This truth provides us a little bit of perspective amid this maelstrom of volatility and cyclothymia through which the markets have been immersed. At the start of the yr, we predicted that tweets would drive the market in 2025, and as soon as once more your complete market is ready for the 280 characters posted by President Trump on the social community X.
Let’s acquire some perspective with two charts. Within the first, we see the evolution of corn futures on the Chicago market. The pink arrow factors to Trump’s inauguration on January 20.
As we are able to see, through the first weeks of this administration, the futures market continued with the upward pattern that had been growing over the previous few months. Out of the blue, the beginning of the commerce battle and the imposition of tariffs started to generate concern out there, inflicting fund liquidations that drove the worth down.
Now let’s take a look at the evolution of the EUR/USD trade fee.
On this second graph, we are able to see the evolution of the EUR/USD trade fee. The primary pink arrow reveals the date of the U.S. elections, November 5, 2024. As we are able to see, the euro continued its downward pattern towards the greenback. The second pink arrow signifies Trump’s inauguration, and as we are able to see, because the publication of a number of tweets saying the imposition of tariffs, the greenback has been devaluing considerably. Tariffs have been introduced, paused, and re-imposed… on Canadian and Mexican merchandise in addition to on European and Chinese language merchandise.
To make clear, a little bit of macroeconomic principle: the imposition of tariffs within the brief time period generates a worth improve (inflation), and the native trade has to purchase dearer merchandise (attributable to the price of the tariff) or much less environment friendly ones (the native ones that till lately had been dearer) to have the ability to proceed with their manufacturing. In brief, the associated fee is borne by the ultimate client. However, protectionist insurance policies devalue currencies. The underlying concept is that this long-term devaluation will favor native industrialization and manufacturing (on this case, the USA), which is able to finally mitigate the damaging results of tariffs. Within the brief time period, for the second, we are able to say that uncertainty and concern have knocked down a great a part of final yr’s good points in indices such because the sp500 or the Nasdaq.
The implications on the native degree have been felt via a drop within the costs of imported merchandise in Spanish ports, because of the affect of each the forex (the autumn of the greenback, since it’s the worldwide buying and selling forex) and the liquidation of funds within the futures markets. In brief, downward costs in corn, wheat, barley, and soybean meal. On the native degree, the shortage of consumption by feed producers has additionally contributed to the drop in native costs. Though this can be a seasonal pattern typical for the tip of January and February, this yr consumption has suffered to a larger extent. Native consumers have additionally had the benefit of getting presents of each wheat and corn of nationwide origin which are cheaper than the restocking worth on the ports. For instance, it has been potential to purchase corn destined for Lleida at 240 €/t when the worth on the port was 238 €/t. In brief, all the pieces has favored the downward pattern of costs till in the present day.
Nonetheless, there stay many unknowns on the horizon. On the time of writing this text, “peace talks” are underway beneath the auspices of Saudi Arabia to place an finish to the battle between Russia and Ukraine. All in all, this yr has had a busy begin and it appears that evidently this would be the pattern for the following few months, so we should collect our energy to cope with the day-to-day information! As a reminder, in the present day is “solely” the seventieth day of the yr 2025.
