Fed path rate 'very muddled' as Trump to push through deals

The “sell everything US related” narrative was alive and kicking in markets yesterday. Under normal periods of market stress or panic in the past, US assets have done well, given that they are viewed as just about the safest investments around.

This has turned on its head since last week, with market participants appearing to completely lose confidence in America’s standing as the pillar of exceptionalism. It's incredibly tough to gauge whether or not the dollar is at or near a bottom, as we simply don’t know what Trump’s next move on the tariffs will be.

Comments from senior White House officials suggest that deals may be closer than we think, and it's our view that Trump will want to force these through quickly in an attempt to avert gaze from the horror show that has been this particular tariff disaster.

Thursday’s US inflation data for March went slightly under the radar in markets, given that it is now pretty stale. The data fell well short of estimates, with the main rate posting its first MoM drop since the start of the pandemic, and dropping to just 2.4% YoY - its lowest level since September.

This may help facilitate a more aggressive pace of cuts from the Federal Reserve this year, but clearly all focus is on the impact of the tariffs on the US economy.

Should Powell and co. deem the tariffs to be inflationary (it seems difficult to see that they won’t be) then the path for rates becomes very muddled.