The unwinding of tariff trade positions is leading to a decrease in market volatility, as traders adjust their expectations for less aggressive tariff actions by the Trump administration. This shift is contributing to a weaker U.S. dollar and lower U.S. yields, as the market anticipates reduced inflationary pressures and a less hawkish Federal Reserve stance. The initial uncertainty surrounding potential tariffs had driven demand for protection in currency markets, but as the threat of immediate tariffs diminishes, these premiums are decreasing, reflecting a broader market adjustment. The VIX, a key measure of market volatility, is reflecting this trend, with its current level at 15.05, marking a slight increase from its last close of 15.02, yet it remains near its 52-week low, indicating a general easing of volatility concerns.
The ProShares Short VIX Short Term Futures ETF (SVXY) saw a modest increase, rising 0.17% to $52.09 as of 7:00 AM on Friday, January 24.