Australia is hesitant to support a US-led trade campaign against China, according to Trade Minister Don Farrell. The Minister noted the importance of economic relations with China, as Australian exports there are nearly ten times greater than those to the United States.

China remains Australia’s largest trading partner, and the country is focused on strengthening its trade relationship with China rather than reducing it. Farrell stressed that any decisions about engaging with China will be made considering Australia’s national interests, rather than following US preferences.

Economic Considerations

What’s going on here is plain enough. Farrell is drawing a line between national economic goals and outside diplomatic pressures. Trade with China clearly outweighs trade with the United States in terms of volume for Australia. The Minister spelled it out when he said that exports to China outweigh those to the US by a factor of nearly ten. In plain terms, that’s a gap too wide to ignore—especially when the Australian economy leans heavily on resource exports.

Farrell is not pushing back outright, but he is signalling a preference. What he is essentially saying is that Canberra won’t be roped into actions that might upset those trade flows. Choosing sides in broader trade disputes, particularly if they involve retaliation or restrictions, poses clear economic risks that outweigh diplomatic alignment.

Now, from where we sit, this is worth noting. It introduces a layer of restraint into global trade dynamics, particularly across the Asia-Pacific region. When a major commodity exporter hedges its position in this way, it creates a certain tilt in how future trade actions might unfold. What we’re seeing is not a rejection of diplomatic alliances—but rather, a clear signal that domestic stability and trade security are higher on the list.

Traders with derivative exposure to commodities or regional currencies ought to remain alert. Any market that leans on Australian outputs—think iron ore or natural gas—could see added short-term resilience should these China-Australia ties remain stable or even tighten. That means volatility driven by news out of Washington may not transmit as directly into these assets as one might ordinarily expect.

Potential Market Impacts

So, in practice, that means trade flows may stay uninterrupted, and pricing could follow domestic supply-demand mechanics more than geopolitical triggers in the short term. If you’re holding positions influenced by bilateral tension, it may be worth reviewing assumptions. We may see others around the region adopt similar speeches soon, which would dampen the scope for trade disruptions to spread beyond immediate actors.

Meanwhile, Farrell’s language implies a degree of predictability—stability, even—for players with long exposure in Australian assets. If Australia sticks to this stance, hedging strategies may need to adjust to the idea that Canberra is unlikely to authorise or support blockades or clampdowns, even under external pressure.

We should keep watching for follow-ups from other ministers or similar economies. Patterns don’t always repeat—but they do rhyme often enough to guide the next round of decisions.

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Gold price rose significantly, reaching $3,228 after a weekly low of $3,120, following a 1.40% gain. The rise was attributed to a weaker US Dollar due to unexpected US Producer Price Index (PPI) data, amidst declining US bond yields.

US economic data revealed the PPI in April fell by -0.5% MoM while Retail Sales slightly increased by 0.1% MoM. The Labour Department reported unchanged jobless claims at 229,000, aligning with estimates.

Market reaction to economic data

The market response saw fixed-income markets adjust, anticipating Federal Reserve interest rate cuts in 2025. Political tensions involving Russia and Ukraine also contributed to Gold’s upward movement.

Technically, Gold risks a downturn if it fails to maintain levels above $3,200. A close above $3,257 may support an upward trend, but a drop below $3,200 could test levels as low as $3,100.

Central banks remain major purchasers of gold, viewed as a safe-haven investment and a hedge against inflation. Gold’s price is influenced by geopolitical instability and movements in the US Dollar, with inverse correlations to US Treasuries and risk assets evident.

The recent surge in gold to $3,228—recovering from a dip to $3,120—followed a 1.40% gain over the week and came largely as a reaction to fresh US macroeconomic data. That data included a surprising -0.5% drop in April’s Producer Price Index (PPI), which sharply contrasted with a marginal 0.1% increase in retail sales for the same period. Weekly jobless claims remained flat, coming in at 229,000, exactly as anticipated. These figures together weakened the US Dollar and pulled bond yields lower, prompting a reassessment of interest rate expectations.

Fixed-income markets reacted swiftly. We began to see investors recalibrate expectations for rates, now largely pushing out any potential policy easing by the Federal Reserve into 2025. The lowered yields on US Treasuries, along with a softer dollar, made bullion comparatively more attractive—and that’s before factoring in external pressure from rising geopolitical tensions involving eastern Europe.

Technical perspective on gold price levels

From a technical standpoint, gold sits close to a tipping point. The $3,200 level is serving as a near-term area of interest. If the price can remain above this figure, upward momentum becomes more believable. We’re familiar with how these levels often act as self-fulfilling reference points: sustained movement above $3,257 might unlock another leg higher. On the other hand, failure to hold support just under the current spot could see a drop as far as $3,100, a well-defined zone where prior buyers stepped in.

A separate, but equally relevant, development influencing gold purchases stems from central banks. These institutions continue to stockpile the metal, reinforcing its place as a defensive asset, especially at times when confidence in fiat currency or inflation stability wavers. Their buying continues to underpin long-term support, independent of speculative flows.

The inverse ties between gold and both the US Dollar and Treasury yields should not be overlooked. When yields fall, often due to expectations of a less aggressive central bank, gold tends to benefit. Likewise, fluctuations in the greenback are essential—if the dollar sees sustained weakness, as it did following the recent PPI surprise, gold typically gains.

Political tensions, when sustained, serve as a catalyst in amplifying demand for perceived stores of value. With a more fragile geopolitical backdrop, defensive positioning could become more common. This often results in premium pricing for hedging tools that are less reliant on counterparty risk, which gold uniquely offers.

Given that the market has realigned itself around the potential timing of policy shifts and that real yields remain sensitive to short-term data points, we are entering a period where reaction to even marginal releases will likely be sharp. Each weekly update, especially those covering inflation or employment, may trigger noticeable swings in expectations and price behaviour in rate-sensitive assets.

Staying nimble and focused on key levels—both technical and macro-driven—should help navigate what could be a volatile patch. Price traction above or below defined bands is important and is likely to shape short-term positioning into the next quarter.

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The U.S. Deputy Treasury Secretary stated that there is no worry over ongoing price rises. It is anticipated that inflation will return to the targeted level.

The foundation for the U.S. economy is forming to potentially accelerate in the second half of the year. There is confidence that the earliest timeline to consider the X date will be in August.

US Inflation Outlook

The remarks from Deputy Secretary Adeyemo offer a relatively calm view on near-term inflation, implying a belief that recent increases in prices are largely contained and are not gaining momentum. This view contrasts somewhat with recent data showing persistent consumer price pressures, especially in housing and energy segments, though notably, core readings have moderated slightly. Reassurance that price movements are not spiralling appears to be rooted in confidence in the Federal Reserve’s trajectory and ongoing strength in labour markets.

His mention of the “X date” — referring to the point at which the U.S. government might cease to meet its obligations without raising the debt ceiling — being pushed to August suggests that Treasury cash balances and tax inflows are tracking better than previously feared. That gives more breathing room, at least from a fiscal disruption standpoint, reducing near-term anxiety in bond and funding markets. The timeline relieves pressure, particularly across short-term bills which have lately shown signs of stress around earlier projected deadlines.

We take from this that rate expectations will remain reactive to upcoming inflation releases, but forward guidance from the Fed and Treasury will carry even more weight. Futures have been whipsawing around CPI and PPI prints, and while rate path uncertainty has shrunk mildly, large moves are still emerging around event risks. That type of volatility isn’t going anywhere in the short run.

Market Volatility and Treasury Updates

With yields pulling back from recent highs and the US dollar drifting lower, risk remains skewed toward additional movement should June data surprise one way or another. In practice, this means volatility premiums are likely staying inflated, especially in STIR and gamma-heavy corners. It’s worth keeping implieds marked aggressively rather than letting theta decay drag too hard — the short gamma trade is not earning its adjust-to-neutral cushion right now in index space.

Yellen’s department continues to show preference for boosting bill issuance at the front-end of the curve, which is encouraging duration out the curve to remain sticky. That’s likely to keep late-week flattening intact unless growth data prints hot enough to trigger another round of repricing in the Fed’s outlook. It’s also meant that SOFR has kept a narrow spread to target upper bound — echoing calm repo market conditions for now.

Our attention will drift next toward treasury auctions and how appetite handles increasing supply. If clearing comes with tail risk or falters any further, pressure may climb again on positioning — especially for those staying long convexity or lean on balance sheets. The pattern we’ve seen lately — a cautious Monday unwind with pickup around midweek — may hold as the rhythm for now.

Eyes next shift toward any Fed commentary on the balance sheet, particularly whether Treasury reinvestments slow enough to change dollar liquidity assumptions. Should that happen, front-end OIS spreads might widen as cash gets drawn up off the sidelines. That flow alone could offset any calm on the rate side, forcing repricing in volatility curves across intermediate rates.

No complacency then — we’ll continue managing skew, keeping optionality focused where event timing overlaps most clearly with market pricing inefficiencies. There’s plenty ahead to keep recalibrating along the way.

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The NZD/USD is trading around 0.5900, facing pressure amid cautious sentiment and mixed economic signals. Despite weaker-than-expected US inflation and retail sales data, Federal Reserve Chair Jerome Powell’s comments supported the US Dollar.

US data showed the Producer Price Index rising 2.4% in April, below the expected 2.5%. Retail Sales increased by 0.1%, missing market hopes. These results fuel speculation about potential Federal Reserve rate easing in 2025. Powell emphasised revisiting policy frameworks due to persistent supply shocks, supporting the US Dollar’s stability.

New Zealand Economic Conditions

In New Zealand, fiscal announcements had minimal impact on the NZD. Finance Minister Nicola Willis announced a NZ$190 million social investment fund, aimed at improving outcomes for vulnerable groups. However, market focus shifts to the upcoming Business NZ Performance of Manufacturing Index and RBNZ inflation expectations survey, which may influence future rate decisions by the Reserve Bank of New Zealand.

Technically, NZD/USD remains bearish, moving between 0.5860 and 0.5916. The Relative Strength Index and MACD indicate weak momentum. Neutral signals from Stochastic %K, CCI, and Bull Bear Power suggest limited rebound potential. Short-term indicators reinforce downside pressure while only the 100-day SMA offers slight support. Key support levels are 0.5860, 0.5846, and 0.5829, with resistance at 0.5878, 0.5883, and 0.5884.

The current pricing of NZD/USD near the 0.5900 region reflects softness in the Kiwi, as limited market enthusiasm and international uncertainties weigh on demand. This pressure comes despite softer-than-projected US inflation and a lacklustre rise in retail sales, which at first glance might have been expected to undermine the greenback. Yet, these data points failed to dent the US Dollar’s footing, largely because Powell’s remarks calmed any assumptions of an abrupt shift towards policy easing.

Market Reactions and Implications

By highlighting that the Federal Reserve must adapt its economic models due to supply-side disruptions, Powell effectively communicated a cautious tone around future rate adjustments—less about cutting soon and more about watching persistent inflation risks. That stance, even with mild data misses, was more than enough to halt any US Dollar losses for now. For those active in currency contracts and directional positions, this could set the tone heading into summer, especially as the market wrestles with timing around the first potential rate cut.

In contrast, across the Tasman, New Zealand’s attempts to stimulate domestic policy sentiment through targeted fiscal pledges didn’t amount to much in the FX world. Willis’s announcement of targeted investment in vulnerable sectors may offer long-term structural changes, but the currency market paid little attention. What will draw more serious reactions, however, is due shortly — the release of the Business NZ Manufacturing Index and the Reserve Bank’s inflation expectations. These will likely serve as firmer indicators for potential adjustment paths in monetary policy from the RBNZ.

From a technical stance, the pair remains capped by well-defined resistance levels, with the high end sitting just shy of 0.5920. The ongoing trading band between 0.5860 and 0.5916 underscores sideways action with a negative skew. On the charts, indicators aren’t pointing to a breakout. The RSI hovers near oversold without any clear divergence. The MACD remains under the signal line, while oscillators such as the Stochastic %K and CCI suggest a lack of conviction — neither buyers nor sellers appear ready to take control.

The 100-day simple moving average still offers a bit of a cushion, yet momentum overall leans lower. Price action down to 0.5846 or even 0.5829 shouldn’t be discounted if sentiment doesn’t improve. Conversely, any attempt at recovery sees resistance lined up tightly between 0.5878 and 0.5884. Those levels need to be cleared convincingly for a rethink of the current bias.

In short, the US is holding firm on its wait-and-see approach around future rate cuts, despite softness in consumer activity. Meanwhile, the NZ side looks to data this week for a potential pivot, though early signals suggest mechanical trading remains favoured — short or flat positioning still dominates. You can feel how macro cues and technical momentum parse decisions in tandem; it’s not calculated impulse, it’s strategic hesitation.

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Jamie Dimon, CEO of JPMorgan Chase, warns that the risk of a U.S. recession is still present. He cites factors such as federal deficits, persistent inflation, and potential for higher long-term interest rates as possible triggers for economic contraction.

Despite equity markets appearing stable, Dimon emphasises caution, noting that the bank’s economists provide precise forecasts but cannot predict the magnitude or duration of a potential downturn. According to JPMorgan’s research team, the recession probability is now “below 50 percent,” having been adjusted from earlier expectations of a slump following tariff policies.

Recession concerns persist

Chief U.S. economist Michael Feroli points out that risks remain “elevated,” causing businesses to pause on new investments amid the uncertainty. Goldman Sachs has forecasted that the Federal Reserve’s tapering may happen in the first quarter of 2022, with a rate hike potentially occurring in 2024.

What Dimon is alluding to is a cautionary stance on where things may head next—not simply because of what we already know, but because of the compounding nature of various pressures at once. The argument he makes draws attention to structural budgetary issues and above-target inflation that has proven resistant to the usual levers. Taken together, this suggests an economic environment where stimulus is less likely to play a helpful role, and where policy tools have narrowing margins for manoeuvre.

When Feroli brings forward the idea that firms are holding back on fresh investment, the implication isn’t mere hesitation. It is reflective of a broader concern trickling through decision-making channels across multiple sectors. Businesses don’t typically pause like this without having hard reasons, and that kind of reluctance often precedes a shift in broader demand patterns. It’s not fear-driven necessarily, but calculative in light of what’s in front of us: smaller margins, less predictable input costs, and short visibility around labour and rates.

Tracking policy signals

Looking at monetary policy signals, Goldman’s projections on rate adjustments suggest not an aggressive stance, but a well-telegraphed move towards normalisation that assumes things stay on a stabilising path. That projection isn’t set in stone. If consumption trends moderate quicker than expected, or if fiscal tensions ripple into surprise liquidity shortages, we might find forward guidance shifting yet again. From our viewpoint, what matters now is closely tracking treasury yields with duration sensitivity, especially out along the seven-to-ten-year horizon where rate movement tends to creep in before public commentary.

Given the indicators and pace of policymaker positioning, we’re weighing the flattening curve against inflation-linked assets as the next test of market sentiment. It isn’t only about predicting policy steps anymore—it’s about understanding how hesitation in capital expenditure sits beside central bank timelines.

For positioning, we’re scrutinising short-term contracts most susceptible to shifts in volatility linked to policy announcements that come with data expressions—consumer price indices, core spending trends, and jobless claims, specifically. When expectations become narrow, reactions become sharper.

While probability has tapered below fifty percent, we’re not taking the reduction in risk metrics as an all-clear. Wordings by Feroli and movement on the Goldman side both carry the weight of measured optimism, but also an acknowledgement: right now, the room for error is smaller than we’ve seen over the past two tightening cycles.

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Walmart’s stock improved in Thursday’s afternoon session after an initial drop of over 5% despite exceeding first-quarter expectations. The company reported an adjusted EPS of $0.61, surpassing the projected $0.58, and revenue of $165.6 billion, over $2 billion more than anticipated.

The Dow Jones Industrial Average, which includes Walmart, also rebounded, gaining 0.4% in the afternoon. A report showed wholesale prices fell more than expected, though US Retail Sales for April increased just 0.1% month-on-month, affecting overall sentiment.

Ecommerce Growth And International Performance

Walmart’s quarter saw a 22% annual rise in Global eCommerce and a 50% surge in international advertising revenues. US comparable sales rose 4.5% year-on-year, surpassing the 3.9% forecast. US transactions and average tickets experienced yearly increases, although international sales decreased 0.3%.

Walmart’s leadership anticipates price rises due to tariffs, leading to withheld EPS and operating income guidance for Q2, though $167.8 billion in revenue is expected. Full-year net sales are forecast to grow by 3%-4% with operating income gains of 3.5%-5.5%.

Walmart’s stock needs to surpass the $100 mark convincingly for renewed bullish momentum. The 200-day Simple Moving Average’s proximity to the 50-day counterpart could impact the share price.

Overall, the company’s performance during the first quarter exceeded expectations on most fronts. It posted stronger-than-forecast earnings per share and revenue figures, with sales coming in more than $2 billion above estimates. Despite this, the stock initially fell sharply, which reflects a disconnection between strong headline numbers and underlying investor concerns. That reaction, however, proved short-lived once sentiment stabilised throughout the session, aided by improved macroeconomic signals—particularly the cooler-than-expected wholesale prices.

What stands out is that while revenue climbed, international performance was less upbeat. There was a 0.3% dip in international sales, suggesting softer activity abroad despite robust growth in global eCommerce and a remarkable jump in international ad revenue. Front-line consumer activity in the US, on the other hand, remained healthy. Transactions were up, as were average spend values, which together underscore broad-based demand resilience.

Future Outlook And Market Reactions

On to the outlook. Management has flagged the potential impact of rising import costs tied to tariffs, which introduces an element of earnings risk in the near term. Notably, they’ve opted to hold back specific EPS and operating income guidance for the upcoming quarter. This is worth tracking because it indicates apprehension around input costs or consumer sensitivity to rising prices. However, the revenue target of nearly $168 billion suggests confidence in topline stability, even if margins come under pressure.

Their full-year forecast calls for moderate sales growth of three to four percent with operating income expected to rise slightly faster, pointing to margin strength somewhere in the model—likely leaning on ad revenue or tech-driven efficiencies. Still, all of this has to clear the technical barrier around the $100 mark. Until price action solidly breaks and holds above that level, momentum remains at risk of fading. The positioning of the 200- and 50-day SMAs near current levels introduces a volatility risk, particularly with automatic strategies calibrated to those curves.

With wholesale prices printing lower, and April retail sales coming in barely positive, rate-sensitive instruments should be monitoring forward guidance charts closely. We expect participants to weigh the inflation data’s disinflationary signal more heavily when responding to these moves, especially if other data releases begin confirming the same narrative. That could mute reactions to weaker sales numbers like those observed internationally—particularly if margin expansion persists.

From our side, index inclusion brings additional variables. The Dow’s midday rebound, while modest, speaks to how influential components can skew readings. Leveraged equity exposures and option buyers that hinge on these names may need tighter hedging parameters in the coming sessions, especially ahead of tariff-related policy announcements.

The revenue surge, especially in digital segments, likely fuels confidence in more speculative call positions, though we’d caution that short-duration instruments might respond sharply if international weakness gains traction. Be alert to changes in implied volatility, particularly around earnings communications or trade-related commentary from executives. Put-call ratios around the current level should stay under review, and if we fail to see follow-through above $100, further downside collars could appear.

So we will be watching volume patterns, rolling correlations with broader equity benchmarks, and any compression in ATM option premiums. If these narrow further without confirming moves in the underlying asset, risk lies in being positioned too heavily toward a breakout that hasn’t settled.

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The Closing Figures

The closing figures for the day show the Dow industrial average increased by 271.69 points, marking a 0.65% rise to 42,322.75. Entering the last day of the week, this index had gained 2.60%. The S&P index went up by 24.35 points, or 0.41%, to 5,916.92, with a weekly increase of 4.54%. The NASDAQ index closed at 19,112.32 with a decrease of 34.49 points or 0.18% but remained up by 6.60% for the week.

The initial section outlines a late-session reversal in tech-heavy equities, largely influenced by Meta’s decision to delay its next-generation AI model, known internally as Llama 4 “Behemoth.” This hesitation wasn’t simply product timing—it stemmed from doubts about its relative advantage over the prior instalment. Investors found the move disheartening, and we observed this directly in the stock’s market behaviour: peaking slightly early in the trading session before retreating into the red. Price action was volatile, and that small intraday high proved to be fleeting.

Meta’s fall shaved off momentum from the NASDAQ, which, at one point, was enjoying a reasonably solid intra-day gain. The sharp reversals sent the index into negative territory by session-end. These kinds of moves tend to suggest thin conviction among buyers by the closing bell, and we’ve seen patterns like this before when uncertainties arise about major product pipelines in tech.

Sector Rotation

In contrast, the Dow and S&P pressed ahead. Gains in industrial and broader-market areas suggest rotation—money flowing into what are perceived to be more predictable or steady sectors. Notably, that 4.54% rise in the S&P over just a week hints at underlying strength, likely on the back of improved economic data and calm inflation prints. It’s also instructive that while the NASDAQ slipped on the day, it still completed the week with a gain of more than 6%. That tells us the broader tone remains constructive, but one to monitor closely, given its reliance on a small clutch of tech names.

We should focus now on how price sensitivity behaves across indices over the next few sessions. The NASDAQ’s double-digit weekly gain in percentage terms, followed by its latest pullback, suggests that momentum trades might see a brief pause. That offers both risk and opportunity, depending on timing. The reaction to headline volatility—in this case, coming from large-cap tech—remains exaggerated, an indication that we ought to temper our leverage and scale into directional trades more conservatively when catalysts are in motion.

Broadening spreads in implied volatility tell us there’s still a premium being built into short-term protection. The subtle flattening of some call put skews in tech sectors may not last beyond this week, especially if other FAANG-related names either beat or miss their development cycles.

There’s no need to overcomplicate. Rotation is beginning. It’s clear from how the Dow behaved—positive on the day and firm on the week—that capital is not abandoning markets. Instead, we’re seeing rebalancing, especially among those funds that run sector-model constraints or have exposure guidelines to maintain. That becomes a visible opportunity when beta adds are being capped, particularly on NASDAQ components dependant on innovation cycle timing.

Long gamma remains uncomfortable in this environment unless short-dated, especially when you consider the flattening we saw in the second half of the session. Trading around these conditions requires much tighter delta hedging windows and smaller notional exposures to avoid headline-driven whiplash.

For positioning ahead, trades that rely on direction should be smaller and more reactive. Look toward expiry profiles that sit just beyond earnings or event deadlines, not through them. The forward curve, especially in rates, is behaving in a way that supports defensive exposure, and we may see tech beta reprice mildly downward if similar announcements emerge in the next fortnight.

There’s measurable opportunity tucked inside this market—particularly when volatility inflates without broader market justification. The key is to follow the adjustment: rotation into lower-vol instruments and a tilt toward conservative sector exposure speaks volumes. While option traders may need to keep rolling higher strikes or trimming upside tails, staying nimble in positioning seems a reward-rich approach given how sensitive these names have become to development updates.

Lastly, it’s worth isolating where open interest is building. Flow from newly opened spreads in S&P-linked contracts suggests institutions are stepping back into broad-market participation, albeit cautiously. That makes a strong case for shorter-dated strategies that reflect this cautionary tone but leave room to benefit from a steady hand.

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GBP/JPY is facing downward pressure as renewed demand for the Japanese Yen strengthens the currency. Safe-haven flows are driven by increasing risk aversion due to geopolitical tensions and uncertainty in US–China trade negotiations.

Despite robust UK GDP data showing a 0.7% quarterly growth, the Pound is hindered by the cautious outlook of the Bank of England. UK economic prospects face challenges from high interest rates, global trade issues, and tighter fiscal conditions.

Bank of Japan Policy Shift

Statements from the Bank of Japan suggest a policy shift, supported by rising inflation and a strong Producer Price Index. Japan’s Q1 GDP report could reinforce this shift if it deviates from the projected 0.1% contraction.

Overall, market sentiment remains defensive, favouring the Japanese Yen amid global uncertainties. In the short term, GBP/JPY is unlikely to see a significant shift unless a change in monetary policy or risk sentiment occurs.

GBP/JPY has continued trading with a downward bias, as the Yen finds support from growing investor caution. What we’re seeing here is not simply a preference for the Japanese currency in isolation, but a pattern where risk-off behaviour is becoming more pronounced across markets. Safe-haven buying often increases when there’s a rise in global unease – and with geopolitical strains and fragile dialogue between two of the world’s largest economies, the appetite for safety is firm.

While the UK economy posted quarterly growth that exceeded many forecasts – at 0.7%, it was relatively strong – that by itself hasn’t been enough to lift the Pound. The Bank of England’s tone remains reserved. Despite positive domestic data, there’s a lingering reluctance to hint at shifts away from a high-rate environment. For traders, this caution makes it more difficult to justify long positions in Sterling, especially against currencies like the Yen that are buoyed by the broader move away from risk.

What matters more in the weeks ahead isn’t whether UK data remains strong, but whether policymakers adjust their message. Until there’s clarity or a material change in stance, it’s unlikely that appetite for the Pound will see a forceful return. The Governor and MPC are clearly keeping a close eye on inflation persistence and wage growth, but their concern over stickiness in prices outweighs the upside surprises in output.

Japan’s Economic Outlook

On the other side of the cross, Japan shows early signs of turning a corner on policy. The Producer Price Index, which tracks the prices businesses charge each other, is rising – suggesting underlying inflation may continue. If Japan’s GDP report reveals less weakness than the -0.1% contraction markets have pencilled in, then it further solidifies expectations for higher interest rates somewhere down the line. For Yen bulls, that’s more fuel on the fire.

The broader mood remains cautious, and market positioning is reflecting that. We are seeing flows that tend toward stability, not growth, particularly as political risks globally continue to deepen. In this context, the Yen’s appeal strengthens. For derivatives traders, the message is clear: favour stability over speculation right now. When volatility rises and policymakers stay ambiguous, it’s defensive structures that tend to reward most.

In terms of strategy, it may serve us best to monitor breakouts driven by surprise data. Should Japan’s economy fare better, it reinforces the chance of gradual tightening, and the Yen could gather further strength. That would naturally drag GBP/JPY lower, especially in the absence of a more optimistic shift from Threadneedle Street.

Likewise, in this environment, pricing short-term risk around headline events, such as central bank commentary or flash PMI readings, could offer more practical entry points than chasing directional trades blindly. The most actionable moves are likely to come from macroeconomic surprises, not slow trends.

Momentum is clearly tilted. Until the rate picture changes – or global risks subside – we lean defensive. The price action is telling its own story.

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Michael Barr from the Federal Reserve Board of Governors addressed the New York Fed’s Small Business Credit Symposium, acknowledging that while the US economy appears stable, trade strategies from the Trump administration pose challenges.

High tariffs threaten US businesses, especially small ones, with potential risks. There is a concern that if supply chains are disrupted or businesses fail due to rising costs, it could lead to inflation.

Us Economy And Trade Policies

The US economy is currently showing resilience with inflation nearing 2%, but the trade policies have introduced uncertainties. A trade shock could particularly impact small businesses and lead to price hikes if supply chains falter or businesses collapse.

Barr’s comments underline a growing concern around the strain that certain policy shifts could place on smaller firms, particularly due to higher input costs caused by tariffs. From our standpoint, that’s relevant not simply because of the direct pressures on these businesses, but because they often contribute disproportionately to supply chain fluidity and job creation. If enough of them begin to feel the squeeze, we may find disruptions rippling outward.

To translate the implications for derivatives, pricing models may need adjusting if inflation expectations begin to rise again. Although consumer price data has recently moved closer to the 2% mark, that progress could reverse if cost-push inflation takes hold through higher import prices. We’re not just talking about the cost of goods, but also logistics and storage—areas that have tighter capacity, which derivatives contracts already factor into.

Those engaged in rate-sensitive strategies should be aware: even in the absence of headline CPI acceleration, the Federal Reserve may hold rates higher for longer if it suspects upcoming price pressure from trade frictions. Barr’s remarks, cautious as they may seem, point to a Fed keeping one eye on policy spillovers. Accordingly, curve plays that are predicated on imminent cuts may need rebalancing if consensus timing shifts.

Market Adjustments And Risk Parameters

What’s more, spreads across different durations could readjust if there’s an increased divergence between near-term inflation resilience and mid-term risk. This isn’t about panic positioning—but rather minor, sensible recalibrations. The recent stability in core inflation won’t necessarily stop TIPS breakevens from widening if input costs surge. That’s another variable our models are nudging us to monitor more closely.

Furthermore, high tariffs could dampen business investment. That, in turn, may affect growth expectations priced into equity index derivatives, particularly in small-cap sectors. These companies hold less bargaining power internationally and may have tighter profit margins exposed to commodity swings. If futures and options are tied too closely to forecasts ignoring such microeconomic stress points, traders could find themselves behind the move.

Given this, we’re adjusting our risk parameters modestly for positions tied to global trade exposure. While it’s not yet a hard tilt, the carry cost of ignoring this risk has begun nudging some implied volatilities higher on longer-dated contracts related to industrials and transport. That shift isn’t linear, but once liquidity moves behind these assumptions, repricing can be more abrupt than expected.

Barr isn’t positioning this messaging as a forecast, but as a caution. That hasn’t gone unnoticed by markets.

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The price of crude oil fell by $1.53 or 2.42%, closing at $61.62. Factors influencing the decline include the potential U.S.–Iran nuclear agreement, which may lift sanctions on Iranian oil, increasing global supply.

OPEC+ is set to raise production by 411,000 barrels per day as they continue easing previous cuts. The IEA predicts a decrease in global demand growth from 0.99M bpd in the first quarter to 0.65M bpd for the remainder of 2025. Additionally, they have revised the 2025 global supply growth forecast to 1.6M bpd from an earlier 1.2M bpd estimate. Economic factors such as tariff tensions and slowing growth worldwide are also affecting oil demand.

Oil Price Movements

Technically, oil prices dipped to test the 200-hour moving average at session lows but did not maintain the drop. Prices are now below the 100 and 200-hour moving averages. The 100-hour moving average stands at $62.12 and the 200-hour at $60.41, which will indicate potential for bullish or bearish trends depending on further movements.

With a $1.53 drop in crude, a decline of 2.42%, settling near $61.62, we’re observing market reactions sharpen in response to potential macro-level developments. The ongoing discussions around the U.S.–Iran nuclear accord, if successful, could reintroduce millions of barrels to the daily output. Traders have started pricing this into short-term expectations well before any formal agreements are signed. It’s less about anticipation, more about hedging against risk exposure linked to a possible oversupplied market.

The alliance, which has already been easing cuts gradually, appears committed to a steady increase—adding 411,000 barrels per day. This adjustment, though broadly expected, feeds into a market already wrestling with weaker demand projections. According to a fresh revision by the global energy watchdog, demand growth, initially forecast at 0.99 million barrels per day for early 2025, has now been lowered to 0.65 million for the rest of the year. Supply expectations, on the other hand, have gone in the opposite direction, bumped higher from 1.2 to 1.6 million. So we’re looking at a widening gap, something that doesn’t usually offer a supportive environment for a rally.

When we zoom in on price action, we can see where sentiment is shifting. Prices briefly dropped to the 200-hour moving average but were unable to stay there, suggesting buyers emerged around that zone. However, the fact that both the 100-hour and 200-hour moving averages are overhead now—$62.12 and $60.41, respectively—creates a type of squeeze. It’s exactly the sort of setup where conviction matters; either buyers start pushing prices back above those areas or sellers will find confidence in pressing further.

From a trading perspective, moving average levels tend to act like momentum thresholds. If prices manage to close above them convincingly, we might assume the pullback was temporary. If not, and especially if volume increases on another leg lower, the market may try revisiting prior support zones—more so when supply news continues to weigh.

Globally, the presence of trade hurdles and softer economic performance in some major regions is dragging expectations. That’s creating shorter-term hesitations in positioning. These aren’t temporary hurdles; weaker consumer demand, lagging industrial activity, and cautious inventory behaviour add up rather quickly. With that, it’s no stretch to say that oil markets are now being shaped more by what’s happening off the charts than on them.

Volatility And Trade Strategy

We’re also watching volatility metrics, which have started to widen modestly, showing clearer directional uncertainty than in recent weeks. This doesn’t favour momentum chasers, but it does keep short-dated options volumes active. Those of us with positions tied directly to spreads ought to reassess exposure and expiry impacts. With implied demand weakness creeping into forward curves, calendar spreads may do more heavy lifting than outright direction.

As prices hesitate at key technical points and the macro backdrop grows heavier, trade selection becomes sharper. Those watching delta or theta sensitivity will want to avoid setups that lean entirely on upward rebounds without some measure of support in underlying figures. Rapid shifts in supply acceptance may not come with warning—when barrels do return to market, it’s often in blocks and not streams.

Patience becomes practical. A market that absorbs bad news slowly often trades sideways longer than it deserves. In that space, turning points emerge less through headlines and more through inconsistencies—an inventory draw that shouldn’t have happened, or a refinery run that crept higher when analysts forecast a fall.

It’s that kind of attention to detail that can separate rushed entries from sustainable setups.

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