Copper rockets, tariff tensions and currency cues

Market wrap

As I flagged in my morning note, Asia’s session was always going to be a muddle, and that’s exactly how it played out. Traders struggled to find conviction, caught between soft U.S. consumer confidence data, geopolitical headline risk, and the ever-looming question mark over Trump’s April 2 tariff reveal.

Asian equities chopped around in a tight range Wednesday, with no real leadership or sectoral rotation to speak of—just a slow drift driven more by indecision than momentum. The exception? Dr. Copper, who clearly didn’t get the memo, trading like it’s got a one-way ticket north, betting on supply constraints.

Bottom line: risk appetite in Asia remains tentative, and until we get clarity on the tariff front—or a macro catalyst with real teeth—expect chop to be the name of the game.

Dr Copper’s moonshot

The U.S. looks set to drop the hammer on copper imports well ahead of schedule, with tariffs possibly landing in the coming weeks—way before the 270-day window initially laid out when Trump tasked the Commerce Department with launching the probe back in February.

While the investigation is technically still ongoing, the writing's on the wall. Trump has already signaled his play, making this more of a box-ticking exercise than a real deliberation. The street is bracing for impact, with some desks pricing in a 25% tariff hit, and let’s be clear—that would torch the copper flow and inject some serious volatility into an already tight market.

No official drop-dead date has been given, but word is that a resolution is expected well before the ink dries on the original timeline. The market’s not waiting to find out—copper’s already flying, with the arb between New York and London contracts blowing out to a record $1,400/ton. That’s not just noise—it’s a code red signal that traders are positioning aggressively for a supply squeeze.

If the tariffs go live, expect a wave of forced repositioning, volatility to spike, and the copper bulls to take the driver's seat. This isn’t just macro—it’s metal-on-metal, gloves-off stuff.

Europe and the Euro

European policymakers have finally been ripped out of their complacency, slapped into action by the cold reality of Trump 2.0 and the escalating countdown to a potential tariff tit-for-tat showdown. The newly unveiled blockbuster German fiscal bazooka is arguably the most significant pivot in EU macro policy since Draghi's "whatever it takes" moment—only this time, it's Berlin throwing the first punch, not the ECB.

From a market lens, this is no small thing. The €500 billion+ firepower, aimed at defense and infrastructure, not only shifts Germany out of austerity gear but injects a powerful fiscal multiplier that could drive a material pickup in euro area growth from 2026 onward. You’re already seeing early flickers of this in the ZEW and Ifo surveys, as confidence indicators begin to reprice the new policy paradigm.

But let’s not kid ourselves—the near-term risk balance is still leaning hard to the downside. All eyes are on next week’s U.S. 'reciprocal tariff' announcement, which could hit EU exporters like a freight train. We continue to expect broad-based measures targeting the so-called "Dirty 15", with Europe squarely in the blast radius. The risk of a full-scale trade war escalation remains non-trivial, especially as Washington leans into its pre-election protectionist playbook.

That said, Germany’s fiscal U-turn acts as a much-needed macro shock absorber. It won’t shield Europe from short-term trade hits entirely, but it does narrow the downside skew and lays the groundwork for a re-rating of European competitiveness over the medium term. For investors, this isn’t just a shift in tone—it’s a shift in trajectory. And for markets? It could mean the difference between capitulation and recalibration in the euro trade.

I’m expecting a bit more short-dollar capitulation across both G10 and Asia FX ahead of next week’s fireworks. Our contrarian long dollar play vs the euro—which raised a few eyebrows at the time—has aged nicely, while the long USD vs Asia FX basket was more consensus, but still delivering.

That said, we’re not in full profit-taking mode just yet. The setup still has room to run, but we’ll likely square up a good chunk of USD longs before the tariff hammer drops, assuming our in-the-money stops don’t take us out first. No point in getting greedy this close to headline risk.

In the very near-term, all eyes are on the scale and scope of President Trump’s reciprocal tariff announcement on April 2—a move that could serve as a major inflection point for both FX and rates markets. The immediacy of the risk means headline sensitivity will remain elevated, with potential for sharp repricing depending on how aggressive the measures turn out to be.

Still, I’m keeping just enough long dollar exposure on the book to make April 2 interesting. It’s shaping up to be one of those binary macro inflection points—and I’d rather show up to the table holding a few cards than watching from the rail.

The US side of the Dollar trade 

That said, looking further out, we’re starting to see cracks forming in the U.S. cyclical backdrop. While the dollar remains resilient for now, bolstered by sticky inflation and relative economic outperformance, the underlying momentum is slowing. As that reality filters through into the data and rate expectations shift accordingly, we believe it will set the stage for medium-term dollar weakness. Tariffs may be the spark in the short term, but the cooling macro engine could ultimately be the story that sticks for the dollar.

The real wildcard now is how much longer Trump lets the fire burn through risk markets and the real economy, both of which remain barometers he cares deeply about. And we’re still trying to game out the sequence of the much-hyped tax cuts and deregulation push. My base case? Those roll out after the Fed finally cuts, which could mean a longer wait than markets are currently priced for.

That’s why I’m increasingly convinced that underlying labor market dynamics are weaker than the headline numbers suggest. Let’s not forget that three-quarters of the new jobs under the previous administration were tied to government or public-sector agencies—and those roles are now squarely in the budgetary crosshairs. In other words, the real employment fragility may still be lurking under the surface, and when the axe swings, it won’t just hit the fat—it’ll cut through the facade.

Soft data overview

If you actually script your own models or plug real hard data into the machine—and completely tune out the noise from soft data—it becomes blatantly clear that the media (I won’t name names, but we all know which publications are running the anti-Trump, anti-U.S. narrative) has been framing the story to shape perception, not reflect reality.

What we’re seeing now is a classic case of sentiment chasing the narrative. Most people and even policymakers react to conditions as they’re told they exist, not necessarily as they are. And while soft data can move markets in the short run, it only affects hard data if the sentiment trend persists long enough to change real behavior—spending, hiring, investment, etc.

For many consumers—who aren’t quants, traders, or even lowly analysts—the media remains an incredibly powerful force in shaping narratives. Without access to raw data or market context, most people rely on headlines to frame their reality, and that narrative often becomes the lens through which sentiment, confidence, and even behavior are formed.

It’s not that people are misinformed—it’s that they’re informed selectively, and that can drive powerful feedback loops in both markets and politics. In the absence of hard data fluency, perception becomes reality, and in today’s media landscape, that perception is often preloaded with bias.