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MARKETSYields climbed while stocks wobbled on Friday after a mixed jobs report kept markets guessing. The U.S. economy added 143,000 jobs in January—slightly below forecasts—but the unemployment rate unexpectedly dipped to 4%, wage growth remained solid, and prior months saw a hefty 100,000-job revision higher.At first glance, it looked like a Goldilocks print—soft enough to keep the Fed in play but firm enough to prevent panic. But then, boom—Reuters dropped a not-so-unexpected bombshell, reporting that Trump is gearing up for a fresh round of Reciprocal Tariffs, initially reported “ as soon as Friday” but later clarified to drop on Monday or Tuesday. That headline hit the tape like a lead balloon, forcing traders to hit the brakes on risk sentiment. Stocks took a sharp turn lower, erasing earlier gains as markets braced for another round of trade war drama.Meanwhile, fresh consumer sentiment data threw cold water on any hopes that Main Street feels better about the economy. The University of Michigan’s preliminary February survey slumped to its lowest level since July 2024, while inflation expectations for the year ahead climbed to their highest level since November 2023. This is not precisely the backdrop the Fed wants to see as it tiptoes toward potential rate cuts.Breaking it down:

But the real gut punch? Inflation expectations shot higher.

This is not what the Fed wants to see. Consumers pulling back while inflation expectations rise? That’s a dangerous mix. It means rate cuts aren’t a done deal, and if inflation fears keep creeping higher, the Fed might have to stay on hold longer than markets expect.Bond traders took notice. The job data was strong enough to establish a floor under yields. Still, Treasury yields rose as rate-cut expectations were adjusted downwards based on gnarly consumer inflation expectations, reinforcing that the market remains conflicted between inflation risks and growth concerns.Bottom line? The market remains in a delicate dance between tariff threats, a jittery consumer, and a labour market that refuses to crack. Volatility isn’t going anywhere, and with Trump ready to shake up trade policy again, traders might want to keep their trade war helmets on—this ride is far from over.
FOREX MARKETSWeekend Risk Elevated as Trade War Chess Moves IntensifyWe’re entering an extended period of heightened weekend risk between now and April 1, as tariff threats continue to loom large. With Trump hinting at auto tariffs as soon as next week, it’s almost a given that German automakers will be squarely in the crosshairs.Sensing the storm ahead, the EU is scrambling to throw an olive branch to Washington, offering to slash tariffs on U.S. car imports in a desperate bid to shield its already struggling auto sector. But whether Trump bites on the deal or keeps Europe hanging remains to be seen. The geopolitical trade chessboard is shifting fast, and the market is left trying to price the unknown.FX Plays: EUR/USD & USD/CNH Hedges Still in PlayOur short EUR/USD and long USD/CNH hedges, which we’ve been eyeing since mid-week, still look good heading into next week. These aren’t just one-day trades but tactical positioning ahead of what could be a major tariff escalation.Meanwhile, our long USD/JPY trade gave way to smaller profits, not on NFP data, but due to deeper discussions between the U.S. and Japan regarding trade, particularly in steel. Signs are emerging that Japan may get some level of insulation from the worst of the tariff turmoil, but the long-term fate of USD/JPY will hinge on something much bigger:Bessent’s High-Wire Act: A Strong Economy Without Runaway InflationScott Bessent and the Trump administration are trying to engineer a delicate balancing act—keeping the U.S. economy strong while taming inflation, largely by relying on higher domestic oil production and Musk’s DOGE-inspired, slash-and-burn attack on government spending.If the 10-year U.S. Treasury yield calls their bluff, USD/JPY’s downside could be limited—even with a slightly more hawkish BoJ. After all, the upper end of the BoJ’s hawkish spectrum is still only 1%, meaning the yen’s upside may have a ceiling unless Japan fully commits to breaking with decades of ultra-loose policy.Bottom Line: Strap In—This Market Is About to Get RealWith Trump’s tariff roulette spinning, market risks are no longer just weekday events—weekend risk is now officially in play. The auto tariff saga, U.S.-Japan trade dynamics, and Europe’s desperate maneuvering will all shape market flows next week. Expect volatility, expect whiplash, and most importantly—expect the unexpected.
OIL MARKETSRisk sentiment found no relief from oil markets on Friday despite crude prices posting a third straight weekly decline. Prices initially ticked higher following fresh U.S. sanctions on Iran’s crude exports, but any sustained rally was snuffed out as Trump reignited his trade war with China and threw in fresh tariff threats for good measure.Sanctions tend to put a temporary floor under oil prices, but traders are waiting to see whether the market can replace those lost barrels. Iran’s floating storage is set to expand further as the sanctions tighten, and all eyes are on OPEC. Of course, Trump will expect them to step in and compensate, but let’s be real—OPEC would much rather ride higher prices than play ball with Washington’s inflation battle.Beyond Guns & Oil: The Saudi-Iran Soft Power War Heats UpBut the bigger story here isn’t just about barrels—it’s about a growing soft power war between Saudi Arabia and Iran that could redefine the geopolitical energy game. Riyadh is shifting its playbook, moving beyond oil dominance and military posturing to position itself as a model of economic and social modernization. Saudi’s aggressive investment in global sports, tourism, and high-tech industries isn’t just for show—it’s a direct challenge to Iran’s legitimacy in the region.Iran, on the other hand, remains locked in a cycle of hard power reliance, using military influence and proxy groups to maintain its regional foothold. But as Saudi Arabia works to rebrand itself as a progressive powerhouse, Tehran risks losing ground—not just in economic influence, but in ideological clout as well. This isn’t just about oil flows anymore; it’s about a broader struggle for regional supremacy.For traders, this means watching more than just the next OPEC headline or storage report. The real game is happening beneath the surface, where economic alliances, geopolitical power plays, and shifting regional influence could shape oil markets just as much—if not more—than supply and demand.
Trade Deal Buzz: Hope or Just Noise?Speculation is mounting that Trump and Xi could be laying the groundwork for a new trade agreement. Optimists are seizing on the modest tariff hikes and diplomatic breadcrumbs dropped by Trump officials, hinting that tariffs may be more of a bargaining tool than an economic wrecking ball. The reasoning? Trump’s 10 ppt tariff increase on all Chinese goods pales in comparison to the once-threatened 60 ppt hike, while Beijing’s 10%-15% retaliatory tariffs on just 80 U.S. exports feel more like a symbolic slap than a serious counterstrike. Add in the yuan’s relative stability, and the market is reading the tea leaves for a potential deal.The Case for SkepticismBut let’s not pop the champagne just yet. While a revamped ‘Phase One’ deal isn’t out of the question, it’s a far more complicated landscape than Trump 1.0. The original agreement—China buying $200 billion worth of U.S. goods and services while promising reforms on IP rights, currency manipulation, and tech transfers—collapsed under the weight of the pandemic. And now, the chessboard has completely shifted.

China’s Play: Decoupling on Their Own TermsBeijing isn’t exactly bending over backward to appease Washington either. There’s a growing consensus that U.S.-China economic decoupling is inevitable, and Xi’s focus is now on shoring up China’s economy—patching up the housing crisis, battling deflation, and reducing reliance on U.S. demand.

Bottom Line: Volatility Is Here to StayWould it be a shock if Trump and Xi patched together a face-saving trade deal? Not entirely. But does it change the long-term trajectory of U.S.-China relations? Unlikely.Trade flows are shifting, geopolitical tensions are entrenched, and Trump 2.0 will likely be just as unpredictable as Trump 1.0—meaning tariff drama isn’t going away anytime soon. Expect a volatile, headline-driven market as both sides continue their economic tug-of-war.
CHART OF THE WEEKFebruary QuickPoll: Inflation and geopoliticsMarkets Navigate Trade Tensions, But Inflation Looms LargerFinancial markets were tossed around this week as trade tensions between the U.S. and its biggest partners flared up, but according to the latest Marquee QuickPoll, investors see sticky inflation as the bigger threat to U.S. exceptionalism than tariffs. The survey, which polled nearly 800 respondents in early February, closed on February 5 and provided key insights into the market’s mindset.Key Takeaways: U.S. economic data (43%) and geopolitics (42%) are the two biggest risks on investors’ minds this month. The focus on geopolitics is reaching levels not seen since April 2022, when Russia’s invasion of Ukraine first rattled markets, says Goldman Sachs’ Oscar Ostlund, who heads global Content Strategy, Market Analytics, and Data Science. Inflation is the primary threat to the U.S. exceptionalism theme. While tariffs may add to price pressures, the bigger concern is that the underlying inflation story remains stubbornly persistent—putting pressure on the Fed’s timeline for rate cuts and potentially extending the “higher-for-longer” regime. AI concerns remain on the back burner—for now. Despite the market hype around artificial intelligence, only 13% of respondents flagged AI-related risks as a major factor. This suggests that the AI narrative is still seen as an opportunity rather than a market risk—at least for now.The Market Lens: Inflation vs. TariffsWhile tariff threats have kept markets on edge, inflation remains the real elephant in the room. If price pressures fail to subside, it could undermine the U.S. exceptionalism trade, put pressure on equities, and force investors to reconsider just how much longer the Fed can stay on the sidelines before cutting rates.For now, traders are balancing tariff uncertainty with inflation reality—and the latter is carrying more weight in shaping market sentiment

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