Friday forex follies: Are FX markets calling trump’s bluff?“

Market wrap

Asian equities fell in lockstep with Wall Street on Friday as jitters over the looming “reciprocal tariffs” and an escalating trade war dragged on risk sentiment across the region. Investor appetite is clearly thinning, with market participants de-risking ahead of next week’s fireworks.

That said, there’s growing chatter of backchannel horse-trading between Washington and both Beijing and New Delhi ( and let’s not forget Tokyo), suggesting the economic fallout—while real—may not be quite as apocalyptic as the headlines imply. Still, with volatility on the rise and policy fog thickening, it’s becoming clear that a proper hedge strategy is no longer optional—it’s essential.

And as we’ve been flagging for months, gold remains the cleanest and most effective hedge in this environment. More on that shortly.

Next week is shaping up to be a firestorm of trade and macro headlines, with Donald Trump’s long-awaited reciprocal tariffs taking center stage. But that’s just the opening act. Markets will also be parsing signals from the U.S. review of the Phase One Trade Agreement with Beijing, the ongoing TikTok saga, and fresh economic prints out of China, Japan, South Korea, and Taiwan, plus a key RBA rate decision in Australia. It’s a full plate—and the second course could sting.

We may have already absorbed the initial gut-punch from Trump’s auto tariffs, but the real test is just beginning. The second-order effects—on global demand, consumer sentiment, and cross-border investment flows—are what will truly determine the staying power of this market dislocation. Buckle up. As we shift into data-driven trading mode, month-end flows offer the perfect excuse to wipe the slate clean and recalibrate for what’s next.

Gold markets

Meanwhile, a modern-day gold rush is in full swing. The yellow metal keeps pushing record highs, with $3,100 in sight—and possibly more. What’s fueling the bullion bonanza? It’s a cocktail of factors: fears that gold could get swept into the U.S. tariff dragnet, massive physical demand at the COMEX, and a relentless safe-haven bid from central banks and Asia buyers. This isn’t just a hedge—it’s a full-throttle flight to hard assets, and traders are riding it like it’s 1979 all over again.

Forex marekts

From a pure trading perspective, what’s truly eye-catching is just how shrugged off the 25% auto tariff bombshell has been—especially in FX. You’d think a headline like that would set off alarms, but the reaction has been eerily muted, almost as if traders had it priced in six ways to Sunday.

There are a couple of theories in play. One, the market might be betting that the spillover to global growth will be more of a fender bender than a full-on crash.Or two, and more likely, there’s a healthy dose of skepticism baked into the cake—that the next level of tariffs may prove more temporary theater than lasting policy.

In short, FX markets are calling Trump’s bluff—for now. But don’t mistake the calm for complacency. The real repricing comes if these tariffs stick longer or cut deeper than expected. Until then, the playbook seems to be: price it in, fade the noise, and stay nimble.

The yen is clawing back some ground from its weekly lows after Tokyo CPI came in hotter than expected, cranking up the pressure on the Bank of Japan. Headline inflation for March hit 2.9% y/y, ticking up from a revised 2.8% in February and beating the 2.7% consensus. More importantly, the inflation impulse is no longer just skin-deep—price pressures are clearly broadening, moving beyond volatile components and into the core.

This isn’t just noise—it’s the kind of persistent stickiness that makes central bankers squirm. The market’s now dialing up odds for a BoJ rate hike in May, and the “wait and see” approach is starting to feel a lot more like "wait and caught off guard."

With core inflation firming and headline figures refusing to fade, the BoJ may be running out of runway to sit on its hands. It may just turn into a live meeting, and the yen knows it but is reluctant to jump on the wagon ahead of next week's reciprocal tariffs.

The EUR/USD price action reflects a subtle but telling narrative shift. What was once a fiscal stimulus-driven euro bid has now been drowned out by the rising decibel level of global trade war concerns. The result? A marginally weaker euro rather than outright capitulation.

All this fiscal fanfare and tariff turbulence set the stage for a lively ECB meeting on April 17. Markets are starting to lean into the idea that the ECB could pause sooner than previously priced, especially given the size of the fiscal deluge in waiting. That soft bid under EUR/USD has been telling for the past 24 hours.

Keep a close eye on front-end EUR curves and short euro rate futures—they’re whispering a shift that’s not yet fully on the radar.