Global markets are bracing for a pivotal 24-hour stretch on Wednesday, awaiting a reaction from a confluence of economic data releases and US central bank commentary. The spotlight will be on US retail sales figures, the UK’s and Eurozone inflation data, and a speech from Federal Reserve Chair Jerome Powell.

Investors are also closely watching President Donald Trump’s recent overture to Chinese President Xi Jinping. They hope Trump’s proposal for renewed negotiations with Beijing could de-escalate a bruising tariff war that has rattled markets for a fortnight.

Bond yields surge, market nerves rattle

The US bond market is sending warning signals. Yields on the 10-year Treasury note have soared to 4.6%, while the 30-year yield breached the 5% mark. These levels have reignited fears of tightening financial conditions. The spike in yields caps a volatile stretch that saw long-term borrowing costs jump more than 50 basis points last week alone.

Markets expect the Federal Reserve to step in, but the central bank is still “cautious.” Fed Governor Christopher Waller recently admitted there is a risk of America falling into a recession. Still, he wasn’t concerned about inflation because the central bank could jump in to stabilize financial conditions.

Other Federal Reserve officials have taken a more hawkish stance, pointing to rising short-term inflation expectations as a concern. St. Louis Fed President Alberto Musalem warned that these could “seep” into longer-term expectations that could compel the central bank to maintain interest rates or consider additional hikes.

Behind the scenes, questions continue to swirl on China’s role in recent Treasury market movements. As the largest foreign holder of US government debt after Japan, owning an estimated $760 billion in securities, Beijing’s potential unloading of US Treasurys could swing markets downwards.

Chen Zhao, chief global strategist at Alpine Macro, believes the plan to cash out bonds is already in play. “I think China is weaponizing the Treasury holding already,” Zhao told CNBC. “They sell US Treasurys and convert the proceeds into Euros or German bunds.”

Retail sales and production data in focus, Powell’s speech follows

Wednesday brings the release of March retail sales and industrial production figures at 12:30 PM UTC. Markets will pay particular attention to the retail numbers, which are seen as a measure of consumer behavior after Trump slapped a baseline 10% tariffs on most US imports.

The data precedes the White House pausing many of the additional levies for 90 days, except those on China. 

Later in the day, Jerome Powell will deliver his speech at the Economic Club of Chicago. Scheduled for 05:30 PM UTC, the address marks his second appearance in less than two weeks, and investors will be watching for any deviation from his earlier stance.

Powell’s last remarks on April 4 came just days after Trump had announced his “Liberation Day” tariffs, shortly before a partial rollback in response to market fallout. At that time, Powell admitted that tariffs could upend inflationary pressures and slow economic growth, saying the central bank would have to “wait and see” how the future rate moves.

The speech and Q&A that follow are expected to influence trading, particularly in bond and equity markets already reeling from extreme volatility reminiscent of the pandemic-era financial disruptions.

Central banks in Canada and Europe policy decisions 

Outside the US, the Bank of Canada is due to announce its latest policy decision at 01:45 PM UTC. Markets broadly expect zero changes, but some analysts predict the BoC will cut its 25-basis-point rate to 2.50%.

In Europe, the Eurozone will publish its final March inflation numbers this Thursday. No surprises are expected, with attention now turned from inflation to growth concerns linked to the ongoing US-China trade war. 

Similarly, the UK’s March Consumer Price Index will be released, with expectations for a slight moderation in inflation. If consensus forecasts hold, the Bank of England will likely proceed with a policy rate cut at its May meeting.

Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More