Trump Tariffs Exceed Expectations, Renewing Risk-Off Sentiment

[Trump Tariffs Exceed Expectations, Renewing Risk-Off Sentiment]
― Funds Flow into Yen, Swiss Franc, and Euro; USD Selling Accelerates ―

■ Trump’s Tariff Announcement Triggers Market Turmoil: USD/JPY Plunges to 146

Markets swiftly shifted into risk-off mode following former President Trump’s much-anticipated “reciprocal tariff” announcement, which turned out to be significantly harsher than expected.

• Initial reaction was a brief USD-buying after reports of a flat 10% base tariff
• However, sentiment deteriorated rapidly after news emerged that high tariffs would be imposed selectively by country
• Result: Global equity markets plunged, U.S. bond yields dropped sharply, and USD/JPY fell from the 150 range to briefly hit the 146 level
  → The market was more alarmed by the targeted and retaliatory nature of the tariffs than a uniform tax.

■ USD Fails to Act as a Risk-Haven This Time

Traditionally, “stock sell-off = risk-off USD buying” is the norm, but this time:

• The U.S. Dollar Index (DXY) fell to a 6-month low
• Reason: Growing recognition that Trump’s tariff policy could pose a direct threat to U.S. economic growth
  → Hence, the dollar itself became a target of risk aversion

Current flows are characterized by:
USD weakness, stock market decline, bond rally (falling yields), JPY/CHF/EUR strength

■ Volatility Likely to Persist into European and U.S. Sessions

With equity markets leading the way lower, risk-off flows may continue in the upcoming sessions. Key factors to monitor:

• How Europe and the UK respond (potential retaliatory tariffs)
• If tit-for-tat actions escalate, concerns over a prolonged trade war may keep volatility elevated
  → Avoid bottom-fishing before a confirmed rebound. Focus remains on selling rallies and buying safe havens.

■ Today’s Economic Events: Political Drivers Take Center Stage

📊 Key Economic Indicators:

• 🇨🇭 Switzerland CPI (March)
• 🇹🇷 Turkey CPI (March)
• 🇪🇺 EU, UK, and U.S. Services PMIs (March Final)
• 🇺🇸 U.S. Trade Balance (Feb) / Initial Jobless Claims
• 🇨🇦 Canada International Merchandise Trade (Feb)

→ Even typically influential releases like the U.S. ISM Services Index may have only short-lived impact, overshadowed by tariff-related concerns.
However, the U.S. trade balance could trigger notable USD movement if it surprises.

💬 Scheduled Speeches & Releases:

• De Guindos (ECB Vice President)
• Schnabel (ECB Executive Board)
• Jefferson (Fed Vice Chair)
• Cook (Fed Governor)
• ECB Minutes (March 6 Meeting)

→ Focus has shifted from monetary policy to how central banks perceive the inflation vs. economic slowdown caused by tariffs.
Dovish tones could add further pressure on risk assets.

■ Trade Strategy: Favor Safe-Haven Currencies, Be Cautious on Rebounds

💡 Currencies with Strong Inflows:
✅ Japanese Yen (JPY)
✅ Swiss Franc (CHF)
✅ Euro (EUR)

💥 Assets Facing Outflows:
❌ U.S. Dollar (USD)
❌ Australian Dollar (AUD)
❌ Equity Indices (especially U.S. and Asia)

📌 Core Strategy:

• Focus on selling rallies in cross-yen pairs (e.g., USD/JPY, AUD/JPY, CAD/JPY)
• Consider buying dips in safe-haven plays like EUR/USD and CHF/JPY
• If gold (XAU/USD) holds above $2,000, a renewed upward phase is likely

📊 Market Summary Table