Global financial markets are still seen moving in a narrow range as investors take a wait-and-see approach ahead of the release of the US (US) first-quarter Gross Domestic Product (GDP) data, which is expected to confirm a significant slowdown in the country's economic growth tonight.
Prolonged trade policy uncertainty and President Donald Trump's changing stance on import tariffs continue to cloud market expectations. At the same time, speculation about an interest rate cut by the Federal Reserve (Fed) is seen as providing only temporary relief.
Although sentiment has eased slightly following the easing of tariffs on the automotive sector and hopes for monetary policy intervention, the market still remains fragile. Tensions between the White House and the Fed have again escalated, becoming one of the main factors influencing market pricing at the moment.
Key Factors Driving Market Movements
US Economy Now at a Turning Point
The US economy is expected to barely grow in the first quarter of 2025, with consensus expectations of growth of just +0.1% (annualized), well below the +1.8% in the fourth quarter of 2024.
Key Headlines:
Business investment is contracting due to uncertain trade policy changes.
Supply chain disruptions and weak consumer demand are also weighing on growth.
Market Risks:
If GDP data is weaker than expected, markets may start pricing in a Fed rate cut in the near future.
Conversely, if the data is stronger, hopes for policy easing may fade, causing volatility in bond and currency markets.
Strategic View:
Today’s GDP result will be a key determinant of the direction of interest rates ahead of the May FOMC meeting. A GDP figure that fails to meet expectations could accelerate the Fed’s outlook to become more dovish.
Trump Loosens Auto Tariff Structure
President Trump signed an executive order to change the tariff structure on the auto industry by eliminating double taxes on imported components and end products.
Economic Impact:
The move is expected to help reduce costs in the automotive supply chain and curb inflationary pressures in durable goods.
Policy Signal:
The decision reflects the White House's political concern about the negative impact of trade policies on the economy.
Strategic Interpretation:
This may be an early sign of Trump's readjustment of his approach ahead of important data releases, and it could also open the way for tactical retreats on other trade issues.
Political & Economic Policy Landscape
White House-Fed Tensions Escalate
In his first 100 days in office, Trump once again targeted Fed Chairman Jerome Powell, criticizing policy delays and openly suggesting that monetary policy easing has been delayed for too long.
Policy Risk:
Political interference risks undermining the credibility of the Fed's communications. If the Fed were to cut rates after this, it could be seen as bowing to political pressure and confusing market interpretations.
Geopolitical Elements:
At the same time, Trump voiced support for high tariffs on China, but at the same time said that Beijing could adjust, thus adding to the confusion over the true direction of its trade policy.
Note:
The reliability of the Fed remains the main basis for the valuation of US assets. If it is seen to be too influenced by politics, the risk of market volatility could increase significantly.
Investor Sentiment & Market Strategy
The market is showing a classic consolidation pattern, moving horizontally with decreasing volatility. Investors are now caught between the reality of increasingly weak economic data and the hope of policy intervention from the Fed.
Investor Attitude: Most are still taking a cautious position by focusing on safe assets such as the high-quality bond market, low-risk investment strategies, and capital preservation.
Currency Market: The US dollar is currently moving horizontally, awaiting a clearer direction from economic data and Fed statements. Several market currencies have shown stability as speculation over a dovish Fed policy has increased.
Position View:
Remain neutral or defensive in equity markets.
Opt for an emerging market currency strategy backed by competitive real returns.
Conclusion
The market is currently in a delicate balance between the reality of an economic slowdown and hopes for monetary easing. Trump's uncertain trade policy moves, coupled with his open criticism of the Fed, have made macroeconomic projections increasingly difficult to predict.
Today's US GDP data release will be a key turning point. If the economic slowdown is confirmed, the Fed may have justification to start easing policy. However, if the numbers surprise with strength, hopes for a rate cut could be dashed and rekindle market volatility.
