The People’s Bank of China (PBOC) establishes the daily midpoint for the yuan, or renminbi (RMB), adhering to a managed floating exchange rate system. This system permits the yuan’s value to fluctuate within a +/- 2% band relative to a central reference rate.

The previous closing rate was 7.2798. Recently, the PBOC injected 97 billion yuan through a 7-day reverse repurchase agreement, setting the rate at 1.5%.

Today, 292.5 billion yuan is maturing, resulting in a net drain of 195.5 billion yuan.

Impact of Liquidity Drain on Market Conditions

A tighter liquidity environment could follow such a large net drain, impacting short-term funding conditions. Traders should weigh the implications of this withdrawal carefully, especially as we have seen how past liquidity adjustments have influenced market sentiment. With the central bank opting for a smaller injection, borrowing costs in the interbank market may edge higher, affecting leveraged positions.

In parallel, the daily yuan fixing reflects the authorities’ commitment to managing exchange rate fluctuations within the permitted range. The midpoint’s level, when compared to market expectations, often signals policy intent. If the reference rate is stronger than anticipated, it suggests some effort to curb depreciation pressure. Conversely, if it is set weaker, it allows more flexibility for movement.

Looking beyond liquidity operations, broader market forces also remain at play. Capital flows, trade balances, and interest rate differentials shape investor positioning. Given that today’s liquidity strain coincides with these forces, near-term volatility may increase. While movements staying within the central bank’s band are expected, rapid shifts can still trigger reactionary positioning.

External Factors Influencing the Yuan

Observers should also remain mindful of external influences, particularly the US dollar’s trajectory and any shifts in global risk appetite. If external pressures align with the existing policy stance, there could be a sustained directional move in currency markets. However, if discrepancies emerge, adjustments in central bank operations may follow.

With these elements converging, positioning should account for liquidity conditions and official guidance. The coming sessions could reflect the balance between policy measures and market expectations, shaping price action in a more pronounced manner.

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Gold prices fell over 1% on Friday and have decreased by more than 3% throughout the week due to a stronger US Dollar, which reached a ten-day high of 107.66. The XAU/USD pair is currently at $2,845, having previously peaked at $2,885.

US President Donald Trump announced a 25% tariff on imports from Mexico and Canada, effective March 4. Concerns about new trade policies and recent economic data have contributed to market uncertainty.

Fed Policy and Market Expectations

The Core Personal Consumption Expenditures (PCE) Price Index showed inflation aligning with the Fed’s 2% target. Predictions suggest that the Federal Reserve may cut interest rates by 70 basis points in 2025, beginning as early as June.

Revised GDP estimates indicate a contraction from 2.3% growth to -1.5% for the first quarter of 2025. The yield on the 10-year US Treasury note declined by three basis points, coinciding with the rise of the US Dollar amidst recession fears.

Cleveland Fed’s Beth Hammack expressed doubts about a rate hike, citing uncertainties related to trade policies. The core PCE increased by 0.3% month-over-month and rose by 2.6% year-over-year, whereas the headline PCE remained steady at 2.5% year-over-year.

Despite tariff implications, the yield on the 10-year US Treasury note stands at 4.229%, which has curbed Gold’s declines. Real yields, reflected by the US 10-year Treasury Inflation-Protected Securities (TIPS), fell to 1.853%. Goldman Sachs has updated its Gold price target, predicting $3,100 by the end of 2025.

Gold’s technical outlook shows bearish candles, indicating that traders may be adjusting portfolios. After dropping below the $2,900 level, XAU/USD is aiming for $2,832, with a daily close above $2,850 potentially reviving bullish sentiments.

Key Levels to Watch

Key resistance remains at $2,900, while Gold’s support levels are at $2,800 and the 50-day Simple Moving Average (SMA) sits at $2,770. Central banks, especially in emerging economies, added a record 1,136 tonnes of Gold to reserves during 2022.

Gold’s price movements are often inversely correlated with the US Dollar and Treasury yields. Factors such as geopolitical instability and interest rate changes impact Gold prices, reinforcing its role as a safe-haven asset in uncertain economic conditions.

The past week’s decline in Gold prices can largely be attributed to the US Dollar’s strength, which has gained momentum off the back of rising expectations surrounding monetary policy. With the Dollar Index climbing to 107.66, the appeal of non-yielding assets like Gold has waned. The dip below $2,900 has reinforced cautious sentiment among traders, with key support levels now coming into focus. Attention must remain on $2,800, while a bounce above $2,850 could change short-term direction.

Trade developments remain a focal point after Donald’s decision to impose a 25% tariff on imports from Mexico and Canada. These policies could introduce supply chain disruptions and inflationary pressures, which may, in turn, influence the Federal Reserve’s decisions. So far, inflation figures from the Core Personal Consumption Expenditures (PCE) Price Index remain within the Fed’s 2% target. The yearly increase of 2.6% in core PCE suggests pricing pressures persist but are not intensifying rapidly enough to push the central bank towards rate hikes.

Fed officials have taken a cautious stance, with Beth noting the uncertainty stemming from trade policies. With Gross Domestic Product (GDP) estimates now pointing towards a contraction of 1.5% in the first quarter of 2025—down from an earlier 2.3% growth projection—recession fears have come to the forefront. This shift in expectations has coincided with the drop in the 10-year Treasury yield, which has eased by three basis points, further influencing trader sentiment.

Despite these concerns, real yields have slipped to 1.853%, which has helped cushion some of Gold’s losses. The relationship between Treasury yields, the Dollar, and Gold remains a pivotal dynamic, particularly with market participants now predicting a total of 70 basis points in rate cuts in 2025, potentially starting in June.

Goldman Sachs has revised its price target upwards, now projecting $3,100 by the end of 2025. While this provides longer-term optimism, traders are currently focused on technical indicators, observing how Gold reacts around support zones. The 50-day Simple Moving Average at $2,770 represents another level that could come into play if further downside materialises.

Emerging economies continue to accumulate Gold at an aggressive pace, with central banks adding 1,136 tonnes in 2022. These purchases reflect ongoing concerns over economic uncertainty, reinforcing Gold’s role as a store of value. While inflation figures have stabilised for now, any deviation in upcoming data releases could influence both rate expectations and Gold price volatility in the weeks ahead.

The Dollar’s behaviour, Treasury yields, and positioning from institutional investors will remain key in shaping price movements. With fundamental and technical factors pointing to mixed signals, traders will need to monitor how macroeconomic data impacts sentiment before positioning for the next major move.

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In Australia, business inventories rose by 0.1% for the fourth quarter of 2024, surpassing expectations of no change. This figure follows a decline of 0.9% in the previous quarter.

Operating profit increased by 5.9% quarter-on-quarter, significantly higher than the anticipated 1.8% after a prior decrease of 4.6%. The positive inventory data suggests a potentially stronger GDP outcome for the fourth quarter, with results set to be released on Wednesday.

Stock levels in Australia edged slightly higher, defying expectations of stagnation. Although modest, this shift points to a possible stabilisation after the contraction from the prior period. When businesses hold more stock, it often reflects either increased demand or preparations for stronger sales ahead.

Meanwhile, company earnings posted a robust rebound, extending well beyond analysts’ forecasts. A 5.9% surge in profits suggests that businesses managed to recoup losses from the previous decline far more quickly than expected. This upswing introduces a fresh dynamic to growth projections, especially with upcoming GDP figures expected mid-week.

For those active in the market, these shifts change the equation. An uptick in inventories, paired with stronger-than-expected earnings, implies that businesses may be in a stronger position than feared. If the GDP figures align with these developments, broader market sentiment could shift accordingly.

We must also keep in mind that prior inventory contractions had pointed to underlying weakness. The reversal of that trend raises questions about whether this improvement is sustainable or simply a correction after an overly sharp decline. Either way, this will shape expectations for the months ahead.

With this new data, previous assumptions regarding economic momentum may no longer hold. Adjustments will need to be made as the full picture becomes clearer in the days to come.

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The AUD/USD pair fell by approximately 0.54%, nearing 0.6200 and marking a three-week low after a six-day decline. Contributing factors included a proposal for an additional 10% tariff on Chinese imports by President Trump and disappointing Australian Private Capital Expenditure data, which shrank by 0.2% in Q4 2024 against a forecast of 0.8%.

The US Personal Consumption Expenditures (PCE) data rose by 0.3% month-on-month in January, in line with expectations. The Australian dollar is affected by various factors, including interest rates set by the Reserve Bank of Australia, the state of the Chinese economy, and the price of Iron Ore.

Moreover, the trade balance influences the AUD’s value, with a positive balance generally strengthening the currency. Immediate support for the AUD/USD may be around the 0.6150 level, while resistance is likely near the 20-day Simple Moving Average if market sentiment improves.

This latest move in the AUD/USD pair reflects the weight of both domestic and global pressures on the Australian dollar. A slide of 0.54% might not seem extreme in isolation, but a six-day losing streak leading to a three-week low suggests a shift in sentiment. It isn’t just the broader market mood—specific economic indicators are pointing to the same direction.

Adding friction to the Australian dollar’s performance was Trump’s proposal for an additional 10% tariff on Chinese imports. Markets tend to react quickly to such announcements, as any potential economic burden on China may have a knock-on effect on Australia. With a deep trade relationship between the two countries, anything that slows Chinese demand can ripple through to Australia’s exports, particularly commodities like iron ore.

The latest data on Australian Private Capital Expenditure didn’t help either. A 0.2% contraction in Q4 2024, when economists had expected a 0.8% rise, doesn’t exactly inspire confidence. Weakness in capital expenditure often signals hesitancy among businesses to invest, which can be a reflection of broader uncertainties in the economy. If firms aren’t comfortable expanding, job markets and consumer spending could eventually feel the strain.

Meanwhile, across the Pacific, the US Personal Consumption Expenditures (PCE) data for January was exactly as expected, rising by 0.3% month-over-month. Given that PCE is the Federal Reserve’s preferred inflation gauge, a solid reading without surprises tends to keep rate expectations stable. It maintains the status quo rather than forcing traders to reposition heavily.

Interest rates set by the Reserve Bank of Australia remain among the defining factors for the Australian dollar’s strength. When rates are relatively high compared to other major economies, demand for the currency tends to pick up, as investors seek better returns. But if expectations shift toward cuts, downward pressure can build. The Chinese economy plays an equally critical role, given how much Australian exports rely on continued demand there. The third factor, iron ore prices, ties directly into that dynamic. If China slows, so might its appetite for raw materials, and that has a direct impact on Australia’s trade revenues.

Speaking of trade, Australia’s trade balance remains one of the key measures of support for the currency. A surplus typically reflects strong demand for Australian goods and services abroad, which can lend strength to the dollar. If exports falter or imports surge, that balance weakens, potentially leading to a softer currency.

At the moment, technical indicators suggest that support around the 0.6150 level could be an area of interest. If selling momentum persists, prices might gravitate toward that zone before finding more stability. On the upside, should risk appetite improve and fundamentals turn in Australia’s favour, resistance could emerge near the 20-day Simple Moving Average. From a short-term trading perspective, those are the levels worth watching, as they may determine the next round of price action in this pairing.

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Japan’s final Manufacturing PMI for February stands at 49.0, an increase from 47.7, yet still below the neutral mark of 50. This indicates that the manufacturing sector remains in contraction despite the slight improvement.

Challenges persist primarily due to weak global demand and uncertainties in trade policy. Although the pace of contraction in the factory sector has slowed, there are ongoing struggles with sluggish demand domestically and internationally.

Production has fallen for six consecutive months, with a continuing decline in new orders since mid-2023. While manufacturers express a cautious positive outlook for the coming year, confidence has weakened significantly, reaching its lowest level since June 2020.

Employment levels remain unchanged, as full-time hiring is counteracted by retirements and departures. Rising input costs, attributed to increased expenses for raw materials, labour, and utilities, lead manufacturers to raise selling prices at a faster rate.

We see Japan’s manufacturing sector showing some resilience, but the core challenges are far from over. While February’s final Manufacturing PMI reading at 49.0 is an improvement from the prior month’s 47.7, it remains below the key threshold of 50. This confirms that factories continue to shrink, albeit at a slower rate.

The pressure on production is not easing. A six-month streak of declining output reflects weaker demand from both domestic and international buyers. The drop in new orders, persisting since mid-2023, suggests that purchasing activity is still weak, and businesses are hesitant to commit to fresh acquisitions. Although firms maintain a degree of optimism for the next twelve months, sentiment has taken a hit. Confidence now sits at its lowest point in nearly four years, a reminder of the uncertainty within the sector.

Hiring trends tell a similar story. Employment levels are holding steady, but not due to an uptick in recruitment. Instead, any job additions are balanced out by retirements and voluntary exits. Without fresh demand driving higher production needs, businesses appear cautious about onboarding new workers. Rising input costs add another layer of complexity. More expensive raw materials, higher labour expenses, and increased utility charges mean that factories are passing the burden onto consumers by lifting selling prices at a quicker pace.

For traders, these conditions point to heightened volatility in this space. Pricing dynamics, cost pressures, and order flows will remain key factors to watch. Inflationary concerns could prompt shifts in monetary policy expectations, influencing market reactions. The persistence of weak global trade will continue weighing on sentiment, and any policy developments that impact supply chains or export competitiveness could drive further movement.

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CFTC data shows that Australia’s net positions in AUD NC rose from $-56.7K to $-45.6K. This change indicates a shift in the sentiment regarding the Australian dollar.

The AUD/USD pair is recovering towards 0.6250, supported by positive data from China’s Caixin Manufacturing PMI for February. Broader movements in the market, including optimism from peace talks and a rise in cryptocurrency values, contribute to the Australian dollar’s strength.

Meanwhile, USD/JPY fell toward 150.00 due to overall weakness in the US dollar. Expectations for interest rate hikes from the Bank of Japan bolster the yen’s value.

Additionally, gold has rebounded towards $2,900, primarily driven by uncertainty surrounding the Russia-Ukraine conflict and a weaker US dollar. Upcoming data releases, including the US February ISM Manufacturing PMI, may provide further market direction.

In the week ahead, the focus will be on NFP data and the ECB’s monetary policy decision, alongside a Canada jobs report and minutes from the RBA. Concerns surrounding tariffs are re-emerging, with plans for new tariffs on Canada and Mexico anticipated to be enacted soon.

The recent shift in Australia’s net positions, moving from -56.7K to -45.6K, reflects an adjustment in market sentiment around the Australian dollar. This suggests that traders are not as bearish on the currency as they were previously. A reduction in net short positions often signals a willingness to engage in more risk-taking or an expectation that the currency will strengthen relative to its peers.

AUD/USD recovering toward 0.6250 is not happening in isolation. The latest Caixin Manufacturing PMI data out of China played a role in boosting confidence, offering signs that demand remains steady in one of Australia’s key trading partners. On top of that, sentiment in global markets has shifted as peace talks provide some relief, and cryptocurrency prices push higher. When risk appetite improves, higher-beta currencies like the Australian dollar tend to benefit.

The US dollar weakening had an effect elsewhere as well, particularly in the USD/JPY pair, with the yen climbing back toward 150.00. Expectations that Japan’s central bank may go ahead with an interest rate hike are adding to the yen’s appeal. If the Bank of Japan does follow through, borrowing costs could rise, a stark contrast to the US, where markets anticipate rate cuts later in the year. Traders should be aware that such expectations, if met, could lead to continued pressure on USD/JPY.

Gold prices have also been climbing, making their way toward $2,900. The ongoing Russia-Ukraine situation fuels uncertainty, and with the US dollar wavering, investors are turning to safe-haven assets. The next moves in gold may depend on upcoming macroeconomic releases, with particular attention on US ISM Manufacturing PMI data for February. If the data signals a slowing economy, expectations for rate cuts may strengthen, which could extend the gold rally.

Looking ahead, the focus will be on employment data, central bank decisions, and trade policies. The release of non-farm payrolls in the US will provide more clarity on the labour market’s health, potentially influencing Fed expectations. Meanwhile, the European Central Bank’s stance on monetary policy could drive euro volatility. Canada’s jobs report and minutes from Australia’s central bank will also be closely watched, offering additional clues on future monetary actions.

Trade tensions are once again entering the conversation, with discussions around new tariffs on Canada and Mexico. If enacted, these could impact various sectors and affect market sentiment. Traders should keep an eye on whether such measures gain traction, as any trade disruptions tend to influence currency flows and risk appetite.

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The People’s Bank of China (PBOC) is anticipated to set the USD/CNY reference rate at 7.2857. The PBOC determines the daily midpoint of the yuan under a managed floating exchange rate system, permitting fluctuations around this central reference rate.

Each morning, the PBOC sets a midpoint for the yuan against various currencies, mainly the US dollar, by assessing market supply and demand, economic indicators, and international currency conditions. This midpoint acts as a trading reference throughout the day.

The yuan can move within a trading band of +/- 2% from the midpoint, which may adjust according to economic conditions. If the yuan nears the band limits or experiences high volatility, the PBOC may intervene to stabilise its value.

Authorities in Beijing have relied on this system to temper excessive price swings while maintaining a degree of market flexibility. By steering the midpoint setting at 7.2857, policymakers are sending a clear message about their current stance. Given recent currency movements, the central bank’s approach suggests a preference for stability rather than abrupt shifts. The way this plays out will influence market thinking and future pricing.

Shifting sentiment in global markets has kept traders attentive to any shifts in guidance from monetary authorities. The reference rate continues to serve as a barometer of policy intent. A setting near market expectations would indicate alignment with natural trading pressures, whereas a stronger-than-expected fix could imply greater intervention efforts behind the scenes. Watching these daily actions can help determine whether authorities feel any need to curb depreciation forces or allow for some adjustment.

Beyond the immediate exchange rate levels, broader macroeconomic trends remain in focus. Economic data from China has painted a mixed picture, with policymakers balancing the need for growth support while avoiding excessive financial risk. A carefully managed currency acts as one lever in this broader strategy. Decisions related to liquidity management, lending conditions, and fiscal support all feed into exchange rate dynamics.

Interest differentials between major economies add another layer of complexity. Policy direction from the US Federal Reserve and other central banks remains an active consideration. As funding costs abroad shift, differences in bond yields influence capital flows, affecting demand for the yuan. These global factors add pressure on Beijing’s decision-making, shaping how much flexibility they allow in daily rate settings.

Market participants will be closely dissecting each morning’s midpoint, alongside policy signals from onshore authorities. If adjustments in liquidity provisions or guidance from policymakers hint at greater tolerance for movement, expectations around currency paths may shift rapidly. The coming weeks will provide further clarity on whether authorities anticipate larger price swings or intend to keep daily fluctuation strictly controlled.

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CFTC data indicate that net positions for oil in the United States decreased to 171.2K from the previous 197.6K.

The AUD/USD pair rose above 0.6200, recovering to around 0.6215, aided by positive Chinese PMI data. Meanwhile, USD/JPY faced resistance near the 151.00 mark due to interest rate expectations from the Bank of Japan and geopolitical concerns. Gold prices increased to approximately $2,870, driven by ongoing global uncertainties.

Upcoming events include the Non-Farm Payroll (NFP) report and the European Central Bank’s monetary policy decision. Market sentiment may be influenced by tariff discussions, particularly regarding measures on Canada and Mexico.

The drop in net positions for oil shows that traders are reducing long bets, which might suggest lowered confidence in future price rises. This could be due to adjustments in expectations based on supply and demand shifts. If this trend continues, it could weigh on prices, but external factors, such as production cuts or geopolitical issues, could quickly change the course. Tracking inventory data will be key to seeing if this shift has momentum or if it’s just a temporary positioning change.

The Australian dollar gaining traction above 0.6200 seems to reflect renewed optimism following better-than-expected Chinese PMI data. Since China is a major trading partner, signals of stronger economic activity spill over into stronger demand expectations. However, staying above that level will depend on whether this economic momentum is sustained. If risk sentiment takes a hit globally, the pair could struggle. The 0.6215 region might act as a short-term test, with additional movement hinging on broader USD trends.

For the yen, pressure near 151.00 suggests the market is still watching the Bank of Japan closely. Traders seem reluctant to push further without clearer signals on rate policy. Rate hike expectations, layered with geopolitical concerns, have kept a cap on strong yen weakness. Any shifts from policymakers or sudden risk aversion could see a sharp move lower for USD/JPY. Patience will be needed in this zone, as reactions may be sudden once clarity emerges.

Gold’s rise towards $2,870 shows how uncertainty is keeping safe-haven demand alive. Whether inflation concerns or geopolitical risks continue to support prices will be something to monitor. If central banks maintain their cautious stance, this momentum could hold. However, rapid shifts in rate expectations could see gold retrace if the dollar strengthens again. Those holding long positions might want to watch for any hints of market overextension.

With the Non-Farm Payroll (NFP) report approaching, volatility can be expected. A stronger-than-expected payroll number could fuel expectations of tighter monetary policy, causing sharp moves. Conversely, weakness in the labour market would shift attention towards potential rate cuts. Given the weight this report carries, short-term adjustments are likely across USD pairs and broader risk assets.

The upcoming European Central Bank meeting adds another element traders need to keep an eye on. If policymakers lean towards a more supportive stance, it could push the euro lower. On the other hand, resistance to further easing could stabilise the currency. Reaction in bond yields will provide insight into how convinced the market is about any policy messaging.

Lastly, trade measures targeting Canada and Mexico could bring added tensions. Any imposition of new tariffs or escalations in trade disputes might create ripple effects through commodities and currency markets. Keeping a close watch on government announcements and negotiations will be necessary, as sudden shifts in trade policy could catch markets off guard.

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Warren Buffett discussed the implications of Trump’s tariffs in a recent CBS interview. He stated that tariffs could lead to inflation and negatively impact consumers.

Buffett described tariffs as a form of warfare and indicated that they effectively act as a tax on goods. He emphasised the need to consider the long-term effects of such policies.

Chinese media have responded to his remarks regarding tariffs being an ‘act of war’. This feedback aligns with the sensitivity surrounding trade relations between the US and China.

Warren’s comments come at a time when markets are already dealing with uncertainty surrounding trade policies. The mention of tariffs as a form of warfare is not just a rhetorical choice—it highlights the financial consequences that come with these policies. If imported goods become more expensive due to added costs, businesses will either pass those expenses to consumers or absorb the hit themselves, which can create instability in different sectors.

Given that we have seen inflationary pressure build up in several economies, caution is necessary. If prices rise too quickly, buying power weakens, which can shift market sentiment in unpredictable ways. Investors may begin pricing in expectations of further inflation, affecting valuations and broader confidence. This is where trader behaviour becomes even more relevant. When uncertainty grows and political risks add to existing concerns, volatility often follows.

Reactions from Chinese media also serve as a reminder that rhetoric has real-world effects. Markets are not just affected by direct policy decisions but also by responses from key players. If Beijing sees Warren’s phrasing as an escalation, it may influence future policy in ways that affect trade flows. Even a shift in tone from one side can push negotiations in a different direction, making it necessary to track updates closely.

As discussions about tariffs remain in focus, those navigating price movements must weigh the potential speed at which new decisions can roll out. We have seen in the past that official statements or policy shifts often trigger immediate reactions before broader trends take hold. Short-term traders should recognise the difference between temporary market swings and longer-lasting changes that shape pricing over weeks or months.

With inflation already being watched closely, any additional cost pressures could push central banks to act sooner than expected. If monetary policymakers see price increases as persistent, they may adjust interest rates accordingly, which would have direct effects on borrowing costs and risk appetites. The link between trade policies and central bank decisions is not always immediate, but it remains an area that cannot be ignored.

For those focused on short-term moves, paying attention to statements from policymakers and corporate leaders will be essential. Market pricing does not wait for confirmed data—it adjusts based on expectations. If sentiment shifts due to policy concerns, this can cause swift adjustments in key sectors, particularly those directly linked to international trade.

Trade remains a factor that affects multiple areas of the economy, and responses from businesses and governments will determine how far-reaching the effects become. With Warren’s warning about the consequences of tariffs now widely discussed, watching both policy decisions and market reactions in the coming weeks will remain a top priority.

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Stocks showed initial gains on Friday following in-line PCE inflation data for January, which indicated core inflation rose by 2.6% year-on-year. This was a welcome sign compared to a revised figure of 2.9% in December, aligning with market expectations.

However, the mood shifted when a meeting between US President Trump and Ukrainian President Zelenskyy ended unsuccessfully. Tensions arose as Zelenskyy demanded security guarantees while Vice President Vance deemed his negotiations disrespectful, contributing to volatility in major stock indices.

Additionally, layoffs announced by Trump advisor Elon Musk and rising tariffs imposed on major trading partners raised concerns within the labour market. Initial Jobless Claims surged to 242,000, surpassing the anticipated 221,000.

Bearish sentiment was prevalent as major US indices remained below their starting points for the year. Nvidia’s stock plummeted 8.5% despite positive earnings, and the Dow Jones traded under its 100-day moving average.

Recent surveys indicated increased pessimism, with 60.6% of retail traders expecting market declines in six months. Meanwhile, 89% of fund managers believe the US stock market is overvalued, marking the highest proportion since April 2001.

The trading session initially looked promising after inflation data matched expectations. Core inflation showed a 2.6% year-on-year rise for January, which came as a relief when compared to December’s revised 2.9%. Many expected something similar, so there were no major surprises, leading to early gains in stocks.

That optimism, however, faded quickly. A meeting between Donald and Volodymyr ended on a sour note. The Ukrainian leader pressed for security guarantees, which did not sit well with Vice President Vance. She called his approach disrespectful—something the market did not take lightly. As tensions rose, so did volatility across major stock indices. The dip seen later in the session reflected the uncertainty surrounding geopolitical affairs.

Adding to the turbulence, Elon announced workforce reductions while new tariffs hit trade partners. That created fresh labour market concerns, which were reflected in a steeper-than-expected rise in initial jobless claims. The latest figures came in at 242,000, well above the anticipated 221,000. With layoffs in focus and protectionist policies tightening, economic worries deepened.

Investor sentiment took a clear hit. The US stock market remains under pressure, with major indices unable to climb back into positive territory for the year. Even Nvidia, which reported strong earnings, felt the weight of selling pressure. The company’s stock dropped 8.5%, defying expectations for a rally. At the same time, the Dow Jones slipped beneath its 100-day moving average, adding to concerns that momentum is fading.

Surveys paint a bleak picture as well. Retail traders have turned more pessimistic, with over 60% expecting further declines in the next six months. Institutional views are even more striking—nearly nine in ten fund managers now think the US stock market is overpriced. That level of concern has not been this high since April 2001, a period that carried its own set of troubles.

For those keeping an eye on derivatives, all of this suggests a complex few weeks ahead. With equity weakness persisting, geopolitical uncertainty on the rise, and labour market fears creeping back in, there is no shortage of factors that could shift price action. Conversations around monetary policy will matter too, though for now, inflation appears to be moving in the right direction.

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