Think in the future: it is a week that …

Week where everything – and nothing – changes

Here are some things that have changed in the financial market this week: US 10-Treasury years produced more than 40 basis points. Increased week-in-week like that has not occurred since the early 2000s. Dollars are almost 4% weaker towards the euro. More than one point percentage has occurred since I started typing this previously today. S&P 500 is also almost 4% higher.

However, what is extraordinary is that for all volatility, the view for US tariffs looks the same as what happened a week ago.

You might argue that it is a strange thing to say, in a week interspersed with the suspension of 90 days for the most significant US trading partners. But this is the rub:

Before the inauguration of President Trump, the average tariff applied to all US imports was 2.5%. Everything that occurs until Wednesday morning-25% tariffs on metal, cars and certain items from Canada and Mexico, reciprocal rates and last levels of 50% minutes in China-take the rates up to 28%, if my mathematics is correct. We must return to the beginning of the 20th century to find the rate of rates this average.

Wednesday climbing seeing various countries, especially in the EU and most of Southeast Asia, see their tariff levels were reduced to 10%. But China, which has been hit by 104% of the tariff, has now seen the tariff increase to 145%, if the latest report is accurate.

The two changes precisely cancel each other: the average rate of today is 28%, as before the change on Wednesday.

Indeed, it’s rather simple. Lynn Song made an excellent point that extra tariffs on China will have a reduced impact. Simply put, if the US importer has an option to replace non-Chinese goods, it will be done so long before the tariff reaches 145%. And if you do not have that option, then US companies and consumers only need to pay a higher price.

However, the big picture is clear. US inflation will increase significantly this year despite the surprising consumer price data from this week. James Knightley argues that the tariff will reach inflation in just a few months. As a result, the US economy is determined to get an increase in pressure, although not before we see the surge in retail sales data when consumers try to run before the tariff rises. More than JK below.

The last point is another reason to think that Fed will remain focused on inflation today. But it will begin to change in the summer, and James K thinks the market is true to give a price of three to four cuts in the second half of this year.

As for ECB, Carsten considers we still see the tariff cuts next week. Yes, the EU was hit with a lower rate this week than expected. But the prospect of the continent is inherent related to US economic health, just like them with the tariff itself. And if the US goes to a slowdown, it cannot be good news for the European export -oriented economy, whatever the tariffs are slapped by the European Union.

The prospects for large government expenditure are still very important, but my euro zone colleagues feel that it is more a 2026 story. And meanwhile, it fell to the ECB to do more heavy appointments.

For the market, the main question – that I don’t have answers – is what is needed to calm everything down? Is this a reduction in further tariffs for US allies? Of course it can be imagined that some countries will succeed in negotiating carvings from the 10%base line tariff. England might be interesting to watch here.

Wednesday drama shows that investors receive signs of flexibility from US administration. But the initial excitement was short -lived, a recognition might be that further cutting and changing only added uncertainty that was very burdensome to the current market and global economy.

As long as most of the tariffs are expected to remain for some time – and that is our basic case – then the pressure may continue.

Our bond experts are paddhraic Garvey thinking the results of treasury can rise higher in the near future, maybe as far as 4.75% in 10 years. My fx strategy colleagues are the same -the same alert about calling the bottom in the dollar.

This is a week where everything changes, but in many cases nothing has changed. Next week may look the same.

Think in the future in the advanced market
United States (James Knightley)

After a large swing in the sentiment that was seen for the past few weeks, we (temporarily) anticipated a macro environment that was calmer in what was a shorter week because of Easter. The reciprocal rate has been delayed 90 days, but there is still a substantial price increase coming in the business of American business and consumers. In addition, we remain nervous that now there are three main headwinds for households; 1) Tariffs that lead to price increases that suppress expenditure power 2) Increased anxiety about job loss, partly caused by cutting large federal government expenses and concerns about what it means to rights 3) The fall of the stock market that has an impact on household wealth that makes consumers more vigilant in making large tickets purchases.
Retail Sales (WED): The one who said, the March retail sales number must be very strong because consumers anecdotal out and make large -scale purchases before the tariff imposition. The volume of the car jumped 10.6%mom based on ward data while credit card expenditure rates also suggest company demand for equipment and electronics. This should be enough to prevent GDP growth from contracts at 1Q, but we are still worried that weaknesses will be updated in the coming months.
Industrial production (WED) will also be a number that must be watched, given the desire of President Trump to see more reshoring. However, a business survey shows the lack of clarity about the trade environment because of the tariffs and concerns of the potential for foreign retaliation and the potential consumer boycott of US exports causes nervousness. We will also follow Fed’s comments. The hope of slaughtering interest rates is the cutting of 107BP before President Trump resigned on April 9. They suddenly fell to 75BP, but given the belief that the US faced several major headwinds, we returned to around 90bp deduction that was valued for 2025. We agree that three or four 25BP interest rate cuts this year may be possible.
Canada (James Knightley)

Interest Rates (Wednesday): Markets and economists are divided, whether the Canadian bank will cut interest rates again next week. There is a very sleek majority that supports results without changes after 25BP cuts in January and March, but it can go well. On the one hand, the latest activity data has defeated expectations, and inflation has been beating higher, and BOC may want to maintain ammunition again, given the uncertainty related to US tariffs. However, a weaker job report and concern about future growth, considering that 75% of exports go to the US, can justify other slaughtering that will leave the policy rate of 2.50%. We chose for results without change, also remembering its proximity to the election.
English (James Smith)

Job (Tuesday): Will the new increase in the National Insurance (Tax) Employers encourage the cooling of the material in the job market? The survey suggested that possible, but so far the weekly redundancy data has not increased. Overseeing the decline in material in a vacancy number or payroll -based job next week, although we suspect it is impossible.
Inflation (Wednesday): The decline in gasoline prices will reduce the canopy rate in March, but the key question is how far we will see inflation services down. We suspect we will not see a dramatic decline here, but we can begin to see a greater increase in the second quarter if the annual price re -price is less aggressive than the previous year. That is one of the reasons why we expect the Bank of England to continue to cut the tariff once a quarter for the remaining 2025 and up to 2026.

Think in the future for Central and Eastern European
Poland (Adam Antoniak)

CPI/Core (Tue/Wed) inflation: CPI data details that are due on Tuesday must confirm that core inflation does not include food and energy prices (the official Data of the National Poland National Bank was issued on Wednesday) Continuing a decline trend in March, giving one of the arguments for the Monetary Policy Council (MPC) to start monetary opportunities in May. In dealing with the negative impact of the potential of trade war on economic activities, the council is not possible to delay the slaughtering of interest rates and we see the opportunity for cutting 50BP in May.
Czech Republic (David Havrlant)

PPI (WED): Prices in the industry remain under pressure in March, because foreign demand remains lukewarm, and price competition increases. The price of industrial producers is likely to be still in a minor annual decline in March, also influenced by a decrease in global energy prices in the same month and stronger domestic currencies, which make all imports cheaper.
Türkiye (Muhamet Mercan)

Interest Rate (Thu): In a temporary meeting after March volatility, CBT not only raised the ribbon over the corridor of interest rates (loan interest rates overnight) to 46%, but also changed it into an effective policy rate by tightening the liquidity of the experiment, while maintaining the policy rate (1 week Repo) remains flat at 42.5%. This development shows that CBT is likely to remain mute in the April MPC meeting. Data of benign parade inflation, with an increase in the underlying trend, will also make CBT keep the policy level unchanged rather than climbing. However, the CBT daily balance has, in the last few days, showing a continuation of the pressure on the FX net position. Therefore, we do not rule out further adjustments in the top band.
Source: Ing