On Tuesday morning Wall Street applauded a major rollback of tariffs as some kind of turnabout. This policy shift changed the incentive structure of the market and re-ignited trading activity. Traders rushed back into the market with urgency Tuesday following the holiday weekend. They were motivated to profit from all the pent-up cash and fueled by the FOMO– fear of missing out.
While not related to energy, the reversal of tariffs on Chinese imports was undoubtedly a major market mover, especially influencing European financial conditions. Currency pair GBP/USD was struggling to get above the all-important psychological level of 1.3500 during European trading on Wednesday. As it flew towards recovery, however, it took some important steps. This session was a major inflection point for the USDJPY FX pair, having been clawing back losses after a major drop last week.
The reactions on Wall Street were palpable. Analysts were quick to point out that the market’s reaction to the tariff rollback was more a reflection of overall investor mood. That one headline about tariffs was enough to set off a tsunami of activity, forcing traders to re-evaluate their positions and strategies.
“Tariff tango turns risk on rumba: Wall Street rips on the reversal” – FXStreet
As trading continued through the day, the GBP/USD’s challenge to the 1.3500 mark highlighted the currency’s resilience and potential for recovery. Market volatility increased significantly, and traders remained on edge. One thing the central bank’s team seems to have done well was to closely monitor any movement in the currency pair.
The extended weekend prior to this trading week allowed traders to collect their thoughts and formulate their battle plans. To that end, they truly delivered with a big comeback to action on Tuesday. New positive news regarding tariffs fanned traders’ hunger to challenge the market. This combination made for a vibrant trading culture.