The ongoing trade saga began a new chapter on Wednesday after president Trump announced a 90 day pause on the new tariff regime. The olive branch was extended to everyone but China, which is now facing effective duties of 145%. For all the hysteria on Wall Street, the current situation is by no means unpredictable. The developing negotiations are perfectly in-line with the president’s typical approach to such matters. For those in search of a more calming influence, it is perhaps worth paying attention to Treasury Secretary Scott Bessent – a former hedge fund manager. Bessent stated on Thursday that the United States would be in a place of “great certainty” after the pause and that many countries had already expressed their intent to fully cooperate in establishing new trade deals. Indeed, the EU has already rescinded its retaliatory tariffs following the US’ lead.
Not for the first time, the continued focus on tariffs allowed an important macroeconomic development to slip under the radar. Thursday’s CPI print revealed a major slowdown in inflation in March, to the point where prices dropped compared to the previous month. Yearly inflation is now down to 2.4% and continues to approach the Fed’s 2% target rate. The latest data in theory paves the way for the Fed to cut rates on the Dollar, although the next decision is still a month away.
Along with everything else, the development weighed on the Greenback, which is now looking weaker than ever against a number of currencies. The Swiss Franc has emerged as the currency of choice for safe-haven flows, climbing over 7% since Liberation Day to reach a multi-year high of $1.22 as of this morning. The Yen and Euro have also made significant gains versus the Dollar in recent sessions, enough to push the DXY below 100.
Once again, gold was all too happy to seize the moment, blasting to a new record high of $3,176 an ounce yesterday. The precious metal wasted no time climbing further still this morning, pushing to $3,200 and beyond. The extreme volatility in stock markets around the world is enough to make gold look tame in comparison, further contributing to its appeal in these chaotic times.
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