April’s Liberation Day tremor feels like ancient history—risk gauges have reset to pre-tariff levels, high-yield spreads are back in tidy ranges, and the S&P 500 treats every morning swoon as a buy-the-dip opportunity. A 2% slide in the morning? More like a launch pad for a green-close rocket, fueled by blockbuster earnings and a growing conviction that the 90-day tariff truce will morph into an extended détente.
Microsoft and Meta crushed estimates in after-hours trading, reminding everyone that real-time corporate performance now eclipses stale GDP snapshots. The trade war’s dark cloud hasn’t vanished—expect duties at or north of 10% once this pause lapses—but today’s tape is betting on tactical carve-outs and diplomatic olive branches. The actual litmus test will be whether this calm holds or the tariff hammer falls again when the clock runs out on Washington’s cease-fire.
On the FX front, Tokyo’s hold at 0.50% and ensuing statement leaned softer than many FX traders hoped, and on the “ Dovish Hold, ”USD/JPY seized the cue, surging past 144.50 and punching higher even before Governor Ueda finished at the podium. With no hawkish anchor in sight, and U.S. equities glowing green, carry flows are gleefully pummeling the yen. This isn’t mere rate inertia; it’s policy normalization dialling back to idle as tariff fog thickens. The wage-price loop may still be humming in the background, but it’s whisper-quiet—and that’s all the signal the carry crowd needed to drive USD/JPY higher.
U.S. equities have recovered nearly 90% of the drawdown on Liberation Day, and that bounce in sentiment is bleeding into FX. Trade chatter has flipped from panic to cautious optimism—Washington quietly dialling for talks and Beijing publicly hinting at a hotline—and Europe’s camp now arrives at the table with fresh concessions. Toss in a headline-grabbing U.S.–Ukraine minerals pact, and cross-asset volatility has been melting lower, underpinning the dollar’s bid. With the greenback’s risk premium ebbing and EUR positioning stretched to a fault, don’t be surprised to see EUR/USD slide toward the low 1.1200s if this constructive mood music holds—and US growth fears don’t reassert themselves first.
Reprinted from FXStreet，the copyright all reserved by the original author.
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