Markets on Edge as Tariff Uncertainty Overshadows U.S. Tax Reform Progress

John Hall • May 23, 2025

πŸ“Š Markets remain cautious as tariff tensions escalate and the temporary 90-day reprieve nears its end. While Trump’s tax bill passed the House, traders are now turning their attention to the upcoming Senate vote.

Key Market Takeaways

πŸ‡ΊπŸ‡Έ USD: Under Pressure from Climbing Bond Yields

  • U.S. Treasury yields continue to rise, reflecting market unease over fiscal outlook and government borrowing levels.
  • This is adding pressure to the dollar, which remains vulnerable amid questions over long-term debt sustainability.

ο»Ώ

πŸ‡ͺπŸ‡Ί EUR: ECB Faces Tariff Uncertainty

  • European Central Bank officials remain cautious as they assess the potential fallout from recent U.S. trade tariff announcements.
  • The lack of clarity around the economic impact has left policymakers hesitant to shift stance aggressively.


πŸ‡¬πŸ‡§ GBP: Holding Firm

  • The pound continues to trade near recent highs, supported by resilient UK inflation data and scaled-back expectations of immediate rate cuts.
  • Markets remain focused on upcoming economic releases for clues on how long sterling’s strength may last.



Market Recap:

πŸ’€ Markets Pause Amid Tariff Lull

  • Currency markets saw muted moves yesterday, with traders holding fire in the absence of fresh trade headlines.
  • Attention now turns to the upcoming U.S. Senate vote on the much-anticipated tax legislation, which could revive volatility depending on the outcome.


πŸ‡¬πŸ‡§ GBP: Holding Ground Near Recent Highs

  • The pound remained steady against the dollar, continuing to benefit from last week’s strong UK inflation figures and reduced rate cut expectations.
  • GBPUSD stayed close to its highest levels in three years, showing resilience even in a quiet news cycle.


πŸ‡ͺπŸ‡Ί EUR: Soft Patch in Sentiment

  • The euro edged slightly lower as recent data pointed to a surprise slowdown in Eurozone business activity.
  • Coupled with growing expectations that the ECB may need to adopt a more aggressive rate-cutting stance to avoid falling short of its 2% inflation target, sentiment around the euro remained cautious.


πŸ‡ΊπŸ‡Έ USD: Edging Higher on Positioning

  • The dollar made modest gains, likely driven by traders adjusting positions ahead of the Senate's vote on President Trump’s tax package.
  • Despite underlying concerns over debt and deficits, short covering helped support the greenback in the short term.



Today’s Market Update:

πŸ”„ Trade Tensions Resurface

  • Market volatility remains elevated as investors digest the ongoing uncertainty around U.S. tariff policy.
  • With the 90-day tariff suspension window nearing its end, attention is sharply focused on whether the temporary measures become permanent or are scaled back.
  • The lack of clarity is fueling caution across global markets, with participants reluctant to commit to risk positions without firmer direction from the White House.


πŸ›οΈ U.S. Tax Bill Clears Another Hurdle

  • News that President Trump's tax reform bill successfully passed the House had a limited impact on markets.
  • Traders appear more focused on the upcoming Senate vote, which is seen as the real test for whether the legislation will ultimately be implemented.


πŸ’‘ What This Means for Markets

  • Risk sentiment: Likely to remain fragile until there’s more transparency on trade and fiscal policy.
  • Dollar outlook: Gains may be capped in the short term as uncertainty offsets any positive sentiment from tax reform progress.
  • Equities and FX: Traders may continue to adopt a wait-and-see approach ahead of key political developments.



23rd May 2025



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