The US Dollar (USD) is trading slightly weaker against major currencies as markets await the tariff announcement from the White House. A proposed 20% levy on most imports could lead to a temporary increase in US prices and slow growth, though details remain unfinalised.
European stocks are performing well, while US equity futures decline and bonds are favoured. The White House press secretary stated there would be no exemptions for the upcoming tariffs, which may affect the administration’s revenue targets for tax cuts and reshoring efforts.
Strength In Defensive Assets
The Japanese Yen is doing well and gold prices have reached $3149 per ounce. The DXY is consolidating but could face further technical weakness below the 103.75/80 level. Upcoming US data reports, such as ISM Manufacturing, are expected to indicate slowing growth, potentially dropping the index to 49.5 in March from 50.3.
The existing passage outlines a cautious mood across currency and equity markets, particularly influenced by pending tariff decisions out of Washington. The Dollar Index (DXY), while still range-bound, has been showing signs of vulnerability near 103.75/80—a technical zone that, if breached, may accelerate selling pressure. Weakness here could be exacerbated by further economic data pointing to a slower manufacturing environment. The upcoming ISM Manufacturing report, expected to slip below the neutral 50 mark to 49.5, would confirm contraction in the sector. These are hardly the sort of figures that bolster confidence in cyclical momentum.
Over in equities, there’s a clear divergence between regions. European stocks continue rising—seemingly buoyed by solid earnings and limited direct exposure to the White House’s potential tariff policy—while US equity futures waver. Bonds are catching a bid, which hints at increasing demand for safety. This suggests that funds are already seeking shelter ahead of policy clarity. It’s not yet panic, but it’s risk-off by degrees.
Policy Driven Volatility
We’re also watching how the Yen is rallying with quiet strength, a common pattern when investors feel uneasy. There’s typically little ambiguity when both gold and the Yen move higher; it reflects money positioning cautiously, preferring liquidity and stability over exposure. That gold touched $3149 per ounce isn’t just about inflation or rate-cut speculation – it’s part of a broader response to perceived instability in fiscal policy and possibly geopolitical spillover.
What stands out as well is that the administration has made clear: no carve-outs. By refusing exemptions on tariffs, the White House is opting for a uniform implementation, which introduces a level of rigidity into what is typically a highly negotiated process. This kind of blanket approach tends to rattle pricing models and disrupt hedging strategies, particularly across manufacturing and commodities-linked sectors. Traders will need to recalibrate scenarios, especially if these tariffs are enacted in the coming week without delay or scope for revision.
For those of us engaged in pricing risk, short-term directional trades on the Dollar may hinge far more on policy timing than economic rhythm. If Washington’s plan indeed aims at a wide-reaching import levy, then the knock-on effect will likely centre around consumer goods inflation and forward guidance from the Fed. Policymakers may find themselves needing to navigate contradictions—on the one hand, inflation pressures from higher import costs, and on the other, growth softening through a manufacturing slowdown.
It will be increasingly important to monitor how 10-year yields behave here. A flight to treasuries might result in suppressed yields, even before new data confirms the slowdown. That in turn could reinforce gold’s trajectory, producing feedback loops that few models are currently equipped to interpret efficiently.
Hultquist’s remark about no tariff exemptions means that the market probably won’t be able to dissect winners and losers as easily. When there’s no selective enforcement, it’s harder to build positioning around relative strength. Instead, the focus shifts towards broad directional trades and volatility spikes in options pricing. Delta hedging becomes less precise in this environment, particularly with EUR/USD flirting around technically reactive zones.
As DXY hovers just above that 103.75 boundary, any loss of support could open probabilities for a fast slide towards 102.90. The line to watch isn’t arbitrary—it’s aligned with accumulating volume and the neckline of a short-term topping pattern. We need to be prepared for liquidity gaps.
Ahead of Friday’s NFP and the ISM data, most models will need recalibration. Noise will increase with trade headlines and, in the interim, dislocations in cross-asset correlations may not correct swiftly. There is reduced anchoring in the current pricing structure, and week-to-week bias could shift abruptly.
