Headline fatigue and healing exhaustion

Asian equities and U.S. stock index futures slipped while the dollar held firm, but gold stole the show, ripping higher and completely breaking its usual correlation. With settlement risks mounting and safe-haven demand surging, gold briefly touched $2,940, setting a fresh record as gold fever reached a boiling point.

The latest market jitters come after President Donald Trump slapped a 25% tariff on all U.S. steel and aluminum imports, reigniting global trade tensions. The fallout was evident across Asia, with a broad gauge of regional equities sliding; Japanese markets were closed, leaving liquidity thinner than usual. Meanwhile, U.S. futures eased in what can only be described as a nothing burger move—traders clearly suffering from a case of headline fatigue and healing exhaustion after weeks of tariff whiplash.

Looking ahead, all eyes are on Fed Chair Powell’s testimony before the Senate Banking Committee, where he is unlikely to stray far from the FOMC’s current neutral stance. Markets will be combing through his remarks for any hints on inflation and the future rate path, but barring any major surprises, the focus will likely remain on the broader trade war drama.

The NFIB Small Business Index is also on the docket, and while the employment sub-index might get a glance, it’s doubtful that this tier-two data point will shift the narrative ahead of more critical inflation numbers later this week.

For now, gold remains the standout performer, defying rate and dollar strength as settlement risks and geopolitical uncertainty continue to push investors toward the yellow metal. The question now is: How long before the next Trump tariff headline throws rocket fuel on the rally?

Forex view

We reloaded a scalable short on EUR/USD as the market continues to grapple with a fundamental shift—global rates are moving out of sync with U.S. yields, and the euro swap curve is marching to its own beat. Trump’s tariff playbook is fueling asymmetric rate reactions, pushing U.S. inflation expectations higher while potentially slamming the brakes on growth and inflation in targeted economies.

We’ve already seen this divergence play out—when Trump first threatened tariffs on Canada, Mexico, and China, markets rushed to price in more ECB cuts while the Fed’s outlook took a hawkish tilt. But what’s really intriguing? The market’s almost indifferent response to the latest steel tariffs. No major moves, no real volatility—almost like traders have become numb to the noise. Either that, or they believe Trump is just throwing out negotiating bait rather than setting the stage for an all-out trade war.

But here’s where the real opportunity lies: The widening rate spread between the U.S. and Europe is a trade that still has room to run. The 10-year euro vs. 10-year SOFR swap spread is sitting at 175bps, still a breath away from the 185bps peak we saw back in 2018. We see more downside for the front end of the euro curve in the near term, and the spillover across the curve will only reinforce pressure on the back end.

Bottom line? It’s the divergence trade that keeps rewarding dollar bulls. Unless the ECB suddenly finds a reason to push back against easing bets, or Trump somehow dials down the tariff rhetoric (not likely), the euro is going to remain a prime short candidate. The market may be slow to react, but the cracks are forming, and we’re here to take advantage before the herd wakes up.