A reprieve from the 145% tariff on consumer electronic imports from China and a 10% flat tariff has led to gains in Asian and European equities. US equity futures also showed improvement in response to these market developments.
The US dollar remains weak despite gains in stock markets, with the currency trading broadly lower. Treasury yields have eased by 5-6 basis points, while Japanese government bonds saw yields increase by 4 basis points due to losses.
Decline In US Dollar Sentiment
Short-term metrics show a decline in US dollar sentiment, with the dollar index pricing indicating a large premium for index puts. The DXY index is trading below 100 and threatens to drop further if losses persist beyond 99.
Crude prices are firmer, although slower global growth poses concerns about excess supply. Stocks received slight support following comments from the Federal Reserve indicating readiness to stabilise financial markets if necessary. This support is typical for central bankers under current conditions.
The lifting of punitive import tariffs, particularly the sharp 145% levy on specific Chinese consumer electronics, and the introduction of a more predictable 10% flat rate have had a clear impact. Equity markets in both Asia and Europe responded with gains, bolstered by the immediate relief and clarity around trade conditions. Futures in the United States followed the trend, hinting at market participants pricing in better trade flow and potentially stronger corporate earnings from lower import costs.
What we’ve seen in the past few sessions is an uptick in global risk appetite. Even so, the US dollar continues to underperform, even as equity assets moved higher. Currency markets often present a counterpoint to equity optimism, particularly if traders interpret monetary policy as softening or if global capital shifts reduce inflows into dollar-denominated assets. The dollar index holding below 100 sends a message; if the trend holds below 99, especially on weekly closes, options traders are front-running possible further downside. The heavy demand for index puts underscores the prevailing mood.
Global Bond Yield Trends
Yields on US Treasuries have drifted down by around 5 to 6 basis points. That might suggest a modest shift toward safety, or at least some profit-taking in riskier assets ahead of key data. Meanwhile, Japanese government bonds are moving in the opposite direction. A 4 basis point rise in yields there reflects a divergence between regional expectations for inflation or perhaps supply dynamics in Japanese debt issuance.
Oil prices are holding up, but not without pressure. The firmness in crude is more mechanical than structural right now—there is still a real worry about excess inventory if global economic activity slows further. Energy traders are cautious, especially when Chinese demand can’t pick up enough of the slack. So, while there’s a bit of backbone in crude futures, no one’s ruling out further corrections.
As for rates policy, we picked up on dovish elements from the US Federal Reserve. The commitment to stabilise markets does not mean aggressive cuts are back on the table, but it does mean policymakers won’t hesitate to intervene should market function falter. From a trader’s perspective, that level of implied support sets some implicit boundaries in pricing volatility. Forward guidance here acts less like a target and more like protection rails.
What this means over the next two to three weeks is greater sensitivity to policy remarks and macroeconomic prints. Volatility in short-term interest rate derivatives may rise if dollar weakness persists or oil prices surprise to the upside. Staying nimble on intraday positioning could be the most practical way forward in this environment, especially given current skew in options. There’s less room for directional conviction when the undertones shift this fast, but there are more exploitable dislocations between asset classes.
