This Week: Tariff tensions & data-driven market volatility

• Trump’s tariff shift sparks brief market relief
   
• US-China trade drama keeps volatility alive
   
• Central banks set to steer global direction
   
• UK inflation, wages may support the pound
   
• ECB rate cut likely; EUR may still find support

It’s been a rollercoaster ride of extreme lows and highs in the last week. US President Trump’s pivot over reciprocal tariffs on most countries was a positive shock to stock markets for a day, but the melt up in risk assets doesn’t necessarily mean the uncertainty is over.

The 90-day delay is just that, while confidence in US policymaking has been severely dented.

That means markets will remain vulnerable to trade related headlines while the US and China continue to slug it out. Moreover, US tariffs are still higher than they were before Wednesday’s moves, and more (copper, pharma) tariffs might still be coming.
 

Any headlines on the above and US-China chatter will be key for market direction.

US assets (US dollar, NAS100, US500) will remain markets to watch as investors continue to navigate “headline havoc”.

This will be tempered with some big risk events on the calendar this week – with major central banks, the ECB and the Bank of Canada on the roster. US retail sales and the mid-month UK data dump will also direct price action.

Watchlist:
 

• Tuesday/Wednesday, April 15/16th: UK Employment, wage growth and CPI

Sterling was initially shielded by some of the tariff noise as it was presumed the UK would be less impacted by major levies with its service sector-based economy. But GBP has lagged all the major currencies this month, apart from the aussie, as markets have repriced the Bank of England easing cycle more in line with other major economies. Sticky wage growth and rising headline inflation is expected to continue with their releases this week, potentially helping the pound.

• Wednesday, April 16th: US March Retail Sales

With so much uncertainty around tariffs on or off, US retail sale activity could be somewhat subdued. After all, consumer spending is 70% of the economy and if that activity stalls, that will have inevitable consequences for jobs and the outlook. The flip side to this is if inflation does start to rear its head, then yields will go higher with interest rates predicted to be held high for longer.

The dollar has sunk recently on growth worries while the credibility and haphazard nature of US trade policy is making some question owning US assets. USD bears are aiming for the recent low from September 2023 which tallies with the long-term bottom from December 2023. US stock indices also have earnings season to contend with.

• Thursday, April 17th: ECB expected to cut rates again

Markets are virtually fully priced for another quarter point rate cut at this ECB meeting, despite some policymakers’ shift toward a pause. That would take the deposit rate to 2.25%, after seven rate reductions in this cycle. Policy guidance from the Governing Council is expected to remain relatively unchanged – that means it will be data dependent and take a meeting-by-meeting approach to future decisions, especially amid the tariff backdrop. That could impact growth going forward, but there are mounting risks of an inflation undershoot.

A surprise mildly hawkish stance would be EUR-positive and keep EURUSD beyond the September 2024 highs around 1.1213. But President Lagarde is unlikely to make waves at her post-meeting press conference. A long-term down trendline from the 2008 highs has recently been pierced so may act as a pivot point with the 1.12 area.

Here’s a comprehensive list of other key economic data and events due this week:
 

Monday, April 14

• USDInd: Fed Barkin and Fed Waller speeches
   
• BRN: OPEC monthly report
   
• Earnings: Goldman Sachs, LVMH
   

Tuesday, April 15

• AU200: RBA Meeting minutes
   
• GBP: UK Unemployment rate
   
• EUR: Germany ZEW Economic sentiment index
   
• CAD: Canada Inflation rate
   
• US500: Fed Harker and Barkin speeches
   
• Earnings: BofA, Citigroup
   

Wednesday, April 16

• CNY: China GDP, Industrial production and Retail sales
   
• UK100: UK Inflation rate
   
• NAS100: Fed Chair Powell speech, US Retail sales
   
• CAD: BoC Interest rate decision & Monetary policy report
   
• BRN: EIA Crude oil stock change
   
• Earnings: ASML
   

Thursday, April 17

• JPY: Japan Balance of trade
   
• GER40: ECB Interest rate decision
   
• USDInd: US Building Permits, Initial jobless claims; Fed Schmid and Barr speeches
   
• Earnings: TSMC
   

Friday, April 18

• JP225: Japan Inflation rate
   
• RUS2000: Fed Daly speech
   
• CHINAH: China FDI (foreign direct investment)