What a difference a week makes. With growth slowing, legal tensions rising, and crypto taking a breather, markets traded with less conviction — but no shortage of headlines. Let’s dive in.
Macro: Growth Wobbles, Tariff Confusion Clouds Outlook
This week’s macro narrative was dominated by a confirmed Q1 contraction and renewed legal and political uncertainty around Trump-era trade policies. The US economy shrank 0.2% in Q1 (annualised), dragged down by nearly 5 percentage points hit from net exports — the largest on record — and a sharp slowdown in consumer spending growth to just 1.2%, the weakest pace in nearly two years. Jobless claims rose to 240,000, the highest level since late 2021, pointing to a softer labor market.
While markets initially celebrated Nvidia’s +4% post-earnings rally, broader sentiment deteriorated mid-week. The 10-year Treasury yield settled at around 4.42%, and the DXY remains below 100. Traders continue to price at about two rate cuts by year-end, reflecting growing caution around the economic outlook.
Uncertainty regarding tariffs resurfaced after the US Court of International Trade ruled much of Trump’s global tariff regime illegal. However, a federal appeals court has since issued a temporary stay, allowing the levies to remain in place for now. The administration is vowing to fight the decision in the Supreme Court and is exploring alternate tariff powers under Sections 232, 301, and 122 — though these may take months to implement.
With attention turning to the upcoming release of April’s core PCE inflation data today, the outlook stays clouded. Equities remain range bound as uncertainty around trade policy and inflation tempers market conviction.
Crypto: ETH Outpaces BTC as Market Takes a Breather
After weeks of strong momentum, crypto markets entered a brief cooling phase. BTC trades around USD 105,000 at the time of writing, down roughly -5% since last Friday, while ETH holds near USD 2,625, eking out modest gains. Despite the broader consolidation, ETH outperformed BTC over the past seven days, gaining ~6% relative to bitcoin — a notable reversal in a spread that is typically favoured BTC in recent months.
BTC’s 7-day ATM IV has slipped to 39.3% (down from 46.3% last week), with skews still positive but noticeably softer — the 10D risk reversal is now at +2.32 (vs. +6.43) and 25D RR at +1.15 (vs. +3.39), pointing to more neutral near-term sentiment. ETH remains the higher-beta asset with 7-day ATM IV at 73.5%, but its upside skew has also eased: the 10D RR stands at +8.82 and 25D RR at +2.59, compared to last week’s +10.57 and +3.39, respectively.
While BTC and ETH risk reversals remain in positive territory, the overall picture suggests a cooling in directional conviction — especially in BTC — even as ETH still reflects stronger call-side interest.
Looking Ahead: Focus Turns to Jobs and Central Banks
Next week’s key events include Tuesday’s JOLTS report, the ECB’s expected rate cut on Thursday, and the US nonfarm payrolls report on Friday — all of which could offer fresh clues on labour market strength and policy direction. Until clearer signals emerge, markets may remain cautious as traders sift through conflicting messages from policymakers and data releases.
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