Q2 2025: adapting to global economic shifts

Financial analysis provided by Exness’ Michael Stark, the financial content leader, Stanislav Bernukhov, the senior trading content specialist and Antreas Themistokleous, the trading content strategist.

What every trader should know about shifting global markets

The second quarter of 2025 begins under the shadow of sharp rotations in capital, increased political risk, and growing market segmentation. While US equities struggled in Q1, European stocks, gold, and the yen emerged as havens. Traders now face an increasingly complex global environment marked by softening US growth, surging European confidence, and persistent uncertainty over monetary policy direction.

Q1 recap: a period of strategic rotation

Q1 was characterized by aggressive deleveraging in US markets, triggered, in part, by President Donald Trump’s surprise imposition of tariffs on Canada, Mexico, the EU, and China. Capital flowed from US equities into overseas assets, notably Europe and Asia.

The Nasdaq and S&P 500 declined sharply—affected not only by policy volatility but also by sector-specific developments like NVDA’s drop following the launch of a Chinese AI engine. The tech-heavy Nasdaq is now showing signs of pessimistic breadth and low volume—indicators of a market adrift.

Yet, the pain in the US has been a gain for others: Germany’s DAX hit an all-time high in March, and Hong Kong’s Hang Seng has been in a solid uptrend since January.

The rise of ‘strong Europe’

Europe is seeing a significant narrative shift. Yields on Germany’s 30-year bunds spiked amid rising military expenditure discussions, driving capital into the euro. Once lagging behind the greenback, the euro is rallying, with futures’ open interest increasing in tandem.

The phrase “Make Europe Great Again” may have started as political satire, but it now resonates across bond and FX markets. In early March, the euro-dollar pair recorded its strongest weekly performance in nearly two decades, reinforcing the sense of revival.

Japan and the yen: a haven with yield appeal

Japan is also seeing a shift in expectations. Inflation reached 4% in January—well above the Bank of Japan’s target. Though the government reintroduced energy subsidies, rates are still expected to rise by September. Long-term bond yields over 2.5% are making the yen attractive again—both as a haven and a potential higher-yielding currency.

US macro: resilient yet wobbly

Despite some resilience, the US economy shows signs of fatigue. Unemployment ticked slightly higher, and the Conference Board’s Leading Economic Index fell for a third consecutive month. While GDP remains strong, forward-looking indicators like new orders and consumer confidence are weakening.

The Fed held rates steady in March, but expectations for a rate cut in June remain high. According to CME FedWatch, over half of market participants anticipate a cut by mid-year.

Gold: the winner of Q1

Gold surged toward—and briefly broke—$3,000 per ounce, making it the standout performer of Q1. Political and trade tensions, paired with dovish central banks, have driven haven demand.

With the Fed reviving its use of “transitory” to describe inflation, and global inflation remaining largely under control, gold remains attractive. Technically, $3,140 is a mid-term target, though a consolidation below $3,000 is possible before further gains.

Oil: supply gains vs. demand doubts

Oil’s price has remained range-bound, stuck in a descending channel since mid-January. Despite a slight increase in global supply—thanks to projects in Kazakhstan and increased output from the US and Saudi Arabia—demand concerns linger.

The IEA projects modest demand growth of just over 1 million barrels per day, largely from China and India. Technicals suggest oil may test resistance around $70, with support around $65 if the downtrend resumes.

Stock markets: fragmentation rules

US equities remain under pressure. The S&P 500 and Nasdaq are trading below key moving averages, while European and Asian indices thrive. Investor fear persists, with CNN’s Fear and Greed Index showing weak breadth and price strength.

Still, certain US stocks show promise:

● Gilead Sciences (GILD) is in a solid uptrend, supported by strong earnings guidance and HIV drug sales. The stock is nearing dynamic support and could see renewed upside.

● JPMorgan (JPM) continues to benefit from market volatility. With a 50% YoY rise in Q4 net income, the bank could bounce from its 200-day MA.

● CME Group (CME) may gain from increasing demand for derivatives amid volatility. While long-term targets suggest limited upside, short-term momentum is strong.

Forex: traders eye central bank divergence

Q1 saw an unusually active forex landscape. The euro surged, the yen strengthened, and the dollar wobbled amid tariff chaos and mixed economic signals. The Bank of Japan remains the most uncertain major central bank, with inflation missing forecasts in March and a hike expected only in September.

EUR and USD

The pair broke higher in March on capital rotation and military spending narratives. $1.10 is a key resistance, and depending on bond yields and central bank signals, any retracement might find support at $1.08 or $1.07.

USD and JPY

As rate differentials narrow and haven flows rise, the dollar-yen pair looks set to remain under pressure. ¥146.50 is a key support level, with ¥144 being the next line of defense if the pair continues downward.

Key themes for Q2

1. Capital rotation away from the US: Uncertainty and trade policies are pushing global capital toward Europe and Asia.

2. Low volatility and drying liquidity: Despite declines, markets aren’t highly volatile. This often indicates indecision and exhaustion, not capitulation.

3. Havens dominate: Gold and the yen continue to attract inflows, while speculative risk assets face a tough environment.

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