Relief Rally Unfolds as Washington Hints at Softening Trade Stance
Markets rallied after US Commerce Secretary Howard Lutnick suggested that the Trump administration may reconsider certain tariffs, offering a glimmer of hope to investors rattled by prolonged trade tensions. US Treasuries held onto Tuesday’s losses, while the dollar strengthened against all G-10 peers as President Donald Trump defended his economic strategy.
Trump’s latest remarks on trade policy injected fresh volatility into markets, with the president warning of potential “disturbances” while touting his administration’s commitment to reshaping global commerce. The uncertainty weighed on risk-sensitive currencies, pushing the Australian dollar lower and erasing earlier gains in the South Korean won. Investors appear to be betting on a potential breakthrough in negotiations rather than pricing in the inflationary risks associated with additional tariffs.
China Expands Deficit as Economic Pressures Mount
Meanwhile, China took decisive fiscal measures, lifting its budget deficit to the highest level in three decades in an effort to combat deflation, a deepening property sector downturn, and trade frictions with the US. Policymakers also revised their inflation target downward to 2% from the longstanding 3% benchmark, signaling a shift in economic priorities. The yuan weakened slightly following the announcement, reflecting lingering concerns over China’s growth trajectory.
With global markets closely watching Washington and Beijing, traders should brace for continued volatility. SARACEN MARKETS analysts emphasize the importance of monitoring policy shifts, as any change in direction from the US or China could significantly impact asset prices in the days ahead.