- Trump hits Brazil with a 50% tariff
- Brazil VP: We are not a problem for the US, I see no reason to raise tariffs
- FOMC minutes: ‘A couple’ participants said they would be open to considering July cut
- U.S. Treasury auctions off $39 billion of 10 year notes at a high yield of 4.362%
- Atlanta Fed GDPNow growth for 2Q unchanged 2.6%
- Weekly Crude oil inventories +7.070 million versus a drawdown of – 2.071 million estimate
- US wholesale inventories for May -0.3% versus -0.3% estimate
- Nagel: ECB should neither plan nor rule out further cuts
- EU trade negotiator Sefcovic: Trade talks continue remotely every day with US
- Navarro: The markets understands that the letters are part of negotiations
Markets:
- Gold up $12 to $3312
- US 10-year yields down 7.9 bps to 4.34%
- WTI crude oil flat at $68.32
- S&P 500 up 0.6%
- JPY leads, CAD lags
The FX market largely treaded water in Wednesday’s trade but there was a notable intraday reversal in USD/JPY lower after hitting the highest in two weeks. That came as US yields fell and closed at the lows of the day.
The stock market isn’t really trading off macro at the moment and bounced around before finishing strong on Nvidia leadership, the AI trade and some decent gains from industrials. The FOMC minutes highlighted that Bowman and Waller are alone in calling for rate cuts in July and that the bigger risk may be no cuts at all — particularly given the way stock markets are going.
As for the dollar, it’s been strong so far in July but there were cracks today. I think those cracks widened a bit with this attack on Brazilian trade, despite Brazil having a trade deficit with the US. It highlights Trump’s knee-jerk instincts to hit everyone with tariffs for anything and that ‘reciprocal’ is effectively meaningless.
At some point trading partners will conclude that negotiations are fruitless and change tactics. That would be a potential reckoning for the US dollar, particularly if Trump then escalates.
In the meantime, I will keep a close eye on how the dollar performs in the day ahead. Also keep an eye on bitcoin for signs of risk sentiment. It attacked $112K and got within dollars of breaking it but backed off late.
This article was written by Adam Button at www.forexlive.com.