It will be a lighter data week in the US, aside from some inflation figures on Friday, as we brace for the tariffs “Liberation Day” on April 2. We’re not sure who coined that moniker but in short, markets will get to see the publication of the Trump administration’s varied investigations into unfair trade practices and deficits. After the flip-flopping on Canada and Mexico tariffs since inauguration day, reciprocal and long-lasting tariffs are set to be enforced, notably on Europe.
We have already heard some hints about what is to come next week with potentially more targeted tariffs revealed in the media over the weekend. The recent quieter news on tariffs possibly suggests there is some uncertainty about how Trump wishes to unleash aggressive levies on his trade partners. Although US stocks snapped a four-week losing streak on Friday, and the dollar steadied, the broad secular theme around fading US exceptionalism should remain in the medium-term. That may limit major greenback upside (watch the death cross on the Dollar Index), while it is only natural that high-flying European stocks take a breather. That said, new catalysts do appear to be needed to further fuel EUR/USD and GBP/USD to 1.10 and beyond 1.30 respectively.
We note headline media stories around Europe’s “meme stock” mania as an indicator of where we are in the EZ investor cycle. Also instructive were some recent rather gloomy earnings from US bellwether companies like Fedex and Nike. The logistics group lowered its earnings forecasts, blaming persistent “weakness and uncertainty in the US industrial economy”. Nike warned it expected sales to decline, citing tariffs and falling consumer confidence. No wonder gold continues to make fresh record highs and is up over 15% year-to-date. We see there is a possible reversal pattern on the chart, and huge psychological levels like $3,000 can be tricky to break decisively, especially first time around.