Risk Selloff Continues, Gold Renews Record

Commodity

Summary:

The tariff talk remains on the headlines as the Liberation Day approaches. Risk appetite is nowhere to be found, the US dollar is weak, gold continues to extend gains into uncharted territories and oil bulls remain unreactive to the news that Trump is pissed off with Putin for unveiling plans for the next Ukrainian leadership.

Last week’s US GDP update showed a slightly better reading on Thursday but growth in US GDP fell from above 3% to 2.4% in Q4 and is expected to contract by nearly 3% in Q1 according to the latest update from Atlanta Fed’s GDP Now forecast.

The core PCE, on the other hand, advanced to 2.8% instead of a steady 2.7% read expected by analysts. And the University of Michigan’s inflation expectations keep rising while sentiment keeps dropping. In summary, the US data hints at slowing economy and rising inflationary pressures. That’s the worst possible combination for risk sentiment.

Good news is that the Federal Reserve (Fed) doves are not going away with higher inflation numbers as the rapid fall in growth figures look more concerning than the inflation pick up. Therefore the Fed is expected to cut the rates in June – despite unideal trend in inflationary pressures – with more than 80% probability. The pricing in the bond markets tell the same story. The US 2-year yield – that best captures the Fed rate expectations – dropped below 4% last week and has settled near 3.85% this morning. Alas, even the falling yields and the rising dovish Fed expectations are unable to give a smile to investors. The S&P500 lost nearly 2% yesterday and is set to end the month with more than 6% losses – while seasonally speaking, March could’ve been a good month. Nasdaq 100 was hit by a 2.60% selloff. CoreWeave – the Nvidia-backed cloud computing company specialized in AI – had quite a disappointing debut on Nasdaq. The Dow Jones, small and mid-cap indices all traded down between 1.5 and 2% as well. Stocks in Europe returned to the lowest levels in two weeks, as gold continued to advance towards fresh high, the price of an ounce is trading above the $3110 mark this morning as the selloff continues in Asia with Nikkei down 1.5% on Monday despite data pointing at a 2.5% jump in industrial production in February and the CSI 300 is down 1% at the time of writing despite a set of better than expected PMI numbers.

Oil, on the other hand, is down this morning despite Donald Trump being ‘pissed off with Putin’ for suggesting ways to install new leadership in Ukraine by sidelining President Zelensky – a situation that could lead to ‘secondary tariffs’ on Russian oil. Alas, oil bulls are unable to rebound on the news this morning. Last week’s failure to clear the $70pb resistance is now leading to a toppish sentiment, and the latter is reinforced by gloomy growth expectations and OPEC+ plans to start restoring production from next month.

In the FX, the US dollar reversed an attempt to rebound from the March dip and is down for the third session on mediocre growth expectations for the US economy. The EURUSD found support near its 200-DMA last week. Released last Friday, the French and Spanish early inflation figures for March came in softer than expected, providing more room for the European Central Bank (ECB) to stay accommodative to support growth. The euro’s appreciation and the weakening energy prices are also supportive of European growth.

Speaking of growth, the British GDP update surprised to the upside on Friday giving Cable an additional reason to stay strong against the US dollar, though sterling remains offered against the euro.

In summary, the euro is looking stronger than sterling and the dollar, while the US dollar has become the weakest link among the three.

This week, investors will continue to watch the Eurozone inflation numbers and the US jobs data. The expectations are weak. If the Liberation Day doesn’t lead to a relief rebound in the US dollar, the euro could make an attempt above the 1.10 mark against the dollar, and Cable could break the back of the 1.30 offers.

Source: ACTIONFOREX

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FastBull Featured

Daily News

[Quick Facts]

1. Trump presses advisers for tariff escalation.

2. U.S. unveils new mining agreement for Ukraine with stricter demands.

3. Canadian tourists skip trips to U.S. and other countries may follow.

4. Daly: still sees two rate cuts this year.

5. U.S. February PCE inflation surges beyond expectations.

[News Details]

Trump presses advisers for tariff escalation

Four sources told The Washington Post that U.S. President Donald Trump is urging senior advisers to adopt a more aggressive stance on tariffs. Despite pressure from Wall Street and Capitol Hill allies for a softer approach, Trump continues to push for radical measures to transform the U.S. economy fundamentally. Advisers are deeply discussing the scope of import tariffs, which could impact trillions of US dollars in trade.

U.S. unveils new mining agreement for Ukraine with stricter demands

The U.S. has submitted a new draft mining agreement to Ukraine, with demands significantly exceeding the previously revealed agreement. The latest draft also excludes any security guarantees for Ukraine. According to reports from Reuters and other media outlets, the new version mandates that Ukraine transfer revenue from natural resource development by both state-owned and private enterprises into a joint fund managed by the U.S. International Development Finance Corporation. The fund's board of directors consists of five members, three of whom are appointed by the U.S. The agreement stipulates that the U.S. has the "priority right" to purchase Ukraine's resource extraction rights, and proceeds from the fund must first be used to repay all funds provided by the U.S. since 2022, with Ukraine paying an annual interest rate of 4%. Only after debt repayment can Ukraine utilize the fund's earnings for reconstruction and other matters.

Canadian tourists skip trips to the U.S.; other countries may follow

Trump's trade policies, annexation rhetoric, high-profile visa arrests, and lengthy processing times have strained U.S. relations with traditional allies. Data shows Canadian flights back from the U.S. to Canada in February dropped 13% year-over-year, and road trips fell 23%. Germany, the UK, France, Denmark, and Finland have issued travel warnings for U.S. destinations, potentially worsening the U.S. tourism deficit of $50 billion.

Daly: still sees two rate cuts this year

San Francisco Federal Reserve Bank President Mary Daly said on Friday that local business and community leaders expect tariffs to increase their costs and are currently strategizing about how to mitigate these impacts. They also anticipate some tariffs will be relaxed or exceptions will emerge over time.

The labor market's strength, stable economic growth, and declining inflation are reasons policymakers are waiting before cutting rates, to observe how businesses adapt to tariff costs.

Inflation has fallen from its peak, and last year's Fed rate hikes have made previously delayed projects feasible for implementation.

The Fed has no reason to rush judgment because policy is in a good place, and the economy is in a good place. Thus, the Fed needs time to assess the full impact, including the scope, magnitude, and timing of the final tariff packages, as well as their economic effects.

Her interest rate path projection remains unchanged from last year, and with insufficient information for adjustment, two rate cuts this year remain a "reasonable" expectation.

U.S. February PCE inflation surges beyond expectations

Data from the U.S. Commerce Department showed the core PCE price index rose 2.79% YoY (vs. 2.7% expected), a new high since last December, and 0.4% MoM (also above expectations).

Core service costs, excluding housing and energy, grew 0.4% MoM (vs. 0.2% prior), driven by services' highest contribution to PCE growth in a year.

The personal savings rate unexpectedly rose to 4.6% (vs. 4.3% prior), reflecting a "save more, spend less" behavior pattern. This, combined with a 0.4% MoM rebound in real personal consumption expenditures (vs. -0.5% prior), paints a picture of defensive consumer sentiment amid inflationary pressure.

The data confirms the Fed's long-standing concern about the "last-mile" dilemma: as the deflationary benefits from commodity price declines fade, wage-price spirals in the service sector become harder to contain. President Trump's proposed tariffs could further exacerbate price pressures, already strained by his aggressive trade policies that have eroded business and consumer confidence. Growing signs of household financial strain further fuel fears of stagflation or recession.

[Today's Focus]

UTC+8 15:00 Germany's February real retail sales data

UTC+8 16:00 ECB governor Panetta speaks

UTC+8 16:00 ECB governor Villeroy speaks

Risk Warnings and Disclaimers

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Balogun Opeyemi

Commodity

Gold (XAU/USD) soared to an all-time high of $3,086 on Friday, closing at $3,079 (+0.79%), as escalating trade tensions and expectations of Federal Reserve rate cuts fueled safe-haven demand. With market uncertainty rising, bulls are now setting their sights on the $3,100 level.

Fundamental Analysis:

U.S. Trade Tariffs Ignite Global Uncertainty

Investor sentiment has turned cautious ahead of April 2, a date President Donald Trump has declared “Liberation Day” following his executive order imposing 25% tariffs on all imported cars. The move has already triggered strong backlash, with Canada and the EU preparing retaliatory measures, heightening fears of a renewed global trade war.

Dollar Weakness and Flight to Safety

The U.S. Dollar Index (DXY) closed the week down 0.11%, reflecting the pressure on the greenback. Investors are moving into safe-haven assets like gold and the Japanese yen (JPY) while U.S. Treasury yields continue to decline.

Fed Rate Cut Bets Gain Momentum

The Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, came in as expected, reinforcing speculation of two rate cuts in 2025.

However, the University of Michigan Consumer Sentiment Index showed a steeper-than-expected decline, signaling weakening consumer confidence.

San Francisco Fed President Mary Daly emphasized that inflation progress has stalled but remains committed to gradual easing if conditions allow.

What This Means for Gold

With trade war concerns escalating, the dollar struggling, and rate cut bets strengthening, gold’s bullish momentum remains intact. Investors are closely monitoring potential retaliatory actions from global economies, which could further drive safe-haven inflows.

Gold Smashes Record High as Bulls Eye $3,100 Amid Trade War Fear_1

XAU/USD Technical Outlook: Bulls Target $3,100

Gold remains bullish after repeatedly testing the record high of $3,086. A breakout above this level could pave the way for a move toward $3,100, with further upside targets at $3,150 and $3,200.

On the downside, initial support lies at $3,057. A sustained break below this level could trigger a pullback to $3,025, where the 72 EMA (4-hour chart) provides additional support. A deeper decline could bring XAU/USD into the key $3,000 demand zone.

Risk Warnings and Disclaimers

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Thomas

Economic

Forex

The current strong inflow of international capital into European equities may not continue, according to strategists at Goldman Sachs.

The team, including Lilia Peytavin, expressed skepticism about the possibility of this marking a shift towards constant buying or a substantial reallocation to Europe.

The strategists highlighted that Europe’s economic and earnings growth is slower than in other regions. They also pointed out that the region is exposed to risks, such as potential new tariffs from the United States.

Despite recent inflows, the team does not view this as over-positioning, considering it small compared to the cumulative outflows witnessed in recent years.

It’s worth noting that European stocks are currently on track for their largest quarterly outperformance against the US in history.

This trend has been driven by international investors attracted by factors such as Germany’s fiscal spending plan and lower interest rates.

Source: Investing

To stay updated on all economic events of today, please check out our Economic calendar

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Justin

Cryptocurrency

Hurdles to blockchain adoption in capital markets are falling away. The US’ abandonment of Staff Accounting Bulletin 121 was a key step and the Eurosystem’s advancing work on cash settlement solutions are welcome. However, there are still major stumbling blocks to be addressed.

The Eurosystem announced in February 2025 that it is expanding its work to create a solution for the cash leg settlement of distributed ledger technology transactions in central bank money.

This approach has two prongs: first, a rapid delivery of an interoperability link for the Target settlement system, to be followed by a ‘more integrated, long-term solution… [which] will also include international operations, such as foreign exchange settlement’.

The announcement follows the conclusion of the European Central Bank’s wholesale central bank money trials in 2024, where three national central banks collaborated with the private sector in a series of experiments. The three solutions tested were an interoperability link with Target Instant Payments System driven by Banca d’Italia, a trigger solution (a DLT infrastructure to bridge T2 and market DLT platforms) driven by Deutsche Bundesbank and a full DLT interoperability solution with tokenised central bank money pioneered by Banque de France.

It is not yet clear from the ECB’s announcement whether its long-term integrated solution will be the Bundesbank’s trigger solution or Banque de France’s full-DLT interoperability solution. But DLT accessibility to central bank money is coming.

Official endorsement of a DLT solution

For those working on the integration of DLT into capital markets, this is certainly good news. An officially endorsed solution for the cash leg settlement of DLT securities transactions on a delivery-versus-payment basis has been high on the industry’s wishlist for several years now. The ECB is to be commended for its efforts in advancing this issue and fostering the market’s development.

Perhaps a similar solution will emerge in the US. The drafting of Trump’s executive order (which inadvertently implied a ban on Fedwire, the US interbank payment system), suggests that the US may be happy to allow private sector solutions like stablecoins to fill the gap. The political momentum is certainly there and, given the Securities and Exchange Commission’s withdrawal of the much-criticised SAB 121, it clearly extends beyond the White House.

Despite this momentum, there remains at least one major obstacle to DLT adoption by market participants. The Basel Committee’s rules on prudential exposure to cryptoassets will hold back development in this space. These rules were created in 2022 and are set to come into force in January 2026.

Basel Committee rules

The rules begin fairly clearly. DLT-based assets are divided into four categories. Type 1a are traditional assets represented on blockchain that meet certain conditions (tokenised traditional assets). Type 1b are cryptoassets with effective stabilisation mechanisms that also meet certain conditions, for instance, reserve-backed stablecoins.

Then type 2a are cryptoassets that satisfy the hedging recognition criteria (primarily bitcoin and ether because of their formal futures markets). Type 2b are unhedgeable cryptoassets, for example, most other cryptocurrencies, including tokenised traditional assets, stablecoins and unbacked cryptoassets that aren’t included in the previous groups.

These conditions stipulate that, for inclusion in type 1, the tokenised asset must: represent the same credit risk as the traditional asset and provide the same ownership rights; the rights must be legally enforceable in the relevant jurisdictions; be transacted on a network where material risks are effectively mitigated; and be managed by regulated and supervised entities.

While type 1 assets can be treated the same way as their traditional off-chain counterparts, type 2b assets face an extremely punitive 1250% risk weighting, implying that banks must hold capital 1:1 against them. Holdings are also capped at 1% of the bank’s tier 1 capital. JP Morgan’s tier 1 capital as of September 2024 was $278.99bn, so it would be forced to keep its 2b cryptoasset holdings under $3bn.

This is not necessarily unreasonable on its face. Cryptoassets are volatile and banks can create systemic risk. Limiting their exposure to the market might be prudent.

Public and private networks

At present, however, the definition of type 1 assets is understood by industry participants to require that digital assets can only adhere to that category if they are issued on private ‘permissioned’ ledgers. The classification condition referring to the network’s risk management requires that ‘all participants are traceable’, which would seem to rule out a public network like Ethereum where anyone can be a validator and participate in the validation process of transactions.

This means that even high-quality instruments like bonds from the triple A-rated European Investment Bank, if issued on a public blockchain like Ethereum, will be treated as unhedgeable cryptocurrencies (type 2b), effectively making it impossible for banks to take such instruments on their balance sheets.

Even though the end investors will not be so limited, this would fundamentally alter the market’s dynamic, since banks are expected to hold some of a bond in their inventory, in order to make markets in it after issuance. Moreover, banks often engage in repurchase agreements in which they receive securities from their counterparties in exchange for cash, holding the securities as their own for the duration of the transaction.

This view does not appear to be universally held among regulators. The European Banking Authority’s CRR III Article 501d2a distinguishes tokenised traditional assets like blockchain bonds from cryptoassets for the purposes of capital requirements. This allows tokenised traditional assets to be treated as the assets they represent regardless of whether they are issued on a private or public blockchain.

And that is the right approach. Public blockchains offer specific advantages and features that can make them as reliable and secure as any private blockchain or traditional financial infrastructure.

Public blockchains favour accessibility and interoperability. Contrary to private blockchains and much like the internet, public blockchains are open and based on standardised protocols that facilitate the interaction between different systems, fostering accountability, innovation and competition.

Moreover, as no single party controls public networks, no one can willingly or accidentally tamper with its records or data. Public blockchains have, therefore, strong reliability and operational resiliency as they eliminate single points of failure or attack.

While these arrangements may not follow traditional accountability structures, public blockchains introduce new ways to achieve the safety and vitality that are expected from any financial infrastructure.

Developers, validators, nodes and asset issuers all have incentives to keep a check on each other and make sure that the network will work according to its programmatic protocol rules and that changes will be implemented only after proper vetting.

The decentralised nature of public blockchains is not, however, a limitation for having asset controls that issuers can apply according to their compliance needs and regulatory requirements, like know-your-customer/anti-money laundering checks or the possibility of clawing back or freezing tokens.

The Basel Committee’s rules on prudential exposure to cryptoassets are in urgent need of clarification, grounded in a thorough, reasonable and clear assessment of the true characteristics and risks of digital assets. Only then can we approach a logical system for the prudential treatment of blockchain-based assets.

Source: Lewis McLellan

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ING

Economic

Well today's US data is only inflaming stagflation fears. The Federal Reserve’s favoured inflation measure, the core PCE deflator, has come in hotter than predicted at 0.4% month-on-month while real personal spending comes in softer at just +0.1% MoM and January’s contraction is worse than previously thought – revised down to -0.6% MoM from -0.5%.

The inflation print is ugly, but we did suspect that if there was a risk to the 0.3% MoM consensus number it was going to be the upside given the composition of the CPI and PPI inputs that feed through. Remember that we need to average 0.17% MoM (the blue bars need to average where the black line is in the chart below) over time to bring us down to the 2% year-on-year target. We are moving in the wrong direction and the concern is that tariffs threaten higher prices, which mean the inflation prints are going to remain hot. This will constrain the Fed’s ability to deliver further interest rate cuts.

US core PCE inflation metrics look increasingly ugly

US stagflation fears rise ahead of tariff hit_1

From a growth perspective those potential rate cuts can’t come quickly enough. Tariff-related fears about squeezed spending power and job worries tied to the Department for Government Efficiency’s actions have seen sentiment plunge and this appears to be translating into much cooler spending. Fed Chair Powell was fairly dismissive of this narrative earlier this month so it will be interesting to see if he changes his tune next week.

We expect to see another round of downward revisions to first quarter GDP growth forecasts coming through over the weekend from a lot of banks. For example, if March real consumer spending is flat that will mean first quarter annualised consumer spending would be -0.1%, which would be the first negative print since second quarter 2020 when we were in the depths of the pandemic. Given the drag from awful trade numbers this really does run the risk of a negative first quarter GDP growth rate. As we head towards 'Liberation Day' on Wednesday and then the jobs report on Friday followed by Powell's speech on the economic outlook, this sets us up for a volatile week ahead for markets.

Source: ING

To stay updated on all economic events of today, please check out our Economic calendar

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Justin

Economic

British retail sales unexpectedly rose in February, growing 1.0% from January, figures from the Office for National Statistics showed on Friday. Reuters poll of economists had pointed to a monthly fall of 0.4% in sales volumes.

This marked the second straight monthly increase in retail sales, after a dismal reading in December, the key month for holiday shopping.

Sterling rose to a session high of $1.297 after the data, before retreating to $1.295, roughly flat on the day. The euro was last down 0.25% against the pound at 83.20.

The derivatives market shows traders are placing roughly a 50% chance on the Bank of England cutting rates at its May meeting, and Friday’s retail sales data did little to shift this expectation.

Sterling gains as traders eye US tariffs

This week has been turbulent for sterling. On the one hand, the pound has been caught up in the volatility that has affected global markets after U.S. President Donald Trump on Wednesday announced a blanket 25% tariff on all imported cars into the United States, further stoking fears of a full-on trade war.

The U.S. government is expected to release its full suite of trade policies on April 2, including details on tariffs.

On the other hand, UK finance minister Rachel Reeves this week unveiled her budget plans, in which she announced spending cuts, while the UK’s Debt Management Office said it would issue fewer bonds than expected this year and next.

“Wounds run deep in FX markets and the build-up to (Reeves’) Spring Statement was dominated by tough decisions that the chancellor would need to make. In the end, bond vigilantes and the “glass half empty” brigade were left disappointed,” Bank of America strategists Kamal Sharma and Sonali Punhani said in a note on Friday.

“Where from here? Immediate focus turns to the tariff announcement on April 2nd and positive seasonality through next month,” they said, referring to the pound’s tendency to perform well in the month of April, when the new fiscal year begins.

A separate data release on Friday showed the UK economy expanded 0.1% in the fourth quarter, as economists polled by Reuters had expected. On an annual basis, growth expanded by 1.5%, compared with forecasts for an increase of 1.4%.