Edging closer to US open, European and Asian markets are resisting panic, according to Eric Boess, global head of trading at Allianz GI.
“I was surprised to see that the Asian session, with the exception of Japan, was not super volume heavy. Compared to last month’s averages, it’s been almost a normal session. ,” he told The DESK. “Most of the Asian and the European sessions so far have been fairly orderly. There have been strong market moves, but nothing smells of panic. Flow-wise it’s been surprisingly quiet.”
Liquidity in equities and fixed income has not suffered greatly, he added; “but I don’t necessarily want to trade large volumes now”.
“The only area where I’m a little worried is currency. The moves are too strong. They shouldn’t trade heavy, especially in the yen and euro or we risk even more aggressive moves.”
In a note issued 4 March 2025 Deutsche Bank FXs strategist George Saravelos noted that “fewer dollars leaving the country means a tighter supply here at home”. This implies that tariffs cutting import volumes force a scarcity of dollars and push the dollar index up.
Markets took a very different view post tariff announcements.
As we write, the dollar index is being sold off at a beta near one compared to risk assets. Implied volatility in 1-day EUR/USD is up more than 70% to 22, and 1-month up 20%, with EUR/USD spike more than 2.4% up to 1.115 USD at 11am BST from sub 1.08 on 3 April 2025.
Turning again to broader market performance, “the market has gone into this with a slightly defensive position in most risk assets,” Boess commented. “It’s different to the August 2024 selloff in Asia, which was more position driven. Today’s moves are adjusting for a new US trade policy. We should expect the strong moves that we’re seeing today. The key question is, will it remain orderly? ”
“Most markets are acting rationally, given the structural change. Most equity markets are down between 2 and 5%, most of them in the 2 to 4% bracket.”
“I think people are still making up their minds about what this means in detail,” Boess continued. “Speaking to the street, futures and options are not terribly active today given the moves in spot. It looks like people are unwinding protection more than anything else, which is a natural reaction to every major move we’ve seen over the last month. Judging from the fact that there’s almost double the amount of puts trading versus calls in euro stocks today, I think that’s what we’re seeing.
“Volatility is higher, but it’s not up aggressively. It’s about where it should be, given the moves in the underlying indices.”
©Markets Media Europe 2025
