Morning from Copenhagen.

While equities are taking a bit of a breather today, yesterday’s price action certainly looked like something you would see in a Gung Ho-like environment. This is puzzling given the bombardment of tariff announcements, but I suppose it shows that markets are unwilling to react to tariffs until there are concrete – and more importantly, credible – tariff policies on the table. This aligns with the “headline hockey” we saw in China back in September and October where markets reacted strongly to the first round of headlines but were completely muted during the second round. Headlines have a large effect when first released, but as long as there is not much action behind them, markets remain reluctant to react.

INR is surging today after the RBI intervened around the 88 level, which appears to be their clear line in the sand, while Nifty is taking a hit – most likely a delayed response to the steel tariff headlines from yesterday.

The RBI seems concerned about the weakening exchange rate combined with fresh tariffs on steel, and this will likely be a key talking point during Modi’s visit to the White House, which is happening as we speak. All of this aligns with what we wrote at the end of last week – India, Brazil, and similar markets are among the most exposed to tariffs.

Chart 1: Fresh intervention from the RBI