Markets experienced a sharp sentiment shift this week as the recovery in equities and crypto gave way to renewed caution. While the Fed held rates steady as expected, the dovish tone – particularly around the slowdown in quantitative tightening – offered a temporary relief rally, especially in crypto. However, the underlying fragilities in global macro remain: rising geopolitical tensions, sticky inflation, and softening growth. The bounce in risk assets was choppy, emotional, and ultimately inconclusive.
Macro: Liquidity Tide vs. Global Uncertainty
Markets oscillated between fear and hope this week. The FOMC’s decision to taper quantitative tightening by USD20 billion a month starting from 1 April acted as a liquidity injection signal and was interpreted as a soft pivot by the Fed. While rates were held steady, Powell struck a more cautious tone, emphasising uncertainty and referring to tariff-related inflation as “transitory.” But the softness was not without caveats. The Fed also downgraded 2025 growth forecasts to 1.7% and raised inflation estimates to 2.8%, fanning fears of stagflation. The updated dot also shifted to more hawkish with four officials now forecasting no rate cuts in 2025.
Elsewhere, the BoJ, Riksbank, and BoE all held rates steady, with the BoJ citing rising global uncertainty – notably around Trump-related tariffs. The SNB delivered its fifth consecutive cut, trimming rates by 25bp as expected. Schlegel flagged an uncertain inflation outlook, with downside risks tied to weaker global growth and potential franc appreciation. The franc weakened slightly against USD and EUR post-decision, but the bigger move came yesterday as markets unwound the post-FOMC USD sell-off with DXY back above 104.00.
US macro data was mixed this week. Initial jobless claims ticked slightly higher, but the labour market remained resilient. Retail sales, however, deeply disappointed– rising just +0.2% MoM versus expectations of +0.7% – a clear sign that consumer momentum may be slowing. In contrast, industrial production surprised to the upside, jumping +0.7% in February (vs. +0.2% expected).
The divergence underscores a key theme: cracks are forming beneath the surface – but they’re not breaking the foundation. Yet.
Geopolitical risk also took centre stage midweek. With Trump preparing a new round of reciprocal tariffs by April 2, and tensions escalating between China, Canada, and the EU, fears of a renewed global trade war intensified. Meanwhile, developments in the Middle East were surprisingly muted in energy markets – possibly due to expectations of rising US oil supply.
Crypto: Rally, Retrace, Reset
BTC staged a post-FOMC rally past USD 85,000 on the back of dovish liquidity signals from the Fed, only to retrace back to the USD 82,000–84,000 range as volatility returned, nevertheless it remains well supported around the USD 82,000 level for now. The initial move was driven more by macro liquidity flows rather than crypto-specific catalysts, highlighting BTC’s growing correlation to broader risk sentiment.
ETH remained soft, failing to hold the USD 2,000 level, while altcoins continued to trade on a weaker footing this week.
One of the most notable headlines of the week came from Trump, who expressed support for stablecoin legislation and a more defined crypto market structure in his remarks at the New York Digital Asset Summit. Market reaction was minimal, but his return to the digital asset narrative could become a material tailwind – or headwind – depending on how policy evolves.
Elsewhere, XRP outperformed +7% on the week after the SEC dropped its lawsuit, with CEO Brad Garlinghouse suggesting that an XRP ETF could be launched by the end of 2025. He also hinted at a potential IPO for Ripple Labs, albeit not an immediate priority.
Looking Ahead: Patience, Positioning, and Policy
The coming week will be defined by how markets digest the dovish signals from Fed amid rising uncertainty. While central banks provided some clarity, the lack of directional conviction remains stark. The “soft pivot” is now priced, but is it durable?
Upcoming tariff decisions on 2 April, geopolitical meetings and follow-through from China’s fresh stimulus will set the tone.
Positioning remains cautious. This week’s sharp reversals in both macro and crypto flushed out many leveraged long positions, creating a cleaner setup but leaving little conviction. The emotional tenor of recent price action suggests sentiment – not fundamentals – is still in the driver’s seat.
Volatility is not over. But neither is the opportunity for tactical re-entry if macro data or policy surprises emerge.
Happy Trading!
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