US President Donald Trump has stepped up his tariff rhetoric this week, but financial markets are unconvinced and are hoping that the president will retreat and ultimately reach a compromise from his trading partner.
Earlier this week, the Trump administration sent letters to 14 countries warning of higher tariffs on exports of goods to the United States from August 1st. On Tuesday, July 9th, the original 90-day suspension on customs duties expired.
However, the market seems to believe the saying that Trump always kicked out chicken, as evident from the expectations of stable interest rates in the US.
At the time of writing, CME’s FedWatch tool first came in September, expressing hopes for two rate cuts of 25 basis points this year. Following a hotter than expected employment report on Friday, Hawkish’s re-rick has been stable in the wake of pricing for interest rate cuts in July and Trump’s tariff threats. At the same time, there appears to be little fear of tariff-driven spikes in inflation. Otherwise, traders could have increased the price of their September interest rate cuts.
This is in stark contrast to March, when Trump’s tariff threat was priced by traders to speedy fire extinguishing rate cuts that began this June. Perhaps traders expect deadlines to be suspended indefinitely, leading to negotiations and final trade deals, as mentioned earlier.
The Move Index, which measures the implicit volatility of options-based 30 days on banknotes, continues to decline, in contrast to the beginning of the year, when fears and financial concerns of the trade war rose from 86.00 to 139.00 in early April.
US Stock Market and Bitcoin
They are also not paying attention to Trump’s threat. On Monday, the S&P 500 dropped 6,210 points from 0.8% and stabilised quickly at 6,225 on Tuesday.
Coindesk data shows that Bitcoin, the leading cryptocurrency by market value, continues to trade inactive beyond $105,000. Both markets peaked in February and fell as the first round of the tariff war unfolded in March and early April.
Finally, the dollar index, which tracks the value of greenbacks against major currencies, rose 0.55% to 97.60 on Monday, stabilizing those levels since, surpassing the bearish trendline from its February 3rd high.
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