【Tariff Shock and “Hope in the Eye of the Storm” — Markets Caught Between Fear and Relief】

【Tariff Shock and “Hope in the Eye of the Storm” — Markets Caught Between Fear and Relief】

― Just as CEA Chair Milan Predicted: The Theme Now Is “How to Sell the Dollar” ―

■ Tariff Pause: A Bottoming Signal or Just the Calm Before the Next Storm?

The announcement of a 90-day mutual suspension of reciprocal tariffs triggered a sharp market reversal. The downward spiral brought on by Trump’s second wave of tariffs—selling of safe havens (U.S. bonds, gold) → equity losses → dollar sell-off—has finally seen a temporary halt.

• Intervention by U.S. Treasury Secretary Bessent and optimism over China’s market-stabilizing measures have helped calm investor nerves
• Volatility remains high, with AUD/JPY hitting stop losses on rebounds, underscoring the ongoing risk to short-term trading performance

📌 Still, volatility remains elevated. The market is navigating between “fear” and “hope”, and sudden risk events remain a concern.

■ Spotlight on Milan’s Strategy Paper: “A User’s Guide to Restructuring the Global Trading System”

A strategy paper authored by CEA Chairman Steven Milan, a key Trump economic advisor, is gaining traction as markets believe it’s directly influencing policy. It offers vital insight into U.S. economic direction and dollar strategy.

📌 Three Key Arguments from the Paper:

1. Correcting Overvaluation of the Dollar
   → U.S. manufacturing competitiveness requires a weaker real effective exchange rate (REER)—i.e., a weaker dollar.
2. Tariffs as a Means, Not the End
   → Tariffs are tools to secure better trade terms—not the final goal. They serve as bargaining leverage in strategic negotiations.
3. “Mar-a-Lago Accord” Concept
   → A proposed multilateral framework inspired by the 1985 Plaza Accord, aiming to globally coordinate a weaker dollar policy.

🟩 Strategic Conclusion:

• A weaker U.S. dollar is a deliberate policy, not market noise
• The medium-term outlook clearly favors dollar depreciation
• The key trading theme going forward: “When and where to sell the dollar”

■ Economic Events: CPI Still Relevant, But Tariff & Dollar Policy Are the Main Focus

📌 Today’s Key Economic Releases (JST):

→ Normally, CPI would be a market mover, but Trump’s tariff agenda and the emerging “weaker dollar doctrine” are now driving the narrative.

📌 Key Speeches Today:

• RBA Governor, BoE Deputy Governor, multiple Fed Governors, and ECB officials
  → Rather than rate path signals, the market is watching for tone-shifting remarks aimed at calming volatility.

■ Trading Strategy: Market Entering the “Dollar Selling Phase”

🧠 Strategic Theme: Selling the Dollar Between “Expectation and Policy Reality”

🔍 Weekly Themes Summary

📌 Conclusion:
The market narrative is shifting firmly toward “policy-driven dollar weakness”. Be prepared to sell USD on dips, aligning with the strategic backdrop.

If policy continues to follow the “Milan Doctrine”, it’s safe to say the market has entered a new phase of strategic dollar selling.