Markets are starting the week under significant pressure, driven by reactions to tariff announcements made late last week. The global tone is one of caution and uncertainty as investors assess the broader economic fallout and await potential policy responses.

Market Overview

• USD/CAD: Down 0.22%.
• GBP/USD: Down 0.7%, underperforming against the U.S. dollar.
• EUR/USD: Flat, slightly weaker to start the week.

Global Equities Slide Sharply

• Asian markets led the sell-off, with the Hang Seng Index falling 13.2% and Japan’s Nikkei closing down 7.83%.
• In the U.S., equity markets are extending losses from Thursday and Friday, with major indices down an additional 2% to 4% in early trading. Comments about potential tariff delays from the White House have reversed markets.
• Crude oil is also under pressure, with prices down 1.9%, reflecting fears of slowing global demand.

Tariff Fallout: Focus Turns to Retaliation and Relief Measures

• The market remains highly focused on how other countries will respond to U.S. tariffs, particularly in terms of retaliatory measures or negotiations.
• Concerns are rising around disrupted trade flows, corporate earnings impacts, and consumer price pressures.
• While Canada appears to have been less impacted initially, the situation remains fluid. There are rumors of potential fiscal measures in Canada and targeted relief in the UK aimed at buffering the economic fallout.

Rate Cut Expectations Begin to Emerge

• In the U.S., rate cut expectations are beginning to surface, as the Fed may face increasing pressure to act preemptively in response to weakening equity markets and broader economic signals.
• Market participants are watching closely for any formal commentary from the Fed, which could shape short-term sentiment across asset classes.

Outlook

The focus this week will be on:

• Potential retaliation or negotiation efforts from trading partners.
• Fiscal and monetary policy responses from global central banks and governments.
• Further equity market volatility and the knock-on effects for currencies, commodities, and rates.

As the situation develops, market participants remain on high alert for policy clarity, especially any indications of tariff relief, stimulus measures, or central bank intervention aimed at stabilizing financial conditions.