As such, the OECD expects the US to be the hardest hit among major economies. Japan is also seen feeling the pinch of trade tensions, while projections for Europe remain relatively steady. The euro area is expected to continue growing slowly, and the gap between US and European growth should narrow as the US economy decelerates. That’s also what the euro’s appreciation against the dollar has been signaling since the start of the year.

The EURUSD pair struggles to break through the 1.15 psychological level, with strong offers above 1.1450. But if US trade disruptions persist, those offers could give way, sending the pair into the 1.15–1.20 range by summer. Judging by the latest developments, that scenario looks increasingly plausible—if undesirable. As of today, Trump’s new tariffs on steel and aluminium—doubling the rate from 25% to 50%—take effect.

So why are US stocks still being bought? There are several explanations: FOMO: Fear of missing out on the rally, TACO: Trump Always Chickens Out, or economic data/Federal Reserve (Fed) hopes?

But trade headlines were negative yesterday while the economic data was mixed and the Federal Reserve (Fed) is reluctant to move due to rising inflation expectations. So it’s probably FOMO—and it feels fragile.

Today, investors will watch the ADP employment report and ISM non-manufacturing data for fresh insights into US economic strength. Strong numbers may support further gains while soft figures Maybe could trigger a pullback. Or maybe not. Markets seem to have their own agenda, and the fear of missing a potential rally appears enough to fuel optimism—no matter how weak the forecasts, or the data.

And the economic data is more concerning than encouraging: following a surprise contraction in Chinese manufacturing PMI earlier this week, Australia reported softer-than-expected Q1 growth this morning. The Bank of Canada (BoC) also meets today, with some expecting a 25bp rate cut. Since surveys are split, the move isn’t fully priced in. A cut could lift the loonie by fueling growth optimism, while a hold could prompt a bit of re-positioning. But with the US dollar under pressure, the USDCAD looks ready for further declines.

In June 2021—four years ago—the pair traded near the 1.20 level. It now sits at a critical juncture. A break below 1.37—the 38.2% Fibonacci retracement of the four-year rise - would put the pair into a long-term bearish consolidation phase, possibly driving it toward the 1.30–1.33 range. That would fit the broader narrative of expected US dollar weakness.

In equities, US stocks remain in demand, with tech leading the charge. The Nasdaq is inching toward its February all-time high, driven by Nvidia’s rally past $140. Nvidia has now overtaken Microsoft to become the world’s most valuable company, with a market cap around $3.45 trillion. Its P/E ratio sits near 45—not extreme for a speculative tech name with real earnings behind the story. For AI investors, Nvidia remains a strong conviction play. In Europe, luxury goods are losing ground to defense names.

Germany’s Rheinmetall has joined the Euro Stoxx 50, while Kering has dropped out. Weak demand from Chinese consumers and higher US import taxes are weighing on the luxury sector. Meanwhile, rising geopolitical risks and European pledges to boost defense spending are attracting flows into defense stocks.

Beyond that, softer inflation and looming European Central Bank (ECB) rate cuts continue to support Stoxx 600 valuations, though the upside in most of these names can’t match the momentum of US tech leaders, and there are concerns that the European defense spending plans may have already been mostly priced in.