US tariff policy and CPI data trigger market fluctuations, how should traders respond

Recently, the global financial market has experienced severe fluctuations, with adjustments to US tariff policies, the release of the latest CPI data, and the expectation of the Federal Reserve’s interest rate cuts becoming core drivers. The US government announced the expansion of the tariff list for imported goods, coupled with the expected inflation data, resulting in a sharp increase in risks in the foreign exchange market, and many traders suffered losses to varying degrees due to lagging strategy adjustments. Therefore, EagleTrader will share in this article how to deal with these major macro factors, help traders adjust their strategies and respond to market changes.

The chain reaction of tariff policies

The United States has recently imposed additional tariffs on key imported goods, including electronic products and mechanical equipment made in China. Although the market had previously expected the policy to be tightened, the increase in tax rates and coverage still exceeded most investors’ expectations. The tariff costs are transmitted to the United States, pushing up the prices of raw materials in manufacturing and the costs of terminal consumer goods, further aggravating inflationary pressure, and directly triggering a sharp short-term fluctuation of the US dollar index.

It can be seen from this that changes in tariff policies will not only directly affect the profitability of import and export enterprises, but also indirectly affect the exchange rate of national currencies. When tariffs increase, it usually leads to higher commodity prices in relevant countries, thereby increasing inflationary pressure, and central banks may adopt tightening monetary policies such as interest rate hikes. This policy adjustment will directly affect capital flows and currency exchange rates, resulting in violent fluctuations in the foreign exchange market.

The impact of CPI data beyond expectations

The US CPI data is a key indicator for measuring inflation and an important basis for the Federal Reserve to formulate monetary policies. According to the released US CPI data on April 11, the US unseasonally adjusted CPI annual rate in March was 2.4%, expected to be 2.6%, and the previous value was 2.8%; the monthly rate after the seasonally adjusted CPI in March was -0.1%, expected to be 0.1%, and the previous value was 0.2%. The annual rate of core CPI in the United States was 2.8% in March, expected to be 3.0%, with the previous value of 3.1%; the monthly rate of core CPI after the seasonal adjustment in March was 0.1%, expected to be 0.3%, with the previous value of 0.2%.

As the decline in energy prices brought about a decline in overall inflation rate, the US CPI decline in March exceeded market expectations. Affected by this, the US dollar index fell by about 40 points in the short term; the pound rose 1% against the US dollar. US stock futures rose in the short term, while the decline of the Nasdaq 100 index futures narrowed to around 1.8%. The yield on the 10-year U.S. Treasury bonds fell in the short term. Spot gold has little short-term fluctuation.

How should traders deal with it when macroeconomic factors affect the market?

1. Predict and track macroeconomic data in advance

For the release of macroeconomic data such as tariffs and CPI, traders can view the release time through the EagleTrader economic calendar. By paying attention to the policy direction of governments, central banks’ speeches and changing trends in economic data, the potential impact of these events on the market can be predicted earlier. Especially important data such as CPI, GDP, and unemployment rate should be paid special attention to market expectations and actual differences before release.

For example, if the recent US CPI data sees an increase in inflationary pressure in advance, we should make good response strategies in advance to avoid hasty decisions when the data is released.

2. Use appropriate risk management tools

In a market environment with increasing volatility, risk management is particularly important. Traders should set reasonable stop loss points to avoid excessive risks caused by a single transaction. At the same time, reduce positions appropriately to avoid excessive leverage. When there are large fluctuations, reducing high-risk operations will help preserve capital in the storm.

3. Flexible adjustment of trading strategies

When policy changes occur or important data are released, the market may experience severe short-term fluctuations, and the original trading strategies may no longer be applicable. At this time, traders should adjust their strategies in a timely manner. For example, when the market fluctuates significantly, you can choose to reduce your positions or temporarily exit and wait until the market stabilizes before entering. In addition, using short-term trading strategies to capture opportunities in volatility is also an effective way to deal with this situation.

4. Avoid emotional decision-making

Short-term violent fluctuations caused by policy changes and economic data can easily cause traders to react emotionally and make impulsive decisions. Whether it is panic selling or rushing to counter-trend operations, it will increase the risk of losses. Therefore, traders should remain calm and strictly follow the trading plan they have set, and not easily be disturbed by short-term fluctuations.

5. Pay attention to the long-term trend of the market

Although macro data may cause severe market fluctuations in the short term, in the long run, changes in the market fundamentals are the core factors that determine the direction of the exchange rate. Focusing on long-term trends and avoiding excessive attention to short-term noise will help traders maintain stable profits amid volatility.

6. Diversify investment and reduce concentrated risks

Faced with severe market fluctuations, traders should reduce single market risks through diversified investment. For example, invest in different currency pairs and different types of assets (such as stocks, gold, etc.) to diversify risks. In this way, even if a certain market fluctuates greatly, the overall account wind will beThe risk can also be effectively dispersed.

Recent tariff policy adjustments and the release of CPI data are undoubtedly important catalysts for market fluctuations. For traders, calm analysis, reasonable risk control, and flexible adjustment of strategies are particularly important in this highly uncertain market environment. Only by predicting macroeconomic data in advance, managing risks well, and avoiding emotional trading can traders better respond to market fluctuations caused by policy changes, reduce losses, and seize possible profit opportunities.