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Markets are concerned about President Trump’s approach to tariffs set for 2 April. Liberation Day will clarify anticipated trade policies and tariffs.
The US jobs report on Friday will be key, with a slowdown in employment growth expected to 128,000 in March from 151,000 in February. The impact of DOGE-related layoffs on this data may influence market movements.
Additionally, Eurozone inflation numbers will be released, preceded by German inflation figures today. Expectations have risen for the European Central Bank to cut rates in April, influenced by Trump’s tariffs, particularly on German autos.
Eurozone Inflation Outlook
The upcoming inflation figures could confirm a rate cut, though Germany’s spending package may complicate the ECB’s medium-term outlook.
The Reserve Bank of Australia will also make a monetary policy decision tomorrow. While a rate cut is not expected, recent labour market data may encourage a less aggressive stance from the central bank.
In plain terms, what we’ve seen so far is this: markets are increasingly uneasy about how trade will look after early April, particularly following the announcement of further US tariffs. While the exact details around Liberation Day and its expected policy unveiling remain to be seen, investors aren’t waiting idly. The worry is that if the measures outlined are sharp or poorly timed, global demand for exports—especially from large manufacturing economies—could dip. We should not underestimate the pressure this puts on central bankers as they attempt to judge whether to ease policy or hold steady.
Implications Of Labour Market Pressure
The US jobs data due at the end of the week will matter more than usual—not just for its headline employment number, which is anticipated to cool slightly, but for what it might reveal beneath the surface. The hiring downturn sounds modest at first glance, yet when you factor in recent layoffs tied to certain speculative asset-related firms, the figures could reflect deeper softness, especially in tech and services. It’s worth watching how wage growth holds up. If paychecks grow slowly or shrink, that could mean less spending, lower inflation down the line, and more volatility in rate-sensitive corners of the market.
Then there’s Europe. Inflation data from the Eurozone tends to move slowly and often revises quietly upwards, but Tuesday’s figures from Germany will set the tone. The renewals of tariffs have increased bets that the European Central Bank will opt for easier policy early next month. The logic is straightforward: if external demand weakens, and prices cool off further, there’s little to lose by bringing borrowing costs lower. However, Berlin’s fiscal plans—particularly public investment—make this a trickier call. Several in policymaking circles may argue that further rate reductions are unnecessary if government stimulus begins to do the heavy lifting.
Meanwhile, we’ll be applying a close lens to the Reserve Bank of Australia’s decision midweek. There’s little suggestion from futures markets that a rate cut is imminent. Still, we expect the tone to soften in the short term, especially after employment data indicated softening participation and, in some regions, declining job advertising. If wage pressure stays muted and commodity prices come off, this could be the beginning of a broader shift in messaging.
In the weeks ahead, derivative traders will need to factor in growing rate divergence, thinner price discovery caused by policy uncertainty, and sustained noise out of trade negotiations. Flexibility in volatility pricing will be key as policy path clarity remains elusive. Eurozone short-end contracts may not reflect the full extent of the market’s growing expectations, and Aussie front curves now warrant a reassessment. Maintaining a balanced exposure may become more challenging if politically driven FX movement intensifies. Ultimately, the goal is to stay responsive without overcommitting before the dust settles on these data prints.
