It’s been roughly a week since Donald Trump and his administration last added fuel to the trade fire—and it feels good. The immediate relief from that sweet calm has brought a rebound across equities despite mixed news. Mixed, because Meta and Microsoft announced stronger-than-expected Q1 results, as did Amazon and Apple after the bell yesterday. However, statements from Apple and Amazon sounded cautious—more cautious than analysts expected.

Apple, which found itself in the crossfire of the US-China trade war, saw a 2.3% decline in iPhone sales to China. Meanwhile, Amazon gave a soft guidance for the current quarter, highlighting that tariffs and trade policies make forecasting complicated. Complicated indeed—when nearly 20% of the goods sold on your platform come from China, and 60% of third-party sellers have China exposure (according to MS). With tariffs imposed at 145% by the Trump administration and Chinese buyers unwilling to absorb those costs, forecasting becomes a nightmare. Both companies fell more than 3% in after-hours trading.

But optimism remains fragile

Still, US futures remain in positive territory this morning, with Nasdaq lagging behind S&P 500 futures. Yet optimism is fragile, as Amazon is far from the only company struggling with forecasting. In fact, many firms have softened their guidance this earnings season—or refrained from giving one altogether. Companies like McDonald's and Starbucks reported declining sales. That could be a sign households are preparing for higher prices and potential recession, as the latest consumer surveys all pointed to a sharp drop in sentiment and a significant rise in medium- to long-term inflation expectations.

Indeed, a first look at Q1 GDP data confirmed that the US economy contracted 0.3% last quarter while price pressures mounted. And the Q2 numbers look dull. Yesterday’s data showed US manufacturing activity shrank the most in five months in April. Orders have been falling since the start of the year, production is diving, and jobs are coming under pressure. Data released earlier this week hinted at lower job openings, a soft ADP report, and a jump in US initial jobless claims to the highest level since February.

Today’s official US jobs data is expected to show 138,000 new nonfarm job additions last month. Last month’s NFP report surprised to the upside, but given the recent string of weak data, there’s a higher chance we see a soft report this time. Of course, soft numbers fuel dovish Fed expectations—and dovish Fed expectations fuel risk appetite. The declining 2-year yield explains part of the recent S&P 500 rebound.

Yet there’s a red line that shouldn’t be crossed: inflation. If inflation heats up due to tariffs, the Fed may not be able to provide the necessary support, and sentiment could quickly reverse. Therefore, a soft NFP read could fuel the Fed doves and push the S&P 500 higher into the weekly close—if wage growth remains reasonable.

The Fed is expected to hold rates steady at next week’s meeting, but expectations for June remain uncertain. Fed funds futures currently suggest a 58% chance of a cut, and a 42% chance of no change. Inflation will determine which way the balance tilts.

FX & Commodities

The US dollar was better bid this week, though it’s softer in Asia this morning. The EURUSD is back at the 1.13 mark after dipping to 1.1265. This week’s CPI update hinted at higher-than-expected price pressure across the major eurozone economies. The eurozone aggregate CPI is due this morning; a stronger-than-expected read could soften the hands of European Central Bank (ECB) doves and trigger further retreat in the euro. But ultimately, the EURUSD’strajectory will depend heavily on the dollar’s performance. Easing trade tensions could trigger a broad-based US dollar rebound and lead to a period of consolidation in the majors. But only sustained easing in trade tensions could justify a lasting dollar rally.

Elsewhere, the no-escalation of the trade war and improved risk appetite pulled gold prices lower throughout the week. The price of an ounce dropped to $3,200 yesterday after peaking at $3,500 last week—highlighting just how volatile gold has become. Meanwhile, the USDCHF printed a double top near the 0.8335 level, which could be easily broken on further de-escalation in the trade war.

Crude oil was sent on a rollercoaster ride this week. The barrel of US crude fell below the $57 mark yesterday on reports that Saudi Arabia is ready to tolerate lower prices. But dip buyers quickly stepped in as Trump threatened to expand sanctions on buyers of Iranian crude. Day-to-day moves in crude are tough to catch, but the outlook remains negative given rising supply and weakening demand prospects. A further decline to $50pb is likely.

Lower oil prices will likely weigh on energy companies’ earnings. BP reported lower-than-expected Q1 results and reduced its stock buyback due to economic uncertainties. Exxon, and Chevron are due to report earnings today and are expected to announce EPS declines between 15% and 20%. In fact, energy stocks have been underperforming despite an initial Trump boost, and falling oil prices, the trade war, and broader economic uncertainties suggest that pressure could persist.