Market Summary (April 23, 2025)

The markets experienced a risk-on rally overnight, driven by positive comments from U.S. policymakers suggesting no imminent rate hikes and potential tariff reductions with China, which boosted equities and risk-sensitive JPY pairs like GBPJPY. However, concerns about recession risks remain elevated, with some indicators indicating underpricing of recession probabilities—markets have shown sharp declines in growth expectations post-tariff announcements, though most assets haven’t fully priced in a recession yet. Defensive positioning remains vital; traditional hedges like shorter-dated Treasuries and non-dollar safe havens (gold, JPY, CHF) are favored amid high implied volatility and expensive options. The broader market outlook hinges on incoming economic data, particularly around employment and growth, with a potential for further downside if recession fears intensify.