Volatile Markets and the Kevin Warsh Factor
Another hugely volatile week in the markets, with risk assets hit hard by a mix of uncertainty and profit taking. US indices are on track to finish the week more than 3% below their weekly highs, while the tech heavy Nasdaq has been hit even harder, currently sitting around 5% below the highs seen at the start of the week.
A big part of the weakness is coming from renewed concerns around the US labour market. Rising job layoffs and fewer job openings are starting to flash warning signs, and traders are reassessing just how solid the economic backdrop really is. Add to that the confirmation that Kevin Warsh will be the next Fed Chair, a figure widely seen as less supportive of rapid rate cuts, and it is easy to see why sentiment has shifted. The market is beginning to question whether the economy is as resilient as previously thought.
Forced Liquidation: Gold and the Bitcoin Crash
There is also no doubt that forced selling has played a role. Gold continues to trade with elevated volatility and remains under pressure. While it looks set to end the week higher than last week, it is still down around 15% from last week’s highs. Losses in gold, silver, and crypto often lead to margin calls elsewhere, and that ripple effect is clearly being felt across asset classes.
And then there is Bitcoin. It has been absolutely battered. A 15% drop on Thursday alone has taken Bitcoin close to 40% lower from its mid January highs. This kind of move almost always involves forced liquidation, and this time looks no different. When large assets like gold, silver, and Bitcoin unwind this aggressively, the knock on effect into equities and FX is unavoidable.
Trading Tip: Bottom picking in Bitcoin right now is a brave game. For longer term investors there may be opportunities forming, but for prop traders who must manage daily and overall drawdowns, caution is essential. You might catch the perfect bounce, but consistency comes from trading with the trend and protecting capital, not from trying to be a hero.
Central Bank Divergence: ECB, BOE and the RBA Surprise
On the macro front it has been a busy week for central banks. The European Central Bank left interest rates unchanged, as widely expected. The Euro continues to trade with a softer tone, driven as much by renewed US dollar strength as anything else. For those following my ‘naked trading’ approach, the weekly EURUSD is shaping up into a very clean technical setup. This is exactly the kind of environment where structure and patience matter.
The Bank of England also left rates unchanged, but the tone was noticeably more dovish than the ECB. The vote was tight, with 4 of the 9 members pushing for a cut, and only Governor Bailey’s vote keeping policy on hold. The next couple of meetings are likely to deliver at least 1 cut, which adds further pressure to sterling and reinforces the broader USD strength theme.
The Reserve Bank of Australia raised interest rates for the first time in 2 years. That decision sent the Australian dollar sharply higher. The RBA made it clear that inflation remains a concern and that further hikes later in the year are not off the table, which keeps the AUD firmly on traders’ radar.
The Week Ahead: Capitulation or Stabilisation?
Looking ahead, next week is shaping up to be another volatile one. The big question is whether we see further capitulation or the beginnings of stabilisation. Key data releases include:
• Tuesday: US Retail Sales
• Wednesday: Non Farm Payrolls (NFP)
• Friday: CPI Data
Markets will be watching closely to see whether the recent fears around the US economy are justified, or whether this pullback turns out to be another reset before the next move.
Final Thoughts
In times like these, discipline matters more than predictions. Trade your strategy, manage your risk, and let the market show its hand.
Disclaimer
This market commentary is provided for educational and informational purposes only. It reflects the opinions of the author at the time of writing and should not be taken as financial or investment advice.
Funded Trading Plus operates evaluation and simulated funded challenges, not live trading accounts. All references to trading, strategies, or market opportunities relate to simulated trading environments. Past market performance or individual trader results are not indicative of future outcomes.
About Andrew Lockwood
Andrew Lockwood is a seasoned professional trader with over 40 years of experience in financial markets. Starting his career on the floor of the London International Financial Futures Exchange (LIFFE) in the 1980s, Andrew has traded through multiple market cycles and volatility regimes. Today, he specialises in prop trading strategies, focusing on technical setups, risk management, and trader psychology. As the founder of PropIQ and a leading mentor, Andrew is dedicated to training the next generation of prop traders with proven, real-world trading methods.