Markets are already showing signs of recovery after the sharp risk-off gap lower. The market selloff around tariffs appears overstated, likely exacerbated by thin trading conditions.
Recent U.S. tariff actions could be scaled back as negotiations progress, and markets tend to fill open gaps. The Canadian dollar saw significant weakness, hitting its lowest level against the U.S. dollar since 2003, prompting countermeasures from Canada.
There is growing confidence that this is a negotiating tactic by the US administration, ultimately aiming for more amicable resolutions. The market is also adjusting to a more unpredictable US president compared to his predecessors.
More talks are expected between the US, China, and other trading partners, with the US seeking progress without unsettling investors. Looking ahead, key data releases include US JOLTS job openings, factory orders, Fed and ECB speeches, and the New Zealand GDT auction.
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