Macro Minutes A Little Less Tarrified
May 1, 2025
Elsa Lignos, Head of FX Strategy at RBC Capital Markets, and Blake Gwinn, Head of US Rates Strategy, dive into the complexities of the U.S.-China trade war and its ripple effects on the dollar and equity markets. They discuss evolving corporate earnings amidst tariffs and the sentiment shifts in the investor community. The pair also tackle the latest Treasury refunding announcements and the uncertain debt limit timeline, shedding light on these essential topics for market watchers.
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Rising Optimism on Trade Deal
- Optimism on the US-China trade deal is rising, with sentiment shifting after recent meetings in Washington.
- Though some skepticism remains, the consensus leans toward "the worst may well be behind us" regarding trade tensions.
US Dollar Position Reversal
- The US dollar has shifted from strong net long to a net short position, reflecting eased trade war fears.
- Longer-term trends suggest a slow rotation away from US assets to European and other global assets is likely over 18 months.
Treasury Market Calms but Cautious
- Treasury markets have settled into a calmer range after April volatility, with yields slightly lower than before.
- Trade war headline risks have eased somewhat, but incoming economic data may trigger further market reactions.