a cascading effect that will see things get much worse before they get better.

But as yields are continuing to surge higher, the ball goes back over to Trump’s side of the court.

As we know, it was the bond market – not the stock market – that got him to relent on his reciprocal tariffs position earlier this week.

And yet, Treasury yields are still surging as the market continues to kick and scream. So, what next?

We’re essentially playing a game of chicken where someone between Trump, China, or the Fed has to blink first.

Considering their response to all this, you wouldn’t want to bet on China to be the first to give in. That leaves only a battle between Trump and the Fed.

At this point in time, it’s not an easy call. If Powell & co. do step in with emergency purchases of Treasuries, it will provide some short-term relief. However, the message that it sends is that it just enables Trump to stay on his tariffs crusade for longer. As for Trump backing down further, that’s probably the best case scenario for markets – especially if he picks up the phone to call up Beijing.

That’s pretty much the situation that leveraged funds have gotten themselves into at the moment. That they have to wait and see how this game of chicken plays out.

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

US Commerce Secretary Lutnick with a strange desire/wording for the US economy:

Little wonder Lutnick has been demoted:

• Trump has sidelined some of his advisers – poor performers Lutnick & Navarro on the outer

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

• Tesla has launched new ‘Long Range’ Cybertruck in the US @ $69990USD
• PBOC, BoJ and BoK met to discuss the impact of Trump tariffs on the global economy
• US dollar, bonds, equities have all been smashed in Asia morning trade – recap (so far)
• PBOC sets USD/ CNY reference rate for today at 7.2087 (vs. estimate at 7.3104)
• US troops will be allowed to operate from several Panama-control sites along Panama Canal
• Record high price for gold US$3206+
• Revisiting the January call for a lower US dollar
• Japan fin min Kato says excess FX volatility negatively impacts the economy
• Further hints of efforts to boost consumption in China – from Prime Minister Li Qiang
• Trump is threatening Mexico with more tariffs
• Japan’s government is considering cutting food consumption tax
• New Zealand manufacturing PMI for March 53.2 (prior 53.9)
• US retailer Five Below has compelty halted its business with China
• “The next chapter of U.S.-China decoupling has begun. The pain will be felt everywhere. “
• EU leaders plan to travel to China for a meeting with Chinese President Xi in July
• More from Fed’s Collins: Financial markets are performing well and remain liquid
• EU and China have begun negotiations on abolition of EU tariffs on Chinese electric cars
• In Q1 2025 large US companies filed bankruptcy at the fastest rate in 15 years
• Trump has sidelined some of his advisers – poor performers Lutnick & Navarro on the outer
• Forexlive Americas FX news wrap 10 Apr: DXY has it worst day since November 2022
• Fed’s Collins says interest rate policy to hold steady for now
• Navarro says going to get trade deals with Australia, India and the UK
• EU Commissioner President Von De Leyen says could tax big tech if Trump trade talks fail
• US equity close: Bad, but not as bad as it could have been
• Trade ideas thread – Friday, 11 April, insightful charts, technical analysis, ideas

Fears over the economic fallout from Trump’s tariffs intensified during the Asian session, compounded by fresh concerns over financial stability. A widely circulated Bloomberg piece — shared heavily across social media — raised questions about the Federal Reserve’s independence, further spooking markets:

The spectre of an over-leveraged basis trade added to the pressure, triggering heavy selling of both the US dollar and US assets. The reaction was swift and stark:

• US 10-year yields surged to 4.48%, marking the largest weekly jump since 2001

• US 30-year yields hit 4.95%, the biggest weekly gain since 1982

• The yield curve steepened to levels not seen since February 2022

Liquidity was thin, which only amplified the sharp moves.

As for FX, the USD index, DXT, dropped under 100 for the first time since July 2023:

• USD/JPY took a look under 143.00
• EUR/USD hit highs above 1.1350
• CHF and GBP also rose
• AUD and NZD gained a little, as did CAD

Meanwhile, Chinese equities broke a three-day winning streak after the US revealed its China tariffs now total a staggering 145%, rekindling investor anxiety over trade tensions.

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