Tariff tensions ease, caution lingers

While fears of sweeping "Liberation Day" tariffs under Trump initially rattled markets, recent reports suggest the measures could be more targeted — aimed at a select group of countries with notable trade imbalances rather than broad industry sectors. That shift helped ease some of the more extreme risk-off sentiment, though investor caution still lingers.

Asian Markets

In Japan, Bank of Japan minutes revealed internal discussions around the pace and direction of rate hikes. Despite a January hike to 0.5%, policymakers flagged that real interest rates remain deeply negative — a point raised by one member who sees 1% as a realistic target by late 2025. Inflation in December hit 3.6%, the highest in nearly two years — giving Tokyo more reason to move proactively.

Euro

The euro continues to hover around the 1.0800 mark against the dollar, stuck in a narrow range with neither side showing conviction. Lackluster risk appetite, combined with a soft dollar tone and wait-and-see positioning ahead of the German IFO data, has left the pair directionless.

Uncertainty over upcoming U.S. tariffs and ongoing geopolitical negotiations has kept currency markets cautious, with no clear macro catalyst strong enough to break the gridlock, for now.

Commodities

Gold is clawing back modest gains in early European trade after a three-day pullback, supported by a softer dollar and revived Fed rate-cut speculation. The yellow metal remains sensitive to any signs of economic slowdown linked to tariffs, with non-yielding assets gaining appeal when growth prospects dim. While investor optimism around a more measured U.S. tariff rollout and China’s stimulus efforts is lifting broader sentiment, gold’s downside appears limited for now.

Oil

Oil prices edged up toward $69 in the early Asian session, but momentum remains constrained. Geopolitical risks continue to swirl, especially after Trump floated the idea of secondary tariffs on Venezuelan energy exports. At the same time, any hope for a ceasefire in Ukraine — while far from guaranteed — is acting as a cap on crude’s upside.

For now, WTI remains range-bound, with sentiment pulled in opposite directions by geopolitics and demand uncertainty.