Global Macro Update
While the Fatigued Markets were learning to resist the urge to react to every tariff headline? Fresh round of Trump’s tariff threats hit? -proposed? Pharmaceutical tariffs cause concern - US consumed $560 bio of pharmaceutical products in 2024, of which $200 bio was imported - tariffs may increase the cost of health care -may not be the right way to achieve higher US manufacturing capacity .
In geopolitics , Hints at future US- Russia cooperation can reinforce the notion of isolation for Europe from? defence & economic perspective contribute to rotation out of? Europe if not UK.
FOMC minutes showed concern about the? potential impact of Trump administration, including the Tariffs & reduced regulations and taxes. However markets- as usual - interpret that easing bias of Fed -yields came down a touch & S&P 500 clinched another record close. "Long stocks and short everything" else seems to be the undercurrent as cash levels hit 15 year low.
Goolsbee, Barr?& Musalem? to speak today - in good old days prior to Election , these speeches? were tracked .
Europe spending 4% of GDP should have impact on the EZ? economy. Up to now, the European military industry has remained relatively small and overshadowed by the broader economy. Plenty of room for tariff & Geo political isolation risks to be priced into EUR/USD, rallies may not sustain- Panetta: Signs of weakness in economy are more persistent than anticipated - as expected 1.0420 hit - now break of 1.0403 to hasten the road to 1.0300.
China has published a new action plan for boosting consumption-The 19-point plan did not open Govt wallet whereas it aims at opening consumer wallet - no stimulus ?
10 month high of 3.0% in CPI? -min.wage of 7%? to start in April-? slowing economy - stagflation - Currency cant be stronger - weakness till 1.2430 below 1.2616.
Rotation out of Europe is keeping USDJPY under pressure - the long held? base case view of USDJPY strength gets negated below 151.30- simple lesson is that Rate differentials do not matter now for JPY as its safe haven role gets dominant . Stand aside till conviction returns .
Consolidation in 86.75 - 86.95 continues -?
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