Markets cautious but not fearful on Trump tariffs for now

February 25, 2025 at 09:51AM
In case you missed it: Trump Confirms tariffs on Canada, Mexico ‘will go forward’

The reaction among major currencies has been relatively muted, with the dollar also not doing much today. USD/JPY was the only one that showed some response with the pair moving up to 150.30 but is now flat at 149.70 again. Besides that, there’s not much else to scrutinise on the movement in other dollar pairs.

In the equities space, US futures are slightly lower today after another day of selling yesterday. S&P 500 futures are now down 0.2% but it owes to a softer mood since Friday with eyes also on Nvidia’s earnings release tomorrow after the close. That is arguably the more anticipated event for stocks this week than Trump headlines.

As for the bond market, we’re seeing yields actually track lower on the day with 10-year yields now dipping below its 100-day moving average (red line) and below the 4.40% level:

So, what does that tell us?

The bond market move is by far the most interesting in my view. Previously, traders were fearful that tariffs might stir up inflation and lead the Fed to a pause for longer mode. But with the latest drop in yields this week, those concerns are hardly showing.

And even in equities, the bout of selling since Friday has hardly much to do with Trump’s tariffs threats. The S&P 500 itself is hinting at a double top just above 6,100 and even with the latest drop, price levels are in a comfortable position as we hold at the highs still.

Perhaps the best indication to all this also looking directly at the Canadian dollar and Mexican peso themselves. And both are trading flat on the dollar for the time being.

That pretty much shows how market players are taking to Trump’s latest threat that the tariffs “will go forward”.

I mean, he managed to delay them in just under 24 hours the last time. So, having a full week to go is ample amounts of time for something to happen before the 4 March deadline. We live, we learn.

This article was written by Justin Low at www.forexlive.com.