Market sentiment remained uncertain early Tuesday, with initial concerns over US President Trump’s tariff announcements easing after he delayed the tariff deadline to August 1, from the earlier deadlines of July 9 and April 9. The EU was also reportedly offered a trade deal that could be accepted, despite a 10% base tariff. US-China trade talks are progressing as well. However, tensions in the Middle East and Trump’s announcement of delivering weapons for self-defense to Ukraine continued to add to global uncertainty.
Trump's tariff announcements, which included higher tariffs on Japan, initially worsened market sentiment. But positive US Employment Trends for June helped the US Dollar Index (DXY) gain sharply before pulling back as traders reassessed trade war fears. Trump’s willingness to extend tariff deadlines for some countries also played a role.
Meanwhile, the Reserve Bank of Australia (RBA) surprised markets by holding rates steady, boosting the AUDUSD. The NZDUSD followed suit, while the USDCAD dipped after two days of gains, despite volatile crude oil prices. Gold softened, cryptocurrencies faced pressure, and global equities trended lower following a downbeat close on Wall Street. US and Japan bond yields rallied, but major currencies struggled to benefit from the US Dollar’s pullback in a mixed market environment.
The US Dollar's pullback helped EURUSD and GBPUSD recover from earlier losses, despite mixed Eurozone data, trade war fears between the US and EU, and uncertainty around the UK's fiscal health. Reuters reported that the US has offered the EU a trade deal with a 10% baseline tariff on EU goods, but with exceptions for sectors like aircraft and spirits. This raised concerns that an EU-US trade war might be avoided, despite major trade differences.
In the UK, recent political drama over fiscal health and Chancellor Rachel Reeves brought fresh attention, supporting a rebound in GBPUSD, especially with the pullback in the USD.
Meanwhile, USDJPY fluctuated near a two-week high after Trump imposed 25% tariffs on Japan. Also weighing on the Yen were concerns over slowing real wages, mixed trade and current account data, and the Eco Watchers Survey.
AUDUSD jumped nearly 0.80%, leading G10 currencies as the US Dollar retreated. The rally was driven by the Reserve Bank of Australia (RBA) holding rates steady, defying expectations of a 0.25% cut. The Aussie was also supported by no tariff news, strong June Business Confidence and Conditions, and its risk barometer. China’s new stimulus, progress in US-China trade talks, and plans for offshore bond purchases further boosted the pair ahead of RBA Governor Michele Bullock’s press conference.
NZDUSD followed its Aussie counterpart, benefiting from China-related optimism and a lack of trade-negative news for New Zealand from the US. The pair ended a four-day losing streak, bouncing off a two-week low.
Meanwhile, USDCAD gained from the USD pullback but struggled to account for the drop in crude oil prices, Canada’s key export. The pair posted its first loss in three days, supported by expectations of a strong Canadian jobs report, which challenges the Bank of Canada’s rate cuts and boosts optimism around US-Canada trade relations.
Despite the US Dollar’s retreat, Crude Oil and Gold prices struggled to stay firm amid mixed sentiment. Crude Oil started the week with a downside gap due to the OPEC+ supply increase, but market chatter suggested the actual output rise would be smaller. The continued depletion of inventories also helped oil reverse early losses and end the day higher before today’s retreat.
Meanwhile, news of progress in US-China trade talks and stronger US employment data weighed on Gold, especially as it struggled to break through key trendline resistance.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) began the week on a back foot but lacked direction early Tuesday as crypto traders brace for the next week, a “Crypto Week” termed by the US House in search of passing three key legislation for the industry. It’s worth noting that the seasonal flows and anxiety among institutional traders also challenge cryptocurrencies.
After the early data from Japan and the RBA’s moves, Tuesday’s economic calendar is light, with only the Canadian Ivey PMI for June. This allows traders to focus on risk news, potentially driving fresh US Dollar buying if Trump intensifies trade tensions. However, caution ahead of Wednesday’s FOMC Minutes and global reactions to Trump’s tariffs could add some uncertainty.
May the trading luck be with you!
