The focus has shifted to China after the recent increase in US tariffs to 125%. Trade negotiations dominate the attention, overshadowing upcoming US economic data releases.
The US Consumer Price Index (CPI) for March is due at 12:30 GMT, with a year-on-year expectation of 2.6%, down from 2.8%. Core CPI is predicted at 3.0% year-on-year, a slight decrease from 3.1%.
Labour Market Projections
Initial Jobless Claims are anticipated at 223,000 compared to 219,000 previously, while Continuing Claims are projected at 1,882,000, down from 1,903,000.
Central bank speakers include Fed’s Logan and Goolsbee, who will provide insights on monetary policy.
What we’ve seen so far is a reorientation of market attention, away from the usual noise of US data and firmly toward China. This shift didn’t come out of nowhere — it has been spurred by the White House’s move to raise tariffs on Chinese goods to 125%. That increase marked a notable escalation in trade tensions, effectively resetting expectations around global supply chains and pricing pressure. In doing so, it’s forced a reassessment of global inflation paths and policy trajectories.
While one might usually expect a high US CPI reading to be the dominant driver of volatility, the numbers now sit in a slightly reduced context. Inflation figures for March are scheduled for release, and forecasters are looking for softer prints — down to 2.6% year-on-year headline, and a marginal dip in core. If those expectations hold, we can infer some waning in the upward push from previous supply-side distortions. Yet, as we all know, a day’s release never tells a story entirely; its impact often sits in how markets were positioned and conditioned before the event.
Meanwhile, labour market signals have kept a steady, if slightly weaker edge. Jobless claims are ticking up only marginally, which on the surface suggests a cooling without collapsing in employment. Continuing claims, with a modest drop from prior readings, speak to a system that’s neither overheating nor slipping into disrepair. If these numbers hold, they reinforce the soft-landing scenario that’s been priced in for months now — a scenario that is neither too punishing for risk nor too encouraging for rate doves.
Central Bank Observations
From central bankers this week, we have remarks expected from Logan and Goolsbee. While both are outspoken in their own ways, the real takeaway is likely to revolve around how they interpret recent data relative to future rate expectations. Markets have become exquisitely sensitive to every nuance in tone, phrase, or omission — particularly in this uncertain middle ground where inflation’s decline slows, and growth teeters between rumble and restraint.
For us, positioning in short-term derivatives required careful calibration. Implied volatilities had compressed before the headlines out of Beijing, and that made risk cheaper than it might have otherwise been. Now, where spreads and curves move next depends more on cross-border policy reactions than on domestic figures alone. That unpredictability makes selective engagement more important.
In response, staying nimble is not optional — especially when option skews begin to reflect directional bias tied to one region’s policies more than another’s fundamentals. We’ve begun to lean into relative value setups that price in asymmetry between inflation surprise risks and resultant policy impacts.
Short-dated options around macro releases continue to provide opportunity, but require rapid adjustment. That said, taking on gamma without clarity around the terminal policy rate calls for restraint. Above all, we’re watching US-China dynamics not just for tariff headlines themselves, but also for their secondary effects on international demand, multi-asset correlations, and commodities tied into trade channels.
With risk drifting from traditional rate markets into more global pricing mechanisms, keeping an eye on correlations staying within historical bounds has become ever more worthwhile. There will be trades in mispriced dispersion here — especially if rate vol stubbornly stays suppressed while other asset classes begin to stir.
