This week’s focus is on key global economic data, U.S. inflation, GDP, and jobs reports amid ongoing uncertainty over Trump's trade policies. Markets show cautious optimism, but risks remain as tariff tensions and inflation concerns weigh on sentiment.

Key Events and Data to Watch This Week

Monday, April 28

• Dallas Fed Manufacturing Business Index (Apr)

Tuesday, April 29

• GfK Consumer Confidence Survey (May)

• Business Climate (Apr)

• Consumer Confidence (Apr)

• Housing Price Index (Feb)

• Consumer Confidence

• JOLTS Job Openings (Mar)

• Retail Trade (Mar)

Wednesday, April 30

• Consumer Price Index (Q1)

• Monthly Consumer Price Index (Mar)

• Caixin Manufacturing PMI (Apr)

• Gross Domestic Product (Q1) Prel

• Retail Sales (Mar)

• Unemployment Change (Mar)

• Gross Domestic Product (Q1) Prel

• Consumer Price Index (Apr) Prel

• ADP Employment Change (Apr)

• Gross Domestic Product (Q1) Prel

• PCE Price Index (Q1) Prel

• PCE Price Index (Mar)

• Employment Cost Index (Q1)

• Personal Income (Mar)

• Personal Spending (Mar)

• Pending Home Sales (Mar)

Thursday, May 1

• Trade Balance

• BoJ Interest Rate Decision

• Unemployment Rate (Mar)

• Challenger Job Cuts (Apr)

• ISM Manufacturing PMI (Apr)

Friday, May 2

• Retail Sales (Mar)

• Producer Price Index (Q1)

• Harmonized Index of Consumer Prices (Apr) Prel

• Unemployment Rate (Mar)

• Nonfarm Payrolls (Apr)

• Unemployment Rate (Apr)

• Average Hourly Earnings (Apr)

• Factory Orders (Mar)

Partial Relief Continues in Markets as Trump Softens Stance, but Uncertainty Remains

Following U.S. President Donald Trump's signals of efforts to ease trade tensions and his retraction of comments about removing Federal Reserve Chair Jerome Powell, global markets have continued to experience a degree of relief. However, Trump’s mixed messages regarding tariffs are keeping global markets under a heavy cloud of uncertainty.

Global sentiment improved and risk appetite strengthened last week after Trump adopted a more conciliatory tone on tariffs—particularly toward China—and reports emerged suggesting that Beijing is considering suspending its 125% tariffs on certain U.S. imports.

As the "sell America" theme lost momentum, the U.S. dollar appreciated against all G10 peers, Treasury bonds erased nearly all their losses for the month, and equities rebounded. Meanwhile, safe-haven assets such as gold, the Japanese yen, and the Swiss franc weakened as risk appetite returned.

Still, due to Trump’s conflicting signals on tariffs and persistent uncertainty, some strategists doubt the sustainability of the recovery in U.S. assets. Elevated uncertainty continues to make forecasting difficult, and global investors remain highly reactive to headlines—meaning sentiment could shift quickly.

Dealmaking Hopes Rise, But U.S.–China Trade Tensions Remain Unresolved

Last week, Trump reiterated that he would be "very nice" in any trade talks with China and suggested that tariffs would be reduced if an agreement were reached. While Trump claimed that discussions with China were underway, Beijing firmly rejected speculation that progress had been made.

In a Friday interview with Time magazine, Trump confirmed that talks with China were ongoing but stated he would not initiate contact unless Chinese President Xi Jinping reached out first—later claiming that such a call had occurred, without providing details.

However, during a separate interview aboard Air Force One the same day, Trump confused matters further by stating that unless Beijing offered "something substantial," he would not lower tariffs. Meanwhile, Beijing called on the U.S. to unilaterally lift tariffs.

Earlier in April, Trump had announced aggressive tariff hikes on about 60 countries but later postponed them for 90 days to allow negotiations—maintaining a baseline 10% tariff. However, China was excluded from the pause, and additional rounds of hikes pushed tariffs on Chinese imports to 145%, with China retaliating at 125% on U.S. goods. These effective tariff rates far exceed the 60% level economists believe could collapse bilateral trade altogether.

Although some reports suggest China is considering exemptions on select U.S. imports, analysts caution that the primary motivation appears to be protecting domestic industries rather than easing tensions. As a result, there is little tangible evidence of genuine de-escalation between the world’s two largest economies—enough reason to keep markets cautious.

Turning to negotiations with other trade partners, Trump stated Friday that he expects deals to be finalized within the next three to four weeks. However, when asked about the possibility of extending the 90-day pause, he said it was unlikely.

Cautious Optimism: Markets Rebound, But Risks of Reversal Remain

Despite improving market sentiment, economists remain cautious. They warn that a sustainable risk rally will require concrete resolutions, not mere rumors. Moreover, they continue to predict that Trump’s tariff moves will weigh on U.S. economic growth and push inflation higher this year and next.

According to the latest Bloomberg survey, U.S. GDP growth is now expected to slow to 1.4% in 2025 and 1.5% in 2026—down from prior estimates of 2% and 1.9%, respectively, reflecting the impact of aggressive tariffs announced after April 2.

Despite the 90-day suspension, the 10% baseline tariffs remain in effect, and the U.S. effective tariff rate is now close to 23%—the highest level in over a century—potentially raising prices, accelerating inflation, and curbing consumer spending, thereby slowing growth. In this context, economists have raised the probability of a U.S. recession within the next 12 months from 30% to 45%.

Reflecting these concerns, strategists doubt the durability of the recent rebound in U.S. assets and expect the dollar to continue weakening over the longer term. Deutsche Bank has warned of a potential structural shift against the dollar, while Goldman Sachs has suggested that dollar weakness could prove persistent.

Since Trump’s return to the presidency, the dollar has suffered its worst performance during a president’s first 100 days since the Nixon era, with the euro, Swiss franc, and yen all gaining over 8% against the greenback.

Meanwhile, according to data compiled by Goldman Sachs strategists, foreign investors have withdrawn $63 billion from U.S. equities since early March. Foreign ownership accounted for 18% of the U.S. stock market at the beginning of 2025, making foreign outflows a significant risk to equities.

As Duhani Capital Research, we assess that a meaningful reversal of outflows from U.S. assets would require clear progress on resolving trade tensions—particularly with China. If Trump continues to offer conciliatory rhetoric on tariffs, the partial rebound in U.S. assets could continue, potentially easing safe-haven demand and keeping gold under pressure. However, any negative developments on the tariff front could quickly reverse the recent gains.

Inflation Expectations Surge as Consumer Confidence Falters

Amid ongoing uncertainty, U.S. consumers continued to assess the potential economic consequences. Although the final reading of the University of Michigan’s consumer sentiment survey for April showed a slight improvement compared to the preliminary data, it still pointed to one of the worst levels of sentiment on record, with long-term inflation expectations climbing to their highest since 1991.

The consumer sentiment index fell to 52.2 from 57 a month earlier. Consumers now expect prices to rise by 6.5% over the next year, with long-term inflation expectations (five to ten years ahead) reaching 4.4%.

In addition to tariff-driven inflation concerns, worries about the economy and labor market have also increased, with the expectations index dropping to its lowest level since 2022. Expectations for the economy, income, stock market, and purchasing conditions all deteriorated compared to a month earlier.

Survey director Joanne Hsu noted that consumers now anticipate weaker income growth over the next year, suggesting that strong consumer spending is unlikely to continue. This is expected to be a key driver of the projected slowdown in economic growth.

Polls Show Declining Confidence in Trump’s Economic Management

The deterioration in sentiment among American households is also reflected in recent polling on President Trump. A series of polls from NBC, CNN, The New York Times/Siena, ABC News, and Fox News showed that voters believe Trump has not delivered on his promises to strengthen the economy. These surveys indicate that only 39% of Americans approve of Trump’s handling of the economy, with overall satisfaction declining compared to the previous month.

While Trump continues to urge patience regarding the economic benefits of tariffs, he announced on Sunday that he would seek to cut income taxes for those earning less than $200,000 a year, amid rising concerns about the economic outlook.

Looking Ahead: Tariff Impact Under Scrutiny as U.S. and Global Data Roll In

This week, investors will closely watch a packed economic calendar. Key hard data from the U.S.—including GDP growth, inflation, and employment—are expected to provide the first indications of the impact of Trump’s tariff moves.

Economists forecast that the U.S. economy grew at an annualized rate of just 0.4% in the first quarter—marking the weakest performance in nearly three years and signaling a sharp slowdown from the 2.4% expansion in the previous quarter. Much of this slowdown is likely due to a widening trade deficit caused by front-loaded imports ahead of tariff implementation.

On Wednesday, the Fed’s preferred inflation gauge—the core PCE index—is expected to show some moderation compared to the previous month. After a 2.8% increase in February, core PCE inflation likely slowed to 2.6% in March. Nevertheless, this remains well above the central bank’s target and will not yet fully reflect the impact of tariffs.

Meanwhile, Friday’s employment report is expected to confirm continued labor market strength. While monthly data so far have indicated a slowdown in hiring, there has been no evidence of widespread layoffs. Nonfarm payrolls are expected to have increased by 130,000 in April—down from 228,000 in the previous month—while the unemployment rate is forecast to hold steady at 4.2%.

Economists expect the Fed’s preferred measure of core inflation to reach 3.3% by the end of 2025—driven by tariff effects. The labor market is projected to remain relatively resilient in the near term, with employers adding an average of 72,000 to 100,000 payrolls per month this year and next, and the unemployment rate rising to around 4.6% by year-end.

These projections are somewhat higher than the Fed’s own median forecast for a 4.4% unemployment rate by the end of 2025. Expectations of higher unemployment and weaker growth are key drivers behind market bets on three quarter-point rate cuts from the Fed this year. If this week’s data confirm these trends, it could strengthen the case for easing bets.

Meanwhile, although many Fed officials—including Chair Jerome Powell—have signaled a willingness to keep rates higher for longer due to inflationary risks, a few policymakers recently suggested that a significant rise in unemployment could prompt earlier and more aggressive rate cuts.

The Fed’s next policy meeting is scheduled for May 6–7, with no immediate action expected. However, the meeting minutes to be released afterward could provide further insights into policymakers’ views on the possibility of a rate cut as early as June.

Elsewhere this week, markets will focus on economic data from the Eurozone—including GDP, inflation, and employment figures—as well as China’s Purchasing Managers’ Index (PMI), Australia’s inflation and consumer spending data, and the Bank of Japan’s interest rate decision.