US equity markets roared back overnight, with massive gains across all of the bourse. Trump announced a temporary pause on ‘reciprocal tariffs’, while negotiations are under way, with 70-odd Countries. The relief from markets was manifest, with an explosion upwards in the Dow, Nasdaq and S&P. Markets are experiencing a massive roller-coaster ride and uncertainty breeds volatility. It appears that Trump has taken a chill-pill, on the rest of the world and decided to turn all guns on the resistant and rebellious, China. Trump has increased tariffs on China, then when retaliation arrived, doubled and tripled down. Who will blink first? The equity market tumult has also spread to the bond markets, with yields on the rise, sparking real concerns in the Trump administration. A big sell-off in bonds would be extremely uncomfortable and China have a lot to sell. The USD was softer overnight, with the EUR looking to regain 1.1000, while the GBP trades above 1.2700.The Trump administration announcement of a pause in tariffs, allowed the commodity currencies to regain some mojo. The AUD surged above 0.6100, while the NZD regained 0.5600. The RBNZ cut rates by 25 basis points, in line with expectations, and promised further cuts if the ‘tariff’ volatility continued. The focus for Trump is now China and this will determine the outcome of this trade war.
