- Trump’s tariffs caused widespread panic about the subsequent trade wars.
- On Thursday, Trump suspended tariffs on Canada and Mexico.
- Data this week revealed slower job growth in the US private sector.
Interest futures rebounded from lows hit in the previous session after news that Trump had suspended tariffs on Canada and Mexico. Fears of the impact of trade wars had raised fears about a slowdown in US economic growth. Meanwhile, market participants were gearing up for the US nonfarm payrolls report and Powell’s speech for clues on Fed policy.
Interest futures have collapsed since Tuesday, when Trump implemented tariffs on Canada, Mexico and the US. The wave of tariffs caused widespread panic about the subsequent trade wars. Moreover, all these countries were ready to respond with counter-tariffs.
As a result, risk appetite dropped, with investors dumping stocks and bonds. Moreover, worries about the US economy intensified. Trade wars would hurt major US companies that depend on exports and imports. As a result, the economy would slow down. This pushed traders to safe-haven assets like the yen and gold.
However, things changed on Thursday when Trump again suspended the tariffs on Canada and Mexico. He gave both countries another month to meet the new trade conditions. Meanwhile, the trade war with China remained. This brief relief paused the recent decline in interest futures.
However, in a month, the turmoil might return if Trump implements these tariffs. Moreover, he has promised a reciprocal tariff that could lead to a global trade war.
Meanwhile, traders are also keeping an eye on US data to see the state of the economy. Data this week revealed slower job growth in the private sector. There were 77,000 new jobs, compared to the forecast of 141,000.
US jobless claims (Source: Labor Department)
Meanwhile, unemployment claims fell from the two-year high hit last week. This eased fears about increased unemployment. A separate report showed that service sector business activity improved. Although some parts of the economy have remained resilient, some cracks have pushed traders to bet on more Fed rate cuts this year.
Market participants will watch for more clues when Powell speaks later in the day. Additionally, the US will release its nonfarm payrolls report. Economists expect the economy to add 159,000 new jobs, a slight increase from the previous month. Meanwhile, the unemployment rate might stay steady at 4.0%. A downbeat report will increase Fed rate cut bets, boosting interest futures. Meanwhile, a positive report will slash rate-cut bets.
