Market news & insights

In 2025, the S&P 500 traded around 6,835 and was up approximately 16% year to date (YTD). Market direction remained most sensitive to Federal Reserve expectations, inflation data and the earnings outlook, with returns also shaped by mega-cap tech leadership and the broader AI narrative. The index pulled back from earlier December highs, but it has so far held above key major moving averages (MA).

Key 2025 drivers included:

• ‍Fed expectations and inflation: Inflation cooled through the year but remained sticky around 2.5% to 3%. A Fed easing bias likely supported price to earnings (P/E) multiples and “risk-on” positioning. More recently, markets appeared increasingly rate-sensitive, with the decreased likelihood of an additional rate cut until March 2026.
• ‍Earnings and guidance: Corporate earnings remained strong quarter on quarter. Recent Q3 results reportedly saw over 80% of the S&P 500 beat earnings per share (EPS) expectations. For Q4, the estimated year-over-year earnings growth rate is 8.1%, despite ongoing concerns around import tariffs and potential margin pressure.
• ‍Index leadership and breadth: Returns were heavily influenced by mega-cap tech and AI beneficiaries, even as broader market breadth appeared less consistent at points through the year.
• ‍Policy headlines and volatility: Trade and tariff headlines drove sharp moves, particularly earlier in the year. Some investors pointed to the “TACO” trade, with rapid recoveries after policy proposals were softened. Over time, similar shocks appeared to have less impact as the market became somewhat desensitised.
• ‍Valuations and sensitivity: The forward 12-month P/E ratio for the S&P 500 is 22, above the 5-year average (20.0) and above the 10-year average (18.7). That gap kept valuation sensitivity, especially in AI-linked names, firmly in focus.

Current state

The S&P 500 is about 1% below record highs hit earlier in December. That could indicate the broader uptrend remains in place, with a move back toward the recent highs one possible scenario if momentum improves. Despite the recent retracement, the index remains above all key major moving averages (MA). The latest bounce followed lower than expected CPI numbers earlier this week, alongside continued, and to some, surprising optimism about what may come next.

What to watch in January

• ‍Q4 earnings from mid-January: Results and guidance may help clarify whether valuations are being supported by forward expectations.
• ‍AI narrative and positioning: With AI-linked mega-caps carrying a large share of market capitalisation, changes in sentiment or expectations could have an outsized impact on index performance.
• ‍US jobs and CPI data: The latest US jobs report reportedly points to the highest headline unemployment rate since 2021. Cooling inflation this week may keep markets alert to shifts in rate cut timing, particularly around the March decision.

S&P 500 daily chart

Major FX pairs

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AUD/USD

AUD/USD has been choppy in 2025. Since the “redemption day” drop in April, the move has looked more like a steady grind higher than a clean upside trend.

Key levels
Recent peaks in early September and mid-December highlight resistance near 0.6625. Support has been evident around 0.6425, where price bounced over the last month.

What is supporting the bounce
That support test coincided with stronger than expected jobs and inflation data, lifting expectations that the Reserve Bank of Australia (RBA) may raise rates during 2026 rather than cut again. The latest pullback looks contained so far, with buying interest already visible and price still above key longer-term moving averages.

What could drive a breakout
The pair remains range-bound, but the tilt is still constructive. If Chinese data stays firm, metals prices hold up, and the central bank outlook remains relatively hawkish, a break above resistance could gain more traction.

AUD/USD daily chart

EUR/USD

After early 2025 euro strength, EUR/USD has mostly consolidated since June in a roughly 270 pip range. This month tested 1.18 resistance, reaching highs not seen since September.

What price is doing now
The recent pullback still lacks strong downside conviction. Some technical analysts refer to the 1.17 area as a near-term reference level.

What could come next
If price holds 1.17 and buyers step back in, another push toward 1.18 is possible. One view is that the European Central Bank (ECB) could be less inclined to ease in 2026, which could be consistent with a firmer EUR/USD scenario. Broader analyst commentary also suggests the euro may stall rather than collapse against the US dollar, although outcomes remain data and policy dependent.

EUR/USD daily chart

USD/JPY

Year-to-date picture
USD/JPY is close to flat overall for the year. After US dollar weakness in Q1, the pair reversed higher and now sits just below resistance near 158.

Rates remain the main driver
Rate differentials still favour the US dollar. The Bank of Japan (BOJ) held steady for much of the period despite expectations it might act, and the recent rate increase was modest. Policy has only moved marginally away from zero.

What could shift the balance
Rate differentials remain a key influence. Without a clearer shift in BOJ policy, the JPY may find it difficult to sustain a rebound. Some market commentators cite 154.20 as a chart reference level.

USD/JPY daily chart

Markets have bounced back strongly this week. The S&P 500 is now just 1.5% from record highs, and the Nasdaq is recovering well following its pullback.

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Rate Cut Expectations

The main driver behind this rally was a shift in Federal Reserve rate cut expectations. Markets are currently pricing in a quarter-point rate cut for December, with only a 25% chance of another reduction in January. This week's economic data will be crucial in shaping expectations going into 2026.

Key Economic Data This Week

Several important data releases are scheduled for this week.  The PCE inflation data — the Fed's preferred inflation measure — for September will finally be released on Friday and could have the biggest impact on December and January rate decisions. The ADP jobs report and weekly jobless claims will also be released, while the non-farm payrolls report has been delayed again.

Global Manufacturing Snapshot

Today also kicks off a busy week of manufacturing data releases. Global PMI numbers are due across the board, including figures from the Eurozone, UK, Germany, and the US this evening. These reports will provide a critical snapshot of global economic health and could help reveal the impact of the US trade tariffs.

Gold Breaks Higher

Gold made a significant move on Friday, breaching the key $4,200 level after consolidating last week. The precious metal has followed through today, and the $4,400 level now looks achievable if buying pressure continues.

Bitcoin Under Pressure

Bitcoin has given up last week's modest gains and seen substantial selling pressure. A significant drop of about $4,000 occurred during Asian trading this morning — a notable decline for an Asia session. The key level to watch is $84,000, with potential support at $80,000 (the lowest level since March).

Market Insights

‍Watch Mike Smith's analysis of the week ahead in markets.

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Key Economic Events

‍Stay up to date with the key economic events for the week.

The decision to scale (increase the traded lot size of a specific EA) should be based on statistical evidence that indicates your EA has the potential to perform to certain expectations. 

Equal weight should be given to the decision to scale, as to the initial decision to deploy an EA. This guide provides an indicative approach on how to put together and action your scaling plan.

Before You Start Your Scaling Plan

Important: this should be an individual plan that is consistent with your personal trading objectives, your EA portfolio, and your personal financial situation (including account size).

We are going to use a starting lot of 0.10 per trade in the examples in this document —you want to adjust this based on your own risk tolerance.

Whatever your chosen lot size start point, EA scaling should be a pre-planned incremental approach, scaling stepwise based on performance metrics you are seeing in your live trading account.

You should also have assessed the current margin usage of your EA portfolio exposure to ensure that any scaling and related increased margin requirements are appropriate to the size of your account. 

Suggested Scaling Baseline Requirements

Scaling should only be performed when your EA is performing to what you deem to be a good standard. To make this judgment, you need to set some minimum performance standards.

The past performance of your EA is not a guarantee of future performance. If market conditions change, you must remain vigilant and continue to measure performance on an ongoing basis for every live EA you have.

You need to define the key metrics that are important to you. 

Two important metrics to include are:

• The number of trades: to provide some evidence of reliability 
• The period of time: to have had exposure to at least some variation in market conditions

Example of how you may lay your metrics out in a table:

Some may choose to include proximity to original expectations of other metrics, such as minimum win rate, average profit in winning trades, and average loss in those that go against you. 

It should only be after your metrics are met that lot scaling begins on any specific EA.

Lot Size Scaling Ladder

Below is an example of a performance-based scaling plan assuming a 0.10-lot baseline.

Again, this is indicative. It provides a framework with clear review dates and an approach that illustrates incremental scaling. You must still define a regime that is right for your specific trading objectives. 

Risk Guardrails

It is vital to keep an eye on your general account risks and have limits in place that guide your EA use.

Such limits must be constant across all stages of scaling and referenced beyond the risk of a single EA, but to your portfolio as a whole.:

Per-Trade Risk (Nominal)

Trade risk for any one trade should be seen in the context of account size and the dollar risk based on the risk parameters you have set for your EA. 

Specify a maximum percentage of the account balance — a $200 loss is more impactful on a $1000 account compared to a $10,000 account. 

Stick to what is right for you in terms of your tolerable risk level based on your trading objectives and financial situation. A common suggestion is a 1-2% risk of account equity per trade. 

Total Open Exposure

Specifying maximum exposure in the number of EAs open at any time and those that use the same asset class is important for overall portfolio risk management. 

There are tools you can use to monitor exposure risk generally, as well as those that can be used to indicate single asset exposure.

Margin Usage

It is always desirable that your set exit approaches and parameter levels are what your exits are based on. It should not be because your margin usage has meant you have moved into a margin call situation. 

Specify a minimum level to adhere to and make sure that your account is sufficiently funded. If volatility or slippage rises (e.g., news events or illiquid sessions), reduce lot size temporarily.

Scaling Psychology – Managing “Big Numbers”

As lot sizes rise, your emotions may respond accordingly when you see the larger dollar amounts that your EA is generating. 

If you are used to seeing an average profit of $100 and average loss of $50, and suddenly you are seeing significantly bigger numbers, it creates an emotional challenge where you may be tempted to do a “discretionary override”. 

Although there are situations, such as major market events, overexposure in a specific asset, or VPS or account system problems, where such intervention may be considered, generally this would distort the actual performance evaluation of your EA and is not encouraged (unless it is pre-planned).

The table below presents some of the generally accepted challenges and offers suggestions on how to manage them. 

Your Plan Into Action…

In practical terms, your scaling plan should have two components:

1. The key parameters for action on your chosen key metrics
2. Specified periodic review times to make your next scaling decision

This is not a race. Having systems in place facilitates creating the opportunity that scaling brings while still mitigating the risks.

The “Magnificent Seven” technology companies are expected to invest a combined $385 billion into AI by the end of 2025.

‍Microsoft is positioning itself as the platform leader. Nvidia dominates the underlying AI infra. Google leads in research. Meta is building open-source tech. Amazon – AI agents. Apple — on-device integration. And Tesla pioneering autonomous vehicles and robots.

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With such enormous sums pouring into AI, is this a winner-take-all game?

Or will each of the Mag Seven be able to thrive in the AI future?

Microsoft: The AI Everywhere Strategy

Microsoft has made one of the biggest bets on AI out of the Mag Seven — adopting the philosophy that AI should be everywhere.

Through its deep partnership with OpenAI, of which it is a 49% shareholder, the company has integrated GPT-5 across its entire ecosystem.

‍Key initiatives:

• GPT-5 integration across consumer, enterprise, and developer tools through Microsoft 365 Copilot, GitHub Copilot, and Azure AI Foundry
• Azure AI Foundry for unified AI development platform with model router technology
• Copilot ecosystem spanning productivity, coding, and enterprise applications with real-time model selection
• $100 billion projected AI infrastructure spending for 2025

Microsoft’s centrepiece is Copilot, which can now detect whether a prompt requires advanced reasoning and route to GPT-5's deeper reasoning model.

This (theoretically) means high-quality AI outputs become invisible infrastructure rather than a skill users need to learn.

However, this all-in bet on OpenAI does come with some risks. It is putting all its eggs in OpenAI's basket, tying its future success to a single partnership.

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Google: The Research Strategy

Google’s approach is to fund research to build the most intelligent models possible. This research-first strategy creates a pipeline from scientific discovery to commercial products — what it hopes will give it an edge in the AI race.

‍Key initiatives:

• Over 4 million developers building with Gemini 2.5 Pro and Flash
• Ironwood TPU offering 3,600 times better performance compared to Google’s first TPU
• AI search overviews reaching 2 billion monthly users across Google Search
• DeepMind breakthroughs: AlphaEvolve for algorithm discovery, Aeneas for ancient text interpretation, AlphaQubit for quantum error detection, and AI co-scientist systems

Google’s AI research branch, DeepMind, brings together two of the world's leading AI research labs — Google Brain and DeepMind — the former having invented the Transformer architecture that underpins almost all modern large language models.

The bet is that breakthrough research in areas like quantum computing, protein folding, and mathematical reasoning will translate into a competitive advantage for Google.

Today, we're introducing AlphaEarth Foundations from @GoogleDeepMind , an AI model that functions like a virtual satellite which helps scientists make informed decisions on critical issues like food security, deforestation, and water resources. AlphaEarth Foundations provides a… pic.twitter.com/L1rk2Z5DKk

— Google AI (@GoogleAI) July 30, 2025

Meta: The Open Source Strategy

Meta has made a somewhat contrarian bet in its approach to AI: giving away their tech for free. The company's Llama 4 models, including recently released Scout and Maverick, are the first natively multi-modal open-weight models available.

‍Key initiatives:

• Llama 4 Scout and Maverick - first open-weight natively multi-modal models
• AI Studio that enables the creation of hundreds of thousands of AI characters
• $65-72 billion projected AI infrastructure spending for 2025

This open-source strategy directly challenges the closed-source big players like GPT and Claude. By making AI models freely available, Meta is essentially commoditizing what competitors are trying to monetize. Meta's bet is that if AI models become commoditized, the real value will be in the infrastructure that sits on top. Meta's social platforms and massive user base give it a natural advantage if this eventuates.

Meta's recent quarter was also "the best example to date of AI having a tangible impact on revenue and earnings growth at scale," according to tech analyst Gene Munster.

However, it hasn’t been all smooth sailing for Meta. Their most anticipated release, Llama Behemoth, has all but been scrapped due to performance issues. And Meta is now rumored to be developing a closed-source Behemoth alternative, despite their open-source mantra.

Amazon: The AI Agent Strategy

Amazon’s strategy is to build the infrastructure for AI that can take actions — booking meetings, processing orders, managing workflows, and integrating with enterprise systems.

Rather than building the best AI model, Amazon has focused its efforts on becoming the platform where all AI models live.

‍Key initiatives:

• Amazon Bedrock offering 100+ foundation models from leading AI companies,  including OpenAI models.
• $100 million additional investment in AWS Generative AI Innovation Center for agentic AI development
• Amazon Bedrock AgentCore enabling deployment and scaling of AI agents with enterprise-grade security
• $118 billion projected AI infrastructure spending for 2025

The goal is to become the “orchestrator” that lets companies mix and match the best models for different tasks.

Amazon’s AgentCore will provide the underlying memory management, identity controls, and tool integration needed for these companies to deploy AI agents safely at scale.

This approach offers flexibility, but does carry some risks. Amazon is essentially positioning itself as the middleman for AI. If AI models become commoditized or if companies prefer direct relationships with AI providers, Amazon's systems could become redundant.

Nvidia: The Infra Strategy

Nvidia is the one selling the shovels for the AI gold rush. While others in the Mag Seven battle to build the best AI models and applications, Nvidia provides the fundamental computing infrastructure that makes all their efforts possible.

This hardware-first strategy means Nvidia wins regardless of which company ultimately dominates. As AI advances and models get larger, demand for Nvidia's chips only increases.

‍Key initiatives:

• Blackwell architecture achieving $11 billion in Q2 2025 revenue, the fastest product ramp in company history
• New chip roadmap: Blackwell Ultra (H2 2025), Vera Rubin (H2 2026), Rubin Ultra (H2 2027)
• Data center revenue reaching $35.6 billion in Q2, representing 91% of total company sales
• Manufacturing scale-up with 350 plants producing 1.5 million components for Blackwell chips

With an announced product roadmap of Blackwell Ultra (2025), Vera Rubin (2026), and Rubin Ultra (2027), Nvidia has created a system where the AI industry must continuously upgrade to Nvidia’s newest tech to stay competitive.

This also means that Nvidia, unlike the others in the Mag Seven, has almost no direct AI spending — it is the one selling, not buying.

However, Nvidia is not indestructible. The company recently halted its H20 chip production after the Chinese government effectively blocked the chip, which was intended as a workaround to U.S. export controls.

Apple: The On-Device Strategy

Apple's AI strategy is focused on privacy, integration, and user experience. Apple Intelligence, the AI system built into iOS, uses on-device processing and Private Cloud Compute to help ensure user data is protected when using AI.

‍Key initiatives:

• Apple Intelligence with multi-model on-device processing and Private Cloud Compute
• Enhanced Siri with natural language understanding and ChatGPT integration for complex queries
• Direct developer access to on-device foundation models, enabling offline AI capabilities
• $10-11 billion projected AI infrastructure spending for 2025

The drawback of this on-device approach is that it requires powerful hardware from the user's end.  Apple Intelligence can only run on devices with a minimum of 8GB RAM, creating a powerful upgrade cycle for Apple but excluding many existing users.

Tesla: The Robo Strategy

Tesla's AI strategy focuses on two moonshot applications: Full Self-Driving vehicles and humanoid robots.

This is the 'AI in the physical world' play. While others in the Mag Seven are focused on the digital side of AI, Tesla is building machines that use AI for physical operations.

‍Key initiatives:

• Plans for 5,000-10,000 Optimus robots in 2025, scaling to 50,000 in 2026
• Robotaxi service targeting availability to half the U.S. population by EOY 2025
• AI6 chip development with Samsung for unified training across vehicles, robots, and data centers
• $5 billion projected AI infrastructure spending for 2025

This play is exponentially harder to develop than digital AI, and the markets have reflected low confidence that Tesla can pull it off.

TSLA has been the worst-performing Mag Seven stock of 2025, down 18.37% in H1 2025.

However, if Tesla’s strategy is successful, it could be far more valuable than other AI plays. Robots and autonomous vehicles could perform actual labour worth trillions of dollars annually.

The $385 billion Question

The Mag Seven are starting to see real revenue come in from their AI investments. But they're pouring that money (and more) back into AI, betting that the boom is just getting started.

The platform players like Microsoft and Amazon are betting on becoming essential infrastructure. Nvidia’s play is to sell the underlying hardware to everyone. Google and Meta compete on capability and access. While Apple and Tesla target specific use cases.

The $385 billion question is which of the Magnificent Seven has bet the right way? Or will a new player rise and usurp the long-standing tech giants altogether?

‍You can access all Magnificent Seven stocks and thousands of other Share CFDs on GO Markets.

There are few trades as appealing, or as risky, as trying to catch a market reversal. The idea of entering at the turning point and riding the new trend is exciting. However, most traders fail to consistently produce good trading outcomes on this potential, often entering too early without confirmation, and thus get caught at a pause point of a continuing powerful move.Trend reversals can indeed offer excellent reward-to-risk potential, but as with any trading approach, only when approached systematically, the confluence of key factors, and timing.

What Is a High-Probability Entry?

Before diving into reversals specifically, let’s define what we mean by a high-probability entry.A high-probability entry is a trade taken in conditions where:

• There is clear evidence from price action and structure
• There is an alignment with the overall market context, such as timing, favourable price levels, and volatility
• Risk can be logically defined and limited to within your tolerable limits
• It may offer a favourable risk-to-reward profile (providing you execute following a pre-defined plan)

This approach should underpin all trading strategy development. And be consistently executed according to your defined rules, which must be constantly reviewed and refined based on trading evidence.

Reversal vs. Retracement: Know the Difference

Many traders confuse a retracement with a reversal, often with potentially costly consequences. It is ok to exit on a retracement and be ready to go again if there is a breach of the previous swing high. But this must be part of your plan, with a strategy for trend continuation in place. However, if your plan suggests that you DON’T want to exit on retracements, then the following table gives some guidance on what potential differences may be. RetracementReversalA temporary move against the trendA complete shift in directional controlPrice often continues in original directionPrice begins trending in the opposite directionHealthy part of a trend’s rhythmMarks the end of a trendTypically shallow, to a Fib/MA/structureOften deep, may break previous swing structureVolume often reduced after swing high if long or swing low if short.Volume often increased after swing high if long or visa versa.

Understanding Trend Exhaustion

Before any reversal occurs, the existing trend must show signs of exhaustion. This is the first phase of a potential turning point — and one of the most overlooked.

How Trend Exhaustion Looks on a Chart:

• Climactic candles – multiple wide-range bars with expanding bodies.
• Failed breakouts – price pushes through a level but fails to hold.
• Reduced momentum – smaller candles, overlapping wicks, indecision bars.
• Volume spikes with no follow-through – smart money distributing or exiting.
• Multiple tests of the same level – a sign that the trend is running out of energy.

The Anatomy of a High-Probability Reversal

A strong reversal setup typically has three key factors that can be supportive of a of follow-through.

1. Location – Price at a Key Zone

• Major support/resistance level honoured
• Prior swing highs or lows at a similar price point
• Higher timeframe structure – I,e, agreement on a 4 hourly chart as well as an hourly.

In simple terms, if the price isn’t at a meaningful location, a meaningful reversal is less likely to occur.

2. Previous Signs of Trend Exhaustion

We have covered this above, with evidence that the current trend has now weakened, and there is some justification to prepare to enter a counter-trend.

3. Structural Confirmation

This is the trading trigger you are looking for as a potential signal for entry. Structural confirmation transforms an idea (“the price might reverse”) into an actual setup (“the reversal is underway”).Look for the following four signs:

• Trendline or key short-term moving average breached
• Lower highs and lower lows in an uptrend or higher lows in a downtrend
• Confirmation that a key swing point has been honoured
• Evidence that a retest and rejection of the broken structure has occurred.

This shows that momentum has not just stalled, it has now shifted.

Context Filters

Reversals are more likely to succeed when conditions are supported by other factors. This is to do with the identification of a strong market context where reversals are more likely to happen. These may include:

• Time of day: The open of London or US sessions, or into session close when there may be some profit taking on a previously strong move
• Volatility extremes: Price has expanded beyond its normal daily range (ATR-based or visually evidenced on a chart)
• Market sentiment: Everyone is already long at the top or short at the bottom — setting up for a squeeze
• Catalysts: Reactions to news, or data, that may cause a significant one-sided move

Adding context could make the difference between a technically correct trade and one that may offer a higher probability of going in your desired direction.

Recognising Common Reversal Patterns

There are classic chart patterns that may help visually reinforce the principles. They reflect exhaustion, rejection, and structural change, and may encourage many traders to follow the move, adding extra momentum to any initial move. PatternSignal TypeKey ClueConfirmation NeededDouble Top/BottomReversal StructureRepeated rejection of key levelBreak of swing low/high between peaksHead & ShouldersMomentum FailureFailed retest after strong pushNeckline breakPin BarExhaustion CandleSharp rejection with long wickOpposite-direction close after the pinEngulfingSudden Power ShiftOne candle overtakes previous rangeFollow-through candleRounding Top/BottomSlow Institutional TurnGradual stalling and reversalNeckline break of curveBreak of Structure (BoS)Structural ConfirmationNew higher low/lower high, support breakRetest and failure to reclaim broken level⚠️ These patterns should not be traded in isolation. Use them with context and only after signs of exhaustion and structure shifts.

FOUR Trader Reversal Traps to Avoid

Even with a solid framework, it’s easy to fall into common traps:

1. Trying to pick the exact top or bottom - Wait for price to prove the turn, don’t anticipate and enter early
2. Entering against the higher timeframe trend – Zooming out and checking alignment with higher timeframes may be prudent to reduce the likelihood of having to fight momentum on larger timeframes.
3. Trading every reversal signal - Not all signals are valid or particularly strong. Look for the confluence of multiple factors covered earlier, not just the presence of a pattern.
4. Letting bias override evidence - Just because you want a reversal to happen, it NEVER  means it is there unless backed up by evidence.

Don’t Forget the Full Trading Story

A great setup means nothing without excellent execution. These ESSENTIAL facts are critical as with any trade, but there will never be an apology for reinforcing these.

Patience and execution discipline

Wait for your full criteria to be met. Avoid “almost” setups that feel tempting but don’t fully align with your full plan criteria. Likewise, when all your boxes are ticked, then take action.

Exit strategy

Use a mix of targets, structure-based trails, or scaling out, and know in advance how you’ll manage the trade once it starts moving.High-probability entries are only one part of a winning trade. Exit efficiently or you’ll waste great entry setups because of poor execution. There are many traders in this position; make sure you are not one of them.

Summary

High-probability reversals are not about being right at the top or bottom when you enter; this is rarely possible and adds additional risk without confirmation. They are about recognising and being ready when the trend is potentially changing, and taking action when:

• Price is at a key level
• The current trend shows clear signs of exhaustion
• Structure confirms the shift
• And context supports the move

Trade the evidence and your plan, not just what you think is likely to happen. Be patient, be ready, and when the setup is there, execute your trade with confidence.

Global markets continue to search for anything they can grasp onto that points to possible signs of progress on global trade tensions, and by anything, we do mean ‘anything’ – truth social posts, X posts, this person heard from this person something tangible. It shows just how volatile this current market really is that inuendo and whim is being treated as fact.Back in the ‘tangible’ real world, the other white knight that is being watched ever closely is some form of possible policy backstop from central banks - Particularly the Federal Reserve. Considering the President’s consistent input here that US rates should be lower either through a post or a media rant, so far this has not moved the Fed one inch.While the recent 90-day tariff pause from Liberation Day has provided a temporary market reprieve, the underlying trade tensions, especially between the U.S. and China, remain largely unresolved. In fact, we would argue they are only getting stronger as nations and blocs are now looking to each other to offset the US trade impasse.China remains the most consequential player in this landscape, and despite the pause, the effective U.S. (weighted-average) tariff rate on goods has only fallen modestly, just 3%, from a 24% peak to 21% year-to-date.Beijing appears to be holding the ‘better hand’ currently; the additional back down from Washington with its ‘exemption’ on electronics is case in point. Just take Apple as the example, down over 23% since its peak in December last year, and it is the poster child for the full impact of Trump’s program. This back-down is showing just how much strain the US is experiencing with Beijing playing hardball.Think about it: a US$3,000 iPhone versus a Samsung that, even with tariffs, could be as much as 20% less for the US consumers. That’s a killer for the Silicon Valley Titan and Trump’s plan on the whole.This just shows the structural nature of the U.S.-China trade imbalance and the scale of bilateral tariffs already in place.As negotiations remain tentative and tensions persist, the market is left navigating a landscape shaped by potential escalation, geopolitical signalling, and the lingering question of whether or even what policymakers will/can do if economic or market stress intensifies.China: Market KingmakerAs mentioned, the modest drop in the effective tariff rate even after a 90-day pause highlights the entrenched nature of the dispute. The sheer scale of U.S.-China trade means that even minor changes have significant global implications. While no breakthrough appears imminent, traders and investors alike continue to watch for any sign of constructive engagement – which currently does not exist, if we are honest.Any sign of negotiation could take place, or even if there is a modest de-escalation, it could trigger a risk-on response across asset classes as seen in the final part of the week beginning 7 March 2025. This is why China is now the market kingmaker – it is currently holding firm on ‘escalating’ when responding to Washington’s moves.The indicator we all need to watch for around US/China relations is US Treasury Bonds. Any sign that Beijing is turning from escalation to de-escalation should produce a rally sharply here as market flows have been dominated by heightened cash preference as persistent stagflation concerns, coupled with recession risks.Where’s the Fed at?Will the Federal Reserve step in to support markets? The better question is, can it step in? From a traditional standpoint with rate cuts – no. However, there are other mechanisms like exemptions to the Supplementary Leverage Ratio (this is the amount of tier one capital required to be held at US banks), which was temporarily introduced during the 2020 pandemic crisis. A repeat of that policy would increase the banking system’s capacity to absorb government bonds without triggering capital constraints.More aggressive tools, such as direct purchases at the long end of the U.S. yield curve, are considered much less likely in the current macro environment, and Fed officials have been cautious in their recent commentary around this idea.Realistically, there are limited signs of funding stress and a relatively high threshold for intervention; the probability of a "Fed put" being activated near-term appears low to non-existent. This means the Fed is just as much a spectator as we are.The FX flowWith US exceptionalism now on the blink, the broader trend of US dollar weakness is expected to persist, but the weak spots may change.Rather than concentrating on current account surplus currencies such as JPY and CHF, the weakness may broaden out to risk-sensitive FX like AUD, NZD, and CAD. Just take a look at the bounce back in AUDUSD at the backend of the 7 March week’s trading – a 3.8% jump in 2 days is unheard of.The euro is expected to perform well across both “risk-on” and “risk-off” tariff scenarios, driven by long-term capital reallocation and structural factors within the euro area.We need to highlight Japan and South Korea – both nations have shown signs they are willing to engage with Washington, and the response from the market was huge. More importantly, the administration has responded positively. This puts JPY and KRW in a more positive light than peers, and they would be wary of being exposed as a deal would put them into upside air very quickly.Outlook: Cloudy but clearing – chance of tariff showers later in the week.Markets remain in a holding pattern, waiting for clearer signals on trade policy.The recent softening of rhetoric from the U.S., particularly in response to financial market volatility, suggests some room for constructive negotiations—especially with countries outside China.The 90-day pause has provided some breathing space, but it will need to be followed by tangible progress if market sentiment is to turn, and on that metric, the outlook is still cloudy but clearing. Yet tariff risks retain high later in the period as the 90-day period looks to expire and specific tariffs (healthcare, electronics, etc) get announced.