S&P 500 Ends Losing Streak, but Market Volatility Persists Amid Trade and Fed Policy Concerns | Weekly Market Analysis

Key events this week:

Monday, March 24, 2025

• USA - S&P Global Manufacturing PMI (Mar)  
• USA - S&P Global Services PMI (Mar)  

Tuesday, March 25, 2025

• USA - CB Consumer Confidence (Mar)
• USA - New Home Sales (Feb)

Wednesday, March 26, 2025

• UK - CPI (YoY) (Feb)
• UK - Spring Forecast Statement        
• USA - Durable Goods Orders (MoM) (Feb)
• USA - Crude Oil Inventories

Thursday, March 27, 2025

• USA - GDP (QoQ) (Q4)
• USA - Initial Jobless Claims

Friday, March 28, 2025

• UK - GDP (QoQ) (Q4)
• UK - GDP (YoY) (Q4)
• USA - Core PCE Price Index (MoM) (Feb)
• USA - Core PCE Price Index (YoY) (Feb)

The S&P 500 snapped a four-week losing streak with a modest gain on Friday, but investors faced another turbulent week as uncertainty surrounding trade policies and Federal Reserve decisions weighed on sentiment. The Dow Jones Industrial Average edged up 31 points (0.1%), the S&P 500 posted a slight 0.04% increase, and the NASDAQ Composite outperformed, adding 0.5%.

The Federal Reserve’s decision to hold interest rates steady was widely expected, yet its revised outlook indicated potential economic headwinds. Policymakers raised inflation forecasts while downgrading growth projections for 2025. Although the Fed maintained expectations of at least 50 basis points of rate cuts this year, inflation remaining above the 2% target has cast doubt on this timeline. The Fed also highlighted uncertainty regarding the economic impact of Trump’s proposed tariffs, particularly their potential inflationary effects.

In a development that briefly eased trade tensions, the European Union decided to delay retaliatory tariffs on US whiskey, fueling optimism that negotiations between Brussels and Washington could prevent a broader trade conflict.

The Australian Dollar rebounded against the US Dollar on Monday, reversing two consecutive days of losses. The AUD/USD pair climbed as preliminary Judo Bank Purchasing Managers’ Index data signaled resilience in Australia’s economy. Manufacturing PMI rose from 50.4 to 52.6 in March, services PMI increased from 50.8 to 51.2, and composite PMI improved from 50.6 to 51.3.

Expectations that the Reserve Bank of Australia will hold interest rates steady in April provided further support to the AUD. Analysts anticipate no immediate policy shifts following February’s rate cut, the first in four years. Optimism over potential Chinese stimulus measures also bolstered the Australian economy, lifting the AUD.

Market sentiment improved after reports that the White House was adjusting its tariff strategy ahead of the April 2 implementation, alleviating some investor concerns. Meanwhile, geopolitical risks slightly eased as US and Ukrainian officials met in Riyadh to discuss peace efforts, and President Trump continued advocating for an end to the three-year war.

The USD/CHF pair extended its rally for the fourth straight session, trading near 0.8840 in early Asian markets on Monday. The US Dollar gained ground, supported by rising Treasury yields and a hawkish stance from the Federal Reserve.

Conversely, the Swiss Franc faced headwinds as improved risk sentiment reduced demand for safe-haven assets. Market participants reacted to reports that the White House may scale back its planned reciprocal tariffs, easing some geopolitical concerns.

Further weighing on the CHF was the Swiss National Bank’s decision to lower its key policy rate to 0.25%, its lowest level since September 2022. Although the move was widely expected, policymakers refrained from committing to a firm policy trajectory, citing muted inflationary pressures.

The Japanese Yen struggled in Monday’s Asian session after Japan’s PMI data indicated slowing economic momentum. The weaker print, combined with improved market risk appetite, weighed on the JPY. Meanwhile, reports suggesting that President Trump’s reciprocal tariffs will be narrower and less severe than initially expected provided a minor boost to market confidence, further pressuring safe-haven assets like the JPY.

However, expectations that Japan’s strong wage growth could fuel broader inflationary trends, potentially allowing the Bank of Japan to continue rate hikes, limited downside risks for the JPY. Despite the Fed’s cautious tone, investors have priced in the possibility that the central bank may resume rate cuts soon, amid fears that higher tariffs could slow economic growth. This dynamic could limit the USD’s upside, supporting the lower-yielding JPY in the near term.

Gold failed to sustain Friday’s rebound and started the new week under pressure. Market sentiment received a modest lift following reports that Trump’s planned tariffs would be less restrictive than feared, temporarily easing concerns over global trade disruptions. This shift in sentiment weighed on gold, which recorded its third consecutive daily decline.

However, geopolitical risks in the Middle East continued to underpin some safe-haven demand. Israel intensified airstrikes in Gaza, targeting the region’s largest hospital and reportedly killing Hamas leader Ismail Barhoum.

Iran-backed Houthis in Yemen launched a ballistic missile at Israel, though it was intercepted by Israeli air defenses. US military forces conducted new airstrikes in Yemen’s Saada province, escalating tensions. Houthis claimed fresh attacks on an aircraft carrier in the Red Sea and Israel’s Ben Gurion Airport, heightening risks of further conflict.

Traders will be closely watching the release of flash global PMIs on Monday, which could provide fresh insights into global economic conditions. However, the key event for the week remains the US Personal Consumption and Expenditure Price Index on Friday, which could significantly influence market expectations for Fed policy moves.