Non-farm payroll report tonight + Powell speaks! Under the storm of Trump tariffs, the Federal Reserve faces a "policy test"

According to Zhitong Finance APP, as the global economic turmoil triggered by the Trump administration's tariff policy continues to ferment, Wall Street is entering the decisive moment of the "super data week." At 20:30 Beijing time on Friday, the U.S. Department of Labor will release the March non-farm payroll report, which will not only reveal the current state of the labor market but also become a key clue for predicting a shift in Federal Reserve policy. Just three hours later, Federal Reserve Chairman Jerome Powell's public speech will directly address the impact of tariffs, and his remarks may trigger a new round of intense market volatility.

Amid the shadow of tariffs, global risk aversion sentiment has sharply intensified. On Thursday, the yield on the 10-year U.S. Treasury bond briefly fell below the 4% mark, reaching its lowest level since the election. The market's bets on a rate cut by the Federal Reserve have fully absorbed the expectation of a 25 basis point cut in June, and traders are frantically scrambling for safe-haven assets. However, the statements from Federal Reserve officials contain hidden meanings: although tariffs may weaken corporate and consumer confidence, a strong labor market and stubborn inflationary pressures may still lead the Federal Reserve to choose to hold steady.

"The Federal Reserve is caught in a dilemma," said Gang Hu, a partner at Winshore Capital Management. "If Friday's employment data falls short of expectations, the Federal Reserve will have to take action." Economists surveyed by Bloomberg expect that non-farm payrolls in March may slow to 140,000 from 151,000 in February, while the unemployment rate may remain at 4.1%. This set of data will serve as a litmus test for the resilience of the labor market, and any performance below expectations will exacerbate the policy contradiction between the Federal Reserve's "anti-inflation" and "growth preservation."

In the delicate moment before the data release, institutional speculation has reached a fever pitch. JPMorgan strategists pointed out that the current U.S. Treasury market has not shown signs of buyer fatigue, and the stock market has not shown signs of seller exhaustion, indicating that market sentiment may still swing violently. During the Asian trading session, the yield on the 10-year U.S. Treasury bond fluctuated narrowly around 4.03%, waiting for the storm to arrive.

Figure 1

It is noteworthy that the divergence in market expectations regarding the Federal Reserve's policy path is widening. Morgan Stanley expects no rate cuts this year, while UBS Global Wealth Management anticipates further cuts. This divergence is directly reflected in bond trading strategies, with Longtail Alpha's Chief Investment Officer Vineer Bhansali betting on a "steepening yield curve"—buying two-year bonds and selling 30-year bonds, while speculating that economic slowdown will push down short-term rates, and inflationary pressures will push up long-term rates.

This growing market bet has been reflected in the yield curve, with the gap between the two-year and 30-year bond yields widening to 75 basis points on Thursday, reaching a three-year high

Figure 2

Under the dual pressure of tariff shocks and a flood of data, global investors are holding their breath. Tonight's non-farm payroll report and Powell's speech may determine the short-term direction of the U.S. Treasury market and will further influence the allocation logic of global risk assets. As traders say: "Under Trump's tariff stick, any data could become the 'last straw' that breaks the market."