Last week's tumultuous market movements have given way to a calmer scene, with the S&P 500 closing higher and US 10-year yields dropping below 2.9% by the February 16 close, but that's doesn't mean that volatility won't flare up again. "Volatility has fallen but we're not out of the woods yet and any 'good' economic data could spark further nervousness," says Althea Spinozzi of Saxo Bank's bond trading desk.

John J Hardy, Saxo's head of FX strategy, notes that the US dollar's gains against its peers have come "with no obvious catalyst besides the resumption of risk appetite" so tracking the market's willingness to accept risk will be key to the coming week's developments. One feature that should be closely monitored is China's response to US president Trump's suggestion of tariffs on imports of steel and aluminium, as this protectionist move could trigger harmful retaliatory action.

In equities, the S&P 500 may have recovered about half of its recent decline but the main question now is whether the rebound can extend, says Peter Garnry, Saxo's head of equity strategy. "The VIX index remains above average and could easily become more volatile again," he says. 

Finally, risks of another kind are at play in the crude oil market, following a flare-up in tensions between Israel and Iran at the weekend, which, says Ole Hansen, Saxo's head of commodity strategy, is supporting the price of crude although soaring shale production is still likely to keep the market capped.

Brent crude oil has retraced 38.2% of its recent rally:


Brent crude


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