The unwinding of tariff trades is contributing to a decrease in market volatility, as traders adjust their positions in response to the absence of immediate tariff actions from President Trump. This shift is putting downward pressure on the dollar and U.S. Treasury yields, as the market reassesses the likelihood of aggressive trade measures. The initial uncertainty surrounding potential tariffs had elevated volatility measures, but as fears subside, these measures are beginning to normalize. The potential for Federal Reserve rate cuts could further decrease Treasury yields, adding to the dollar's weakness.
The VIX, a key measure of market volatility, reflects this trend as it hovers near its 52-week low. As of 06:41 on January 24, the VIX is priced at 15.06, slightly above its last close of 15.02. The decline in volatility is indicative of a broader market sentiment shift, as investors grow more confident that immediate tariff threats may not materialize, reducing the risk premium across various asset classes.