US markets got off to a solid start, geopolitical tensions and negative sentiment seem to be disintegrating quickly, Initial Jobless Claims remained extremely stable (around 210k for 5 out of 6 weeks) and the Philly Fed Manufacturing Index climbed to its highest level since April 2022 (driven by New Orders +12.2 and Prices Paid +23).

However, just one day after gaining a foothold, US Treasuries were hit hard again, with New York Fed President Williams suggesting that a rate cut was no longer his "base case," saying that rates were in a "good place" and "I don't see any urgency to cut rates." Yields jumped 5-6 basis points across the board, with the 2-year yield once again approaching this year's high of around 5%.

The sharp rise in U.S. Treasury yields and the dollar index prompted U.S. Treasury Secretary Yellen, Japanese Finance Minister Suzuki and South Korean Finance Minister Choi Sang-mok to issue a joint statement saying the three countries would "continue to consult closely on foreign exchange market developments, consistent with existing G-20 commitments," while acknowledging that Japan and South Korea are concerned about the recent sharp depreciation of the yen and won, suggesting that central banks in the region may intervene in foreign exchange if the trend continues. Reuters later reported further news that Japanese Finance Minister Suzuki said it was meaningful for the "G7 to confirm its commitment to excessive exchange rate movements to prevent negative economic impacts," and it seems that trading risks brought by the news will return for a while.

Speaking of news risks, the news of Israel’s attack on Iran in late trading caused all asset classes to fall rapidly (SPX futures <5000, Nikkei futures -3%, BTC fell from 63,500 to below 60,000), and with the war Risk premiums are escalating and risk sentiment is likely to remain subdued heading into the weekend. Inflows to BTC ETFs also disappointed again, with IBIT only adding $37 million in inflows, while GBTC saw $90 million in outflows.

We have been talking about reducing risk and protecting earnings repeatedly over the past 1.5 weeks, after all, the geopolitical conflict does not look like it will be resolved anytime soon, and macro data is unlikely to show any dovish relief until the PCE data is released next Friday, which means that it is important to be cautious when trading over the next few days.