It will be the turn of the US labor market to take center stage this week. Traders and analysts are anxiously watching all approaching economic data points. With growing fears that we may be approaching a peak in economic activity, the mood is somewhat electric. Recent indications of decelerating growth, along with some worrisome underlying fundamentals, have only added to that uncertainty. In addition, continuing uncertainty over US tariffs has created a new level of formidability among market players.
Mexico, for its part, has risen to beat Canada as the #1 exporter to the U.S. Recent Census Bureau figures indicate that exports were a robust $466.6 billion. This impressive number underscores Mexico’s essential role in the US economy, even as trade dynamics ebb and flow. As traders prepare for upcoming announcements, they are adopting a cautious approach, particularly concerning the anticipated announcement of ‘reciprocal tariffs’ on “Liberation Day” at 20:00 GMT.
Economic Signals Point to Caution
Slow growth indicators and alarming signs come at a pivotal moment. With rising threats from each of these factors, worry escalates over the durability of the US economic rebound. The US labor market’s performance in the coming days will be critical in shaping traders’ perceptions and actions. Many are indeed bracing for discouraging results that would serve to further undercut any budding economic optimism.
With heightened uncertainty hanging in the air, GBP/USD traded very mildly, staying above 1.2900 in a cautious European session on Wednesday. Sentiment among traders is extremely skittish. They are waiting to make new bets on big currency pairs until the new economic picture is more clear. The uncertainty Trump’s upcoming tariff announcement is creating is adding another layer of hesitance among market players.
“There is a lot less excitement about investing in the US at the moment, a stop and hold until there is more certainty,” – ECB President Christine Lagarde
Tariff Announcements and Global Implications
America’s farmers are already worried about the potential new tariffs that President Donald Trump has threatened. Folks are intently speculating about how such tariffs might affect the global economy. Specifically, Trump hopes to use these kinds of tariffs as one tool to strengthen the US economy and protect American producers. Doing so would risk creating trade fragmentation. As ECB board member Isabel Schnabel recently cautioned, this fragmentation is risking damaging long-term growth and inflation.
The current confusion over US tariffs have created a very real climate of fear at home and abroad. Looking ahead to 2024, Mexico, China and Canada now make up 42 percent of all US imports. As a result, even slight shifts in trade policy have the potential to significantly affect supply chains and market dynamics.
“It will be negative the world over and the density and the durability of the impact will vary depending on the scope, on the products targeted, on how long it lasts, on whether or not there are negotiations,” – ECB President Christine Lagarde
Global markets are on the lookout. US labor market, and the future of international trade relations remain closely watched by analysts eager to see how these developments will play out.
Market Reactions and Future Outlook
With traders eagerly awaiting the next round of tariff pronouncements, uncertainty is ripping through multiple asset classes. Gold’s price has bounced back above $3,130 after a mean reversal move earlier in the week on Monday. This stabilization likely shows a flight to safety as economic uncertainties have continued to increase.
As evidenced in our quarterly Market Outlook, market participants are still determining what the effect of these tariffs and other economic signals should be on their investment decisions. Key economic data aren’t offering clear directional guidance. Consequently, most are adopting a wait-and-see approach and sitting on their hands when it comes to new investments until further clarity comes into focus.