Citi analysts suggest Japan and South Korea are the most likely contenders for an initial breakthrough in tariff negotiations.
As global investors monitor the ongoing trade tensions between the United States and its partners, the investment bank notes that reassurance is also needed from the United States Federal Reserve to help steady market sentiment.
“As the US-China trade dispute continues to escalate, there is a need for concrete evidence that trade talks are happening between the US and the rest of the world, and that the direction of travel for tariff levels is lower. As the US bond market struggles to fully normalise, the US administration may need to announce some wins on the tariff negotiation front,” Citi analysts said.
Citi further highlighted the importance of clarity on potential Federal Reserve interventions.
“The other key issue for the market is (the) search for some sort of Fed put — not so much in terms of rate cuts, but in terms of supplementary leverage ratio (SLR) exemption (which the Fed did in 2020 — more likely) or outright purchase of the back end of the US curve (unlikely given current conditions).”
The SLR, a regulatory buffer for large US banks, was temporarily eased during the COVID-19 pandemic.
Markets are now watching closely for any indication of renewed support measures from the Fed.