The USD remains steady, oil prices ease, equity markets rally, and US yields are mixed in response to the news of copper tariffs and FOMC minutes. The USD is steady, holding in a "wait and see" mode as markets digest the latest round of tariff news, and following the Fed minutes, which pointed to an easing on the way but highlighted reservations over the effect of the administration's tariff policy. Global equity markets rally, underpinned by optimism around AI and the prospect of a Fed rate cut following the release of the FOMC minutes. However, US futures are down following the announcement of a 50% tariff on US copper imports, set to take effect on August 1st. The market reaction to Trump's tariffs this week is less severe than in April, said Jeff Ng, of SMBC. Saying investors have grown somewhat 'numb' to the ever-changing situation. "They know that there is still room for negotiation. Even if they are implemented, they could also be reversed in the coming few months to a year." Elsewhere, the LME Copper price rose 0.4%, snapping a five-day losing streak. Oil prices ease amid bearish tariff outlook. Bitcoin slips from its record high down to $111,250, while gold and silver firm in early trading. Investors will be focused on US initial jobless claims and speeches by BoE Breeden and Fed's Musalem to help provide direction to currency markets.
In the news. Trump says a 50% tariff on copper imports will begin on August 1st, and threatens to impose a 50% tariff on Brazil. UK and France vow to coordinate nuclear weapons for the first time. At least four crew members were killed after Houthis hit a cargo ship in the Red Sea. Russian missiles and drones pound Ukraine's capital ahead of the Rome summit. Coffee prices climb after Trump threatens 50% tariffs on Brazil. Top CEOs want Canada to build a strategic minerals reserve for defence. Norway's core inflation quickens for the first time in four months. Canada seeks Southeast Asia trade deal to blunt Trump tariffs.
In currency markets. The BRL is steady in early trading after tumbling from 5.45 to 5.60 against the USD on Wednesday, hitting a five-week low following Trump's comments about a 50% tariff on Brazil. Other currency markets remain within tight trading ranges with the absence of key economic data releases this week. CNY and Asian currencies are flat on average against the USD. Trading currencies are mixed, with CHF & PLN down 0.2%, JPY, MXN, DKK, SEK & KWD flat, NOK up 0.2%, AUD & NZD strengthening by 0.35%, and ZAR rallying 0.45% against the USD.
CAD edges off near two-week lows as the USD holds slips, as investors shrugged off the latest US tariff threats and dovish FOMC minutes. The lack of any key US economic data this week has kept currency markets somewhat subdued. The focus will be on Friday's Canadian unemployment rate, which is expected to rise slightly to 7.1%, up from 7.0% in May. Intraday, we expect the loonie to remain within its current trading range, given the absence of market-impacting economic data releases.
EURCAD dipped slightly in thin trading, but we expect investors will remain on the sidelines ahead of Canada's unemployment report on Friday.
EUR holds above 1.1700 amid ongoing EU-US trade optimism. The euro continues to trade within a narrow range between 1.1700 and 1.1750, finding support from the growing expectation of a Fed rate cut in September and optimism for a EU-US trade agreement by August 1. Domestically, the French trade deficit widened slightly to EUR 7.8 billion in May, making it the largest trade gap since September. We expect investors to remain sidelined, awaiting the release of fresh economic data and updates on EU/US trade.
GBPEUR edges higher in early trading as investors remain cautious ahead of any fresh EU/US trade updates.
GBP edges above 1.3600 in thin, lacklustre trading with the absence of fresh economic data. The pound is up slightly in early trading, but faces headwinds from the Bank of England's warning of ongoing economic risks amid geopolitical tensions and growing national debt concerns. We expect the pound to hold steady ahead of Friday's release of UK Industrial Production and Manufacturing Production, as well as the UK GDP report. Today, the focus will be on Fed speakers and BoE Breeden comments to help provide intraday direction to the pound.
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