Trump was warned of empty shelves and financial turmoil from tariffs and firing Powell. His U-turn pushed stocks higher

Economic

Summary:

Warnings from CEOs and advisers about tariffs and firing Powell prompted Trump to soften his stance, calming markets. Stocks rallied but uncertainty remains over trade with China and economic stability.

President Donald Trump’s unprecedented tariffs, particularly on China, and recent attacks on Federal Reserve Chair Jerome Powell caused alarm among some of his top advisers and America’s biggest CEOs, who warned of financial chaos and store shelves that could go bare, people familiar with the conversations said.

The warnings — and the markets’ own volatility this week — seemed to have broken through. Trump backed down Tuesday from his threats to try to remove Powell from the job, telling reporters in the Oval Office: “I have no intention of firing him.”

That prompted sighs of relief on Wall Street. A day after markets boomed on comments from Treasury Secretary Scott Bessent that Trump would seek to de-escalate the trade war with China, US markets gained again on Wednesday.

Top administration officials were also relieved by Trump’s Oval Office statement on Powell, the people familiar with the matter said. The officials had become unnerved by the heated rhetoric and wary of a prolonged legal battle should Trump attempt to unseat the Fed chair.

The Dow closed higher by 420 points, or 1.07%. The broader S&P 500 gained 1.67% and the tech-heavy Nasdaq Composite rose 2.5%.

The three major indexes held on to a rally but finished well below their highest levels of the day. The Dow surged nearly 1,200 points in the morning before pulling back: Stocks came off their highest levels after Bessent cautioned that it could take considerable time to rebalance trade between the United States and China.

There is a “2 to 3-year timeline for the full rebalancing,” Bessent told a group of reporters on Wednesday after delivering a speech at an event hosted by the Institute of International Finance, a person familiar with the matter confirmed to CNN.

The comments, previously reported by Bloomberg News and CNBC, underscore how obstacles remain even as investors are eager for trade agreements and CEOs seek clarity on tariffs.

White House press secretary Karoline Leavitt on Wednesday said on Fox News there will be “no unilateral reduction in tariffs against China.”

“The president has made it clear China needs to make a deal with the United States of America, and we are optimistic that will happen,” Leavitt said. “And when that continues, it will be up to the president what the tariff rate on China will be.”

Trump on Wednesday told reporters that his administration will get a “fair deal” with China on trade, adding more broadly that negotiations with countries “are going very well.”

When Trump was asked in an impromptu gaggle outside the White House if he was talking to China actively, he responded: “Actively. Everything’s active.”

“Every country wants to partake, even countries that have ripped us off for many, many years. China is an example, but it’s not just China, European Union. They ripped us off for many, many years, and those days are over,” he added.

US Treasury bonds initially rallied Wednesday before giving back those gains in a stark reversal. The benchmark 10-year yield fellow below 4.3% in the morning before rising back up to almost 4.39%, just below where it had settled Tuesday. Yields and prices trade in opposite directions.

Trump shifts tone after meeting with CEOs

Trump’s notable shift in tone toward Powell and China came a day after he met privately in the Oval Office with chief executives of four major US retail companies who conveyed concerns about rising economic fallout from Trump’s tariff policy and the uncertainty it has created for financial markets.

The CEOs of Walmart, Target and Home Depot, all of whom delivered a blunt message about interruptions in the supply chain and its effects on consumers, were invited to the White House as part of an ongoing internal campaign to make the case to Trump about the real-world impact of his policies, administration officials said.

Trump’s tariffs have placed significant pressure on the retail sector. The business leaders warned that store shelves across America could “soon be empty,” two people familiar with the meeting said, as they presented a dire economic picture that could come into sharper view within weeks.

For weeks, White House chief of staff Susie Wiles and other senior advisers have been fielding alarming calls from business leaders about the fallout from Trump’s tariff policies and his ongoing threats to fire the chairman of the Federal Reserve. Taken together, the president’s words have rattled markets and shaken confidence in the administration’s stewardship of the economy.

Bessent, who has emerged as one of the leading Cabinet officials whose words have calmed financial markets, played a key role in arranging the meeting of CEOs, officials said, as part of an effort to show Trump how serious the economic challenges facing the administration have become.

Doug McMillon, the CEO of Walmart who has developed a cordial relationship with Trump through meetings at Mar-a-Lago and several mutual friends, bluntly told Trump that the trade war with China had already started to disrupt the supply chain, officials said, and would only intensify by summer.

Axios first reported the fallout from the president’s meeting with CEOs.

Bessent urges caution on Powell

Many Trump advisers did not ultimately believe the president would attempt to fire Powell, given the warnings he’d been receiving from his economic team — including Bessent — stretching back several months.

And Trump had seemed to absorb the notes of caution.

But his amped-up rhetoric over the past week had caused fresh uncertainty about his intentions — in particular, his message on social media Thursday that Powell’s “termination cannot come fast enough!” and his follow-up Monday calling Powell a “major loser.”

Trump has argued that the Fed should cut rates soon to speed up the economy, perhaps as a way to counteract the significant economic drag that his massive tariffs are expected to create. But Powell has said repeatedly the Fed will only make a decision to raise or lower rates after careful consideration and would not rush a decision or issue an emergency rate cut before the rate-setting committee’s next scheduled meeting in May.

White House press secretary Karoline Leavitt continued Trump’s line of attack Tuesday in a press briefing, in which she defended the president for criticizing the Fed. She suggested that the Fed’s action to lower rates in the late stages of the Biden administration — but not (yet) under Trump — could be political. There is no evidence the independent Fed is taking a political stance, and Powell has vehemently and repeatedly denied suggestions that the Fed plays politics when making its monetary policy decisions.

“The president believes they have been making moves and taking action in the name of politics rather than the name of what’s right for the American economy,” Leavitt said prior to Trump’s Oval Office comments. “The president has the right to express his displeasure with the Fed and he has the right to say he believes interest rates should be lower.”

Trump’s top economic adviser Kevin Hassett also told reporters the White House was studying whether Trump could fire Powell, and said a potential “new legal analysis” might ease market concerns. That represented a break from Hassett’s prior comments in support of the central bank’s independence.

Leavitt said Tuesday that Hassett had recently changed his mind on the Fed after Powell insisted the central bank wouldn’t rush a decision to cut rates.

“I also spoke to Kevin Hassett about the Fed as well and he has called into question the Fed’s independence and whether they are actually doing things out of the best interest of the economy or are they doing it for partisan reasons,” she said.

But White House officials had long determined that firing Powell would spark legal challenges and market tumult.

And if any study was actually underway, Trump suggested Tuesday it wasn’t necessary. He said in the Oval Office he “never did” have any intention of removing Powell from the job.

source : edition.cnn

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Adam

Bond

It's been a choppy month for US safe-haven assets, with the 10-year Treasury yield swinging sharply from about 3.9% at the start of April to nearly 4.6% following President Trump's April 9 "Liberation Day."

Since then, yields have settled at a still-elevated range between 4.3% and 4.4%.

These fluctuations have puzzled investors. Treasurys typically act as safe havens during times of uncertainty, a sentiment currently dominating Wall Street as concerns mount over shifting trade dynamics and a possible self-inflicted recession.

Since bond prices move inversely to yields, rising yields indicate investors are selling off bonds. This is a counterreaction to the usual flight-to-safety behavior investors have come to expect during volatility, sparking concerns of a broader "sell America" trade.

But despite the unusual market moves, some strategists said they aren't alarmed.

"It's not really concerning to me at this point," Jeff Schulze, head of economic and market strategy at ClearBridge Investments, told Yahoo Finance during a Q&A session earlier this week.

Schulze compared current market conditions to those in 2022, a year marked by several sharp spikes in yields as the Federal Reserve aggressively hiked interest rates to combat soaring inflation. In 2022, the 10-year yield began the year at around 1.6%, climbed to a peak of 4.3%, and ended at 3.9%.

Those moves were driven by a combination of faster growth, persistent inflation, and a rise in the "term premium." This is the extra yield investors demand for holding long-term debt, especially when future conditions are uncertain.

In Schulze's view, the current yield increase is once again being driven by a rising term premium, not fundamental deterioration. After hovering near zero following the financial crisis, the term premium has recently climbed to about 50 basis points — a level more in line with historical norms after years of ultralow growth and accommodative monetary policy.

In the 2000s, for example, the term premium ranged between 50 and 100 basis points. It climbed even higher in the 1990s, often between 100 and 200 basis points.

"The term premium is essentially an uncertainty premium," Kelsey Berro, fixed income portfolio manager at JPMorgan Asset Management, told Yahoo Finance on Wednesday.

"What was the narrative over the last few days? A lot of uncertainty about the [status of] the United States within the global order, and more specifically the headlines and the conversations from President Trump about the performance of [Federal Reserve Chair] Jerome Powell."

In other words, rising yields aren't signaling a collapse in confidence over US debt or the broader economy. Instead, it's a reflection of heightened market uncertainty.

Markets rallied midweek after Trump decided to backtrack on his attempt to remove Powell. More positive trade developments also helped lift investor sentiment, contributing to the fall in long-term yields.

As volatility begins to clear, Berro said Treasury moves will more heavily depend on the fundamentals like the outlook for growth, inflation, and the Federal Reserve, which has taken on a more dovish tone.

"We think the Fed is going to be cutting rates later this year," Berro said. "That ultimately means about a range for 10-year yields of 3.75 to 4.5%."

On Thursday, expectations of a Fed rate cut increased after Federal Reserve Bank of Cleveland President Beth Hammack said policymakers could move forward with a cut in June if the economic data is clear and convincing by then.

'There's really no alternative'

In addition to the rising term premium, other factors, including the unwinding of highly leveraged positions, such as the basis trade, along with derisking from European investors, have also added to upward pressure.

"After 15 years of foreign accumulation of US assets, you're seeing a reversal of that flow," ClearBridge's Schulze said. But while some have speculated that this signals a loss of confidence in the US, Schulze sees the shift as a broader derisking process following years of overexposure to US markets.

Others echoed this viewpoint.

"There's really no alternative," JPMorgan's Berro said, arguing recent moves don't necessarily imply that the US is losing its edge. Rather, markets are adjusting to other opportunities.

"Recent trading activity may hint at waning US exceptionalism," she said. "That doesn’t mean the US is no longer exceptional."

Lawrence Gillum, chief fixed income strategist at LPL Financial, offered a similar perspective, writing in a client note on Tuesday, "Despite recent volatility, US Treasuries remain the world's preeminent safe-haven asset (for now), in our view, underpinned by the dollar's global reserve status (for now)."

"This month's Treasury market sell-off, while severe, does not signal a 'regime shift' away from this status," he added. "Instead, we believe it mostly reflects temporary deleveraging pressures rather than a fundamental rejection of Treasuries' safety."

And while nothing is guaranteed, any shift away from the prevailing safe-haven status of the US would be a slow evolution. As Gillum put it: "We would argue that is something that would take place over decades and not days."

Source: yahoo

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Warren Takunda

Economic

China–U.S. Trade War

When US President Donald Trump announced sweeping new tariffs on 2 April, the world braced for a fresh surge in inflation, but three weeks later, a growing number of economists and policymakers see the opposite happening.

Far from stoking inflation, tariffs could end up being the trigger that pushes European interest rates even lower.

European Central Bank (ECB) officials have already begun adjusting their tone. Earlier this month, the Governing Council unanimously cut the deposit facility rate by 25 basis points to 2.25%, with ECB President Christine Lagarde hinting that a 50-point move was also discussed.

The US tariff announcement appears to have tilted the stance in Frankfurt, with policymakers now prioritising downside growth risks.

"We're seeing the tariff impact in PMI numbers, in intentions to purchase, intentions to hire," Lagarde said in an interview with The Washington Post this week, adding that "tariffs are probably more disinflationary than inflationary."

Lagarde also indicated that the ECB is likely to downwardly revise its growth outlook in its upcoming June meeting.

President Donald Trump arrives on the South Lawn of the White House, 24 April, 2025AP Photo

Lower commodity prices, stronger euro, weaker demand

Oil prices have fallen more than 15% since early April, while the European Dutch TTF natural gas benchmark has dropped over 22%.

This cooling in energy markets reflects expectations of slower global growth, particularly if US tariffs restrict trade flows and reduce business confidence.

At the same time, the euro has strengthened against the dollar, thus limiting imported inflation.

Another force fuelling disinflation, especially in Europe, is the expected redirection of global goods.

Goldman Sachs economist Giovanni Pierdomenico said that US tariffs will create around $300 billion (€280 billion) in excess global supply. With US demand falling, some of that surplus, especially from China, is likely to find its way to Europe.

Past episodes suggest about 15% of excess supply ends up in the euro area, equivalent to a 1.5–2% increase in goods supply. "We estimate this should translate into around -1.5% of downside to the price level of core goods, corresponding to -0.5% downside to core HICP," Pierdomenico said.

"China will have overcapacity, will want to reroute its exports somewhere, possibly to Europe. That would have a dampening impact on prices," Lagarde said.

A view of the European currency Euro sculpture at Germany's main financial district in Frankfurt, 9 April, 2025AP Photo

ECB eyes deeper rate cuts

With inflationary pressures easing, markets are increasingly betting that the ECB will deliver additional rate cuts before year-end. Bank of America now expects the deposit rate to fall to 1.25% by December, citing "lower growth, even lower inflation, and policy rates to drop" further.

The bank recently revised down its euro area GDP forecasts to 0.8% for 2025 and 1.0% for 2026, highlighting tariff-related uncertainty, a stronger euro, and subdued global demand.

Germany, given its export-heavy economy and vulnerability to auto sector tariffs, is projected to shrink by 0.1% in 2025. France and Italy are forecast to grow just 0.4% and 0.7%, respectively.

Falling wage pressures are adding to the disinflationary tilt. Bill Diviney, head of macro research at ABN Amro, said the Indeed wage tracker declined to 2.7% in the first quarter- the lowest since the pandemic. "Disinflationary forces mean the ECB is likely to cut rates further to 1.5% by September," he said.

New German cars are stored at a logistic centre in Essen, 27 March, 2025AP Photo

Diviney added that the euro's recent appreciation, tighter financial conditions, and lower energy prices had all reinforced the case for further easing. "Our conviction in inflation leading to an undershoot of the ECB’s 2% target by the turn of the year has increased."

While the ECB is reacting to European conditions, the risk of a US downturn looms large. Goldman Sachs economist Alexandre Stott noted that in past cycles, most European economies entered recession within three quarters of a US contraction. "We already forecast small contractions for Germany, Italy, and Switzerland in Q3 this year," he said.

Although the full effects of President Trump's trade tariffs have yet to materialise, the early market and policy response suggests that inflation fears may have been overdone.

Instead, falling commodity prices, weaker demand, and a redirection of global supply are creating a disinflationary environment that may compel the ECB to accelerate its easing cycle in the months ahead.

Source: Euronews

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Patricia Franklin

Economic

Bank of England policymaker, Megan Greene, expressed her concerns about weak growth and the potential impact of U.S. tariffs on the UK’s inflation during a discussion with the Atlantic Council think tank. The discussion took place on the sidelines of the International Monetary Fund’s spring meeting on Friday.

Greene said that the U.S. President Donald Trump’s tariffs are more likely to lead to lower inflation in Britain rather than higher. She expressed uncertainty about the final impact of these tariffs, stating, "We have tariffs, and none of us have any idea what they’ll look like when the dust finally settles."

She further added that the risk space has shifted slightly. She believes that the risk is now leaning towards the disinflationary side. In her view, the tariffs on the UK would, on balance, be more disinflationary than inflationary.

Source: Investing

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Central Bank

Economic

China–U.S. Trade War

Trump continues to sow tariff confusion

There was finally some relief for financial markets in the past week when US President Trump offered investors a rare glimmer of hope that there is light at the end of the trade war tunnel. However, it didn’t take long for the light to start dimming again as the trade conflict took another complicated turn after it became apparent that the Trump administration’s climbdown in the standoff against China isn’t as big as previously anticipated.

Trump’s carrot-and-stick approach in his bid to get China onto the negotiating table isn’t proving very effective, particularly when the carrot is much smaller than the stick. For Beijing, the trade war has escalated to a level where national pride is at stake, hence, it is not blinking as easily as Trump assumed it would. This is already posing a problem for the White House, which has signalled that the Trump administration is willing to lower the exorbitant 145% tariff rate within two-three weeks if there is a deal.

But according to Chinese officials, the two sides have not even started talks, casting doubt on Trump’s negotiating tactic. Furthermore, other concessions, for example on auto tariffs for US car manufacturers, are far from a done deal, with Trump even threatening to raise them for auto imports from Canada.

All this is only worsening the uncertainty for US businesses rather than offering some clarity. So, although the acknowledgement by the White House that it is keeping an eye on the market turbulence and Trump is keen to reach trade agreements with America’s main trading partners is a positive sign, it does little in terms of easing the immediate fears about the country’s economic prospects.

Dollar and Wall Street on recession watch

Those concerns will either be fuelled or reduced in the coming week, as there’s a flurry of top-tier economic releases on the way. Kicking things off on Tuesday are the consumer confidence index for April and JOLTS job openings for March. On Wednesday, the advance estimate for GDP growth will be monitored very closely amid some predictions that the US economy contracted in the first quarter.

The Atlanta Fed’s GDPNow model is estimating an annualized drop of 2.2% in GDP, but analysts according to a Reuters poll are forecasting growth of 0.4%, down sharply from the Q4 pace of 2.4%.

The ADP employment survey is also out on Wednesday, along with the latest PCE inflation and consumption numbers. The all-important core PCE price index is expected to have risen by 0.1% month-on-month in March to give an annual figure of 2.5%, which would be a decrease from the prior 2.8%.

Personal consumption is forecast to have maintained month-on-month growth of 0.4%, suggesting that US households continue to spend at a healthy clip.

Other data on Wednesday will include the Chicago PMI as well as pending home sales. On Thursday, the Challenger Layoffs for April might attract some attention but the bigger focus that day will be the ISM manufacturing PMI. The index is expected to have declined in April from 49.0 to 47.9, with investors also likely to track the direction of the employment and prices sub-indices.

The real highlight, however, will be Friday’s nonfarm payrolls report, amid the intense speculation about how soon the Fed will cut rates. Jobs growth is projected to have slowed from 228k in March to 130k in April, with the unemployment rate staying unchanged at 4.2%. Average earnings probably grew by 0.3% in April.

A disappointing NFP print, combined with a soft core PCE reading could bolster expectations of a 25-basis-point rate cut in June as opposed to July, though bets for the May meeting would likely remain very low. For the US dollar, a worrying set of data would almost certainly be negative, but on Wall Street, stocks could rise if increased rate cut hopes are not overshadowed by recession fears.

BoJ to keep rates steady as outlook deteriorates

The Bank of Japan is not anticipated to announce any changes to its monetary policy settings when it meets on Thursday, as policymakers take time to assess the impact of Donald Trump’s tariffs on the Japanese economy before deciding whether to hike interest rates again.

Inflation in Japan edged up to 3.2% y/y in March as per the core CPI measure and the BoJ remains confident that the recent wage growth momentum is now becoming more sustainable. However, the downside risks to growth have increased markedly since February when Trump unleashed the first of many waves of tariffs, with Japan not being spared from the universal 10% levies, nor the sectoral tariffs on steel and autos.

The BoJ is therefore expected to lower its growth forecasts in its latest quarterly Outlook Report. The question is whether the Bank will also cut its inflation projections or keep them more or less unchanged. Policymakers don’t think at this stage that tariffs pose a significant danger to their inflation goal so they will probably keep the door to future rate hikes wide open.

If Governor Ueda goes a step further and explicitly signals that further rate hikes are likely in the coming months, this could boost the yen, which is enjoying strong safe-haven demand lately.

In terms of data, the preliminary industrial output for March is due on Wednesday, to be followed by some jobs stats on Friday.

Euro looks to flash GDP and CPI as uptrend stalls

The flash PMI numbers for April painted a grim picture for the Eurozone economy as businesses were hit by a new round of duties. With the impact of the US tariffs on global trade only now being felt, investors will probably ignore the preliminary GDP figures for the first quarter that are out on Wednesday.

Even if the euro area notched up impressive growth in the first three months of the year, this is unlikely to dampen rate cut expectations for the European Central Bank as inflation is falling and growth forecasts are being downgraded. ECB policymakers have already slashed rates by a total of 175 bps and have strongly hinted that they’re not done yet.

If Friday’s flash CPI data shows that inflationary pressures continue to subside, the ECB will have little reason to pause. The headline rate of CPI moderated to 2.2% y/y in March and is forecast to ease further to 2.0% in April.

The euro could come under some pressure if the CPI prints are on the soft side, but the primary driver in the FX domain will be the US dollar, and specifically, sentiment towards Trump’s trade policies. Fresh efforts by the White House to defuse tensions could spur another bounce in the US dollar, setting back the euro’s uptrend.

Australian CPI may not alter RBA bets

Inflation will also be in the spotlight in Australia where the quarterly CPI readings will be published on Wednesday. The Reserve Bank of Australia has only cut rates once during this cycle amid slow progress in getting inflation under control.

The monthly measure dipped from 2.5% to 2.4% y/y in February in a huge relief after rising for three consecutive months. The quarterly figure covering the first three months of 2025 is expected to inch lower too. But for the RBA, the underlying gauges of CPI might be more important. If they extend their decline in Q1 and the monthly rate also falls, there would be nothing stopping the RBA from cutting rates in May.

However, this may not necessarily trigger much reaction in the Australian dollar, as a 25-bps rate cut is already fully priced in for May and for almost every other meeting in the remainder of the year.

Aussie traders will also be watching the manufacturing PMIs out of China for any signs that the steep US levies are hurting the world’s second largest economy. Both the official and Caixin manufacturing PMIs are due on Wednesday.

Canadians to likely pick Carney as next PM

Canadians will be voting in a general election on Monday after former Bank of England and Bank of Canada governor Mark Carney called a snap vote following Justin Trudeau’s resignation. Carney’s Liberal party was all set to lose the election until Trump’s trade tirade reinvigorated the party among voters.

Trudeau’s and Carney’s handling of Trump’s threats to Canada’s economy as well as its sovereignty appear to have earned them plaudits, pushing the Liberals ahead of the Conservatives, who were poised for victory before the trade war escalation.

There’s still room for surprises, however, as the Liberals may fail to win a majority, and with their current coalition partners, the New Democratic Party, expected to lose most of its seats, a hung parliament may not go down well with Canada’s stock market and the local dollar.

But should the Liberals secure a majority, the Canadian dollar could gain slightly, although it’s likely to benefit more from a shock Conservative win, as they’ve pledged bigger tax cuts.

Source: XM

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Adam

Stocks

Economic

China–U.S. Trade War

Global financial markets are relatively stable heading into the end of the week, with risk appetite showing further signs of improvement. European equities are trading modestly higher, following rebounds seen earlier in Japan and Hong Kong. However, US futures are slightly in the red despite strong earnings reports from tech heavyweights Alphabet and Intel. Still, one supportive development is the continued pullback in US Treasury yields, with the 10-year dipping below 4.3% mark—viewed as a positive sign for US assets.

Meanwhile, the trade war front is seeing renewed speculation, especially regarding US-China tariff relations. According to multiple media reports, China has quietly granted tariff exemptions on some US goods—including integrated circuits—previously subject to its 125% retaliatory duties. While no formal statement has been issued by Chinese authorities, there are reports of internal government consultations with foreign businesses. A list of 131 product categories is circulating on social media is believed to outline those under consideration for exemption. These steps signal a possible softening of Beijing’s stance and a willingness to preserve critical supply chains.

Meanwhile, US President Donald Trump told Time magazine that China is actively engaging in talks with Washington to strike a tariff deal, and claimed that President Xi Jinping had recently called him. However, China’s Foreign Ministry declined to comment on Trump’s statement and previously warned the US to stop “misleading the public” about the status of bilateral negotiations. The conflicting narratives underscore the fog of uncertainty surrounding trade diplomacy, though market participants appear cautiously hopeful that both sides are seeking a path to de-escalation.

In the currency markets, the week’s performance leaderboard remains largely unchanged. Kiwi is holding firmly at the top. Sterling and Aussie are also among the week’s better performers. On the other end of the spectrum, Swiss franc, Japanese Yen, and Euro are lagging—reflecting fading safe-haven demand. Dollar and Loonie sit in the middle.

In Europe, at the time of writing, FTSE is up 0.28%. DAX is up 0.87%. CAC is up 0.65%. UK 10-year yield is down -0.021 at 4.482. Germany 10-year yield is up 0.018 at 2.471. Earlier in Asia, Nikkei rose 1.90%. Hong Kong HSI rose 0.32%. China Shanghai SSE fell -0.07%. Singapore Strait Times fell -0.21%. Japan 10-year JGB yield rose 0.03 to 1.34.

Canada retail sales fall -0.4% mom in Feb, but core spending offers rebound hopes

Canadian retail sales declined by -0.4% mom to CAD 69.3B in February, in line with market expectations. The overall weakness was driven primarily by a -2.6%mom drop in motor vehicle and parts dealers, with all four store categories in the subsector posting declines.

However, beneath the surface, the data showed encouraging signs. Core retail sales—which exclude fuel and vehicle-related sales—rose by 0.5% mom.

Looking ahead, Statistics Canada’s advance estimate points to a 0.7% mom increase in total sales for March.

SNB’s Schlegel: Growth may miss forecasts due to trade uncertainty

Swiss National Bank Chairman Martin Schlegel warned at the central bank’s annual general meeting that high levels of trade policy uncertainty continue to cloud the economic outlook.

“It remains very uncertain how inflation and the economy in Switzerland will develop,” Schlegel said, adding that “an economic slowdown cannot be ruled out.”

Growth forecasts are already under pressure, with SNB’s March projection of 1% to 1.5% GDP growth this year falling below Switzerland’s long-term average of 1.8%.

Schlegel reiterated that SNB stands ready to adjust policy if needed, including interest rate changes and foreign exchange interventions. However, he acknowledged the limits of monetary policy in addressing deeper structural uncertainty.

“Price stability cannot prevent trade policy uncertainty,” he cautioned, but emphasized that maintaining stable prices provides an essential foundation for the broader economy.

UK retail sales rise 0.4% mom in March, 1.6% qoq in Q1

UK retail sales surprised to the upside in March, rising by 0.4% mom, defying market expectations for a -0.3% mom decline.

The unexpected strength was attributed largely to favorable weather conditions, which lifted sales at clothing and outdoor retailers. However, this gain was partially offset by weaker performance at supermarkets.

Looking beyond the monthly figure, the broader quarterly performance painted an encouraging picture of consumer resilience. Retail sales volumes grew by 1.6% qoq 1.7% yoy in Q1. These results indicate that UK consumers remain relatively active despite broader economic uncertainties.

Tokyo CPI core surges to 3.4% in April, strengthening case for BoJ June hike

Inflation in Japan’s capital city surged in April, with Tokyo core CPI (excluding food) accelerating from 2.4% yoy to 3.4% yoy, above the 3.2% yoy forecast. The more domestically focused core-core measure (excluding food and energy) also rose sharply, from 2.2% yoy to 3.1% yoy. Headline CPI jumped from 2.9% yoy to 3.5% yoy.

Despite the upside surprise, BoJ is still expected to hold rates steady at its May 1 policy meeting as it gauges the broader impact of recent US tariffs and awaits progress in ongoing trade negotiations. However, with inflation gathering pace across key categories, market expectations are shifting toward a rate hike as soon as June.

USD/CHF Mid-Day Outlook

USD/CHF’s corrective recovery from 0.8038 is still in progress and intraday bias stays on the upside. Further rise would be seen but upside should be limited by 38.2% retracement of 0.9200 to 0.8038 at 0.8482. On the downside, below 0.8196 minor support will bring retest of 0.8038. Firm break there will resume larger down trend.

Markets Steady as US Yields Dip Amid Continuous Tariff Rumors_1

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress and met 61.8% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.8079 already. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.8794) holds. Sustained break of 0.8079 will target 100% projection at 0.7382.

Markets Steady as US Yields Dip Amid Continuous Tariff Rumors_2

source : actionforex

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Adam

Central Bank

Economic

China–U.S. Trade War

After years dominated by the pandemic, supply chains, energy and inflation, there was a new topic topping the agenda at the World Bank and International Monetary Fund’s Spring Meetings this year: tariffs.

The IMF set the tone by kicking off the week with the release of its latest economic forecasts, which cut growth outlooks for the U.S., U.K. and many Asian countries. While economists, central bankers and politicians have been engaged in panels and behind-the-scenes talks, many are attempting to work out whether trade tensions between China and the U.S. are — or perhaps are not — cooling.

Policymakers from the European Central Bank that CNBC spoke to this week broadly stuck a dovish-leaning tone, indicating they saw interest rates continuing to fall and few upside risks to euro zone inflation. However, all stressed the current high levels of uncertainty, the need to keep monitoring data, and the high risks to the growth outlook — sentiments also echoed by Bank of England Governor Andrew Bailey in his interview with CNBC on Thursday.

These were some of the main messages from ECB members this week.

Christine Lagarde, European Central Bank president

On inflation and monetary policy:

“We’re heading towards our [inflation] target in the course of 2025, so that disinflationary process is so much on track that we are nearing completion. But we have the shocks, you know, and the shocks will be a dampen on GDP. It’s a negative shock to demand.”

“The net impact on inflation will depend on what countermeasures are eventually taken by Europe. Then we have to take into account the [German] fiscal push by the defense investments, by the infrastructure fund.”

“We have seen successive movements, you know, announcement [of U.S. tariffs], and then a pause, and then some exemptions. So we have to be very attentive... Either we cut, either we pause, but we will be data dependent to the extreme.”

On market moves:

“When we had done our projections, we anticipated that... the dollar would appreciate, the euro would depreciate. It’s not what we saw. And there have been some counter-intuitive movements in various categories.”

“The German market has obviously been shocked in a positive way by the program soon to be put in place by the German government, with a commitment to defense, with a commitment to a big fund for infrastructure development.”

Klaas Knot, The Netherlands Bank president

On tariff uncertainty:

“If I look back over the last 14 years, in the initial days of the pandemic I think that was comparable uncertainty to what we have now.”

“In the short run, it’s crystal clear that the uncertainty that is created by the unpredictability of the tariff actions by the U.S. government works as a strong negative factor for growth. Basically, uncertainty is like a tax without revenue.”

On the inflation impact:

“In the short run, we will have lower growth. We will probably also have lower inflation. As we also see, the euro is appreciating as energy prices have also come down. So together with the sort of negative factor uncertainty in the short run, it’s crystal clear that it will accelerate the disinflation.”

“But in the medium term, the inflation outlook is not all that clear. I think there are still these negative factors. But in the medium term, you might get retaliation. You might get the disruption of global value chains, which might also be inflationary in other parts of the world than the U.S. only. And then, of course, we have the fiscal policy coming in in Europe. So this is actually a time in which you need projections.”

On a June rate cut and market pricing for two more ECB rate cuts in 2025:

“I’m fully open minded. I think it’s way too early to already take a position on June, whether it would be another cut. It will fully depend on these projections.”

“I would need to see a more structured analysis of the impact on the inflation profile ahead of us, and only then can I say whether the market is pricing fair or whether I don’t.”

Robert Holzmann, Austrian National Bank governor

On the need to wait for more data and news on tariffs:

“We have not seen this uncertainty now for years... unless the uncertainty subsides, by the right decisions, we will have to hold back a number of our decisions, and hence, we don’t know yet in what direction monetary policy should be best moved.”

“Before looking at data in detail, the question is, what kind of political decisions will be taken? Is it that we will have some tariff increases? Is it that we will have strong tariff increases? Is it that we will have retribution by high counter tariffs?”

On the ECB’s April rate cut:

“I think there’s a broad consensus [on rates]. But of course, at the margin, people differ.”

“My assessment is that at this time, it wasn’t clear yet to what extent [tariff] countermeasures were being taken. Because with countermeasures in Europe, prices may have increased. Without countermeasures, quite likely the price pressure is downward. And for the time being, we don’t know yet the direction.”

On the direction of interest rates:

“I think if the recent noises about an arrangement [on trade] were to be true, in this case, quite likely it is more towards the downside than the upside with regard to prices. But this can be changed with different decisions and the result of which, we may even imagine in [the] other direction. For the time being, no, it will be down.”

“There may be further cuts this year, but the number is still outstanding.”

Mārtiņš Kazāks, Bank of Latvia governor

On opportunity from tariffs:

“With all this uncertainty and vulnerability, this is also the time of opportunities for Europe.”

“It’s a time for Europe to grasp all the aspects of being an economic superpower and becoming a really fully-fledged political and geopolitical superpower, and this requires doing all the decisions that in the past, were not carried out fully.”

“This requires political will, political guts to make those decisions, and to strengthen the European economy and assert its place in a global world.”

On market reaction to tariffs:

“So far it seems to be relatively orderly ... but if one looks at the spillovers to Europe, the financial markets are working more or less fine, we haven’t seen spreads exploding or anything like that.”

“But in terms, however, of the macro scenarios, this uncertainty is extremely elevated in the sense that, given the possible outcomes, the multiple scenarios and their probabilities are very similar with the baseline [tariff] scenario.”

Source: cnbc

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Inflation job nearly done but tariff risks loom — What European Central Bank members said this week

Christine Lagarde, European Central Bank president

On inflation and monetary policy:

On market moves:

Klaas Knot, The Netherlands Bank president

On tariff uncertainty:

On the inflation impact:

On a June rate cut and market pricing for two more ECB rate cuts in 2025:

Robert Holzmann, Austrian National Bank governor

On the need to wait for more data and news on tariffs:

On the ECB’s April rate cut:

On the direction of interest rates:

Mārtiņš Kazāks, Bank of Latvia governor

On opportunity from tariffs:

On market reaction to tariffs:

Source: cnbc

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