Market Week in Review: Trade Volatility, Fed Pressure & Key US Data Ahead

Global markets experienced another tumultuous week as sentiment continued to swing between optimism and fear, driven largely by the Trump administration’s evolving trade policies. While some stability has returned to asset prices, traders remain cautious ahead of a data-heavy week that could determine whether the US economy is starting to buckle under the pressure of tariffs and uncertainty.

Here’s what moved markets last week, and what traders should watch for in the days ahead.

Trade Policy U-Turns: Markets Adjust to a Softer Trump

The dominant narrative remains centered around the Trump administration’s handling of trade tariffs. In recent weeks, markets have watched a striking shift—from aggressive tariff announcements toward a softer, more negotiation-focused stance.

Initially, President Trump’s administration rattled markets with plans for sweeping tariffs, including a proposed 145% levy on Chinese imports. However, a series of political and economic signals—most notably pressure from the bond market and warnings from central banks—appeared to force a recalibration. Trump's team has since pivoted toward emphasizing negotiation and selective exemptions, particularly for tech hardware and semiconductors critical to the US economy.

This has created a delicate balancing act between trying to maintain a tough-on-China posture while preventing serious market dysfunction. Nevertheless, uncertainty remains high, and markets have started taking Trump’s tariff threats with more skepticism.

Tensions with the Federal Reserve Spark Volatility

Another major market theme was the political pressure placed on the Federal Reserve. Trump openly criticized Fed Chair Jerome Powell for his reluctance to cut interest rates aggressively, even reportedly exploring legal avenues to remove him.

Although the administration later walked back these comments, the episode injected a new element of risk: concerns about the politicization of US monetary policy. Gold prices surged on these fears, hitting new highs as investors sought refuge from perceived instability at the highest levels of government.

Hard Data vs. Political Narrative: Key Economic Releases Ahead

Despite the noise surrounding trade, the coming week shifts focus back to fundamentals, with a slew of major economic releases that will provide a clearer picture of the real economy’s health.

Critical upcoming releases include:

• US Q1 GDP: Forecasts point to a sharp slowdown, with quarter-on-quarter growth expected at just 0.4%-0.5%. This would represent a stark deceleration from recent quarters, where growth comfortably exceeded 2%.
• PCE Inflation Data: The Fed’s preferred inflation gauge is expected to show modest cooling, potentially giving policymakers more flexibility later this year.
• Non-Farm Payrolls (NFP): A stable labor market is key to maintaining economic resilience. The unemployment rate is tipped to remain steady, though any weakness could amplify recession fears.

If the data disappoints—especially if GDP growth turns negative as the Atlanta Fed’s GDPNow model hints—the conversation could quickly turn toward whether the US is sliding into recession territory.

Equities: Bouncing, But Vulnerable

US equity markets recovered in recent sessions, fueled by hopes of a softening trade stance and the absence of immediate systemic shocks. However, underlying vulnerabilities remain.

The S&P 500 broke through key technical levels but showed hesitancy at higher resistance points, indicating that bullish sentiment is tentative. A clear break and hold above recent highs will be needed to confirm a sustained uptrend.

Europe, meanwhile, has been an area of relative strength. Indices such as the DAX and the Euro Stoxx 600 have seen robust gains as capital rotates away from US assets amid rising political risks. Investors seem to favor European equities on the view that the region may be better positioned to weather global trade disruptions with proactive monetary policy support from the ECB.

FX Markets: Dollar Faces Persistent Pressure

The US dollar staged a modest recovery midweek but struggled to sustain gains. The dollar index drifted lower again by Friday, reflecting persistent concerns about the trustworthiness of the US, growth risks, and the potential for rate cuts.

The yen remains a focal point. USD/JPY formed a complex technical pattern—a broad head and shoulders structure—that suggests possible further downside if support levels are breached. While the Bank of Japan is expected to keep policy unchanged this week, cautious messaging around global risks could support further yen appreciation.

The euro has also benefited from dollar weakness and ECB stimulus expectations, with EUR/USD holding comfortably above 1.08.

Commodities: Gold and Oil Diverge

Gold prices remain firmly bid as investors continue seeking protection against political risk, economic slowdown, and potential monetary easing. After last week’s dramatic rally, gold faces some technical exhaustion, but the fundamental picture remains supportive: strong central bank buying, softening US yields, and persistent geopolitical uncertainty.

Conversely, oil markets are showing clear signs of strain. Brent and WTI crude have been pressured by a combination of demand destruction fears from weaker global growth and rising supply, with OPEC appearing unwilling to tighten production aggressively. The mid-$60s support level for Brent has eroded, and risks remain skewed to the downside unless there is a dramatic turnaround in trade negotiations or an unexpected supply shock.

Natural gas markets tell a similar story: stable supply and uncertain demand, with key technical support around the $3 mark. While short-term bounces are possible, the broader bias remains bearish as global energy demand softens.

Looking Ahead: Critical Data, Cautious Trading

The next week is pivotal. Hard economic data will finally give investors something tangible to anchor their expectations after weeks of whipsaw headlines. If US growth and inflation data hold up reasonably well, risk assets could continue to climb the proverbial "wall of worry."

However, if the numbers disappoint—and confirm that tariffs and uncertainty are materially damaging the economy—markets could quickly correct lower.

Key events to watch:

• Bank of Japan Rate Decision (Wednesday)
• US GDP (Wednesday)
• PCE Inflation (Wednesday)
• Non-Farm Payrolls (Friday)

For now, volatility remains elevated, narratives are shifting daily, and careful risk management is essential.