The unwinding of tariff trade positions is leading to a recalibration of market expectations, resulting in decreased market volatility. Traders are adjusting to the prospect of less aggressive tariff implementation by the Trump administration, which is contributing to a weaker U.S. dollar and lower U.S. yields. This shift is reducing inflationary pressures and prompting a less hawkish stance from the Federal Reserve. 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 slightly up but remains near its 52-week low, indicating a general easing of volatility concerns.
The iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) saw a marginal increase, rising 0.05% to $41.95 as of 7:00 AM on Friday, January 24.