Positive risk sentiment continues in the session, notably influenced by Trump’s comments on tariffs, stating they may be lower in some cases. The anticipation of a plan to be unveiled tomorrow at 15:00 ET adds uncertainty to the market.
Risk assets, including stocks and bitcoin, have seen gains today. Upcoming data includes the US ISM Manufacturing PMI and Job Openings, although both may show weakness.
Market Sensitivity To Tariff Developments
Recent data reflects past uncertainty stemming from tariff fears. Better-than-expected news on tariffs could lead to increased investment in risk assets, while negative news might heighten growth concerns.
As risk sentiment holds its ground, especially amid shifting political cues, traders are reacting to a fresh round of headlines offering possible policy softening. With comments from Trump alluding to reduced tariff rates in some areas, the immediate mood has turned towards cautious optimism. However, all eyes now shift to tomorrow’s announcement set for 15:00 ET, which is creating a pocket of tension in an otherwise risk-on environment.
The current rise in assets such as bitcoin and equities reflects a rebound mindset, likely built on speculation that trade terms will not harden beyond expectations. There’s a clear sense that any market upside is being traded tactically, with participants adjusting exposure to capture short-term momentum rather than commit long durations.
We’ve noted that the most recent releases, although backward-looking, have underscored damage already done by prior trade uncertainty. This came through clearly in areas like hiring and industrial output. If those earlier fears begin to unwind, whether through formal policy shift or verbal tone adjustment, we could see a further leg up in cyclical areas that have lagged.
Outlook On Volatility And Positioning
Today’s scheduled economic figures – specifically the ISM Manufacturing PMI and JOLTS – carry the potential to either reinforce this risk-seeking tone or pull it back sharply. Should they come in soft, but within expectations, we might see them brushed aside as the market leans more heavily on forward guidance from policy voices. On the other hand, sharply deteriorating numbers could reignite concerns over domestic resilience, leading to a swift rebalancing of exposure.
It’ll be key to watch the rates market for initial signals of any change in positioning. Immediate-term option volatilities have stayed relatively muted, indicating a lack of fear over large price moves just yet. That may well change depending on the direction and tone of tomorrow’s release.
From a positioning standpoint, risk asymmetry now likely lies toward a more volatile second half of the week. Traders should be prepared for movement outside recent realised ranges, especially if the timing or content of expected plans drifts from consensus. Timing matters now, not just the content.
Market reactions to political messaging have grown sharper, particularly when paired against weak macro data. As such, any dovish tone may not be enough on its own – it will need to be paired with real detail or near-term implementation timelines.
We’d stay especially alert in assets that have recently run higher without much earnings or data backing. Some rotation into defensive areas could follow any hint of tightening or delay. Equally, over-hedged positions may unwind quickly if details tomorrow suggest improved global trade flow.
For now, early-week sentiment sets the tone, but everything hinges on follow-through. The present calm should not be mistaken for complacency – more likely, it’s the quiet before clarity.
