U.S. President Donald Trump’s 50% tariffs on copper and plans to impose additional tariffs on more countries unsettled the markets as traders await the release of the latest Federal Open Market Committee (FOMC) Minutes. Trump also pressured Fed Chair Jerome Powell to cut rates and hinted at replacing him with someone more aggressive on rate cuts. On the geopolitical front, Iran’s nuclear enrichment program, Trump’s increased arms supply to Ukraine, and Taiwan’s largest-ever military drills added to risk-aversion. At the same time, the United Nations (UN) warned of further instability due to the new U.S. trade war deadline.
On the data side, the New York Federal Reserve’s June inflation expectations eased slightly to 3.0% from May’s 3.2%, while the National Federation of Independent Business (NFIB) small business optimism index came in at 98.6, just below the expected 98.7. China’s Consumer Price Index (CPI) rose for the first time in five months, Canada’s Ivey PMI crossed the 50.0 contraction threshold, and the Reserve Bank of New Zealand (RBNZ) kept rates unchanged. The World Gold Council (WGC) reported a five-year high in gold ETF inflows, and U.S. oil inventories showed a surprise build for the second consecutive week, instead of the expected draw.
German yields rose, challenging market expectations that the European Central Bank (ECB) might miss its inflation and rate targets. Against this backdrop, the U.S. Dollar Index (DXY) reversed Tuesday’s losses, positioning for its first weekly gain in three weeks. EURUSD mirrored the dollar's strength, turning lower and eyeing its first weekly loss. GBPUSD is on track for its second consecutive weekly loss, after a three-day losing streak. USDJPY rose to a two-week high, even as U.S.-Japan trade talks continued despite tensions over U.S. tariffs.
AUDUSD fell, reflecting its status as a risk barometer, while NZDUSD declined despite the RBNZ keeping rates steady. USDCAD rose, reversing previous losses as crude oil struggled to hold onto its two-week gains. Gold prices declined for the second consecutive day, approaching key support at $3,278. Cryptocurrencies paused, with gains from the previous day’s retreat of the U.S. Dollar fading as the Greenback rebounded. Equities traded mixed, affected by trade and geopolitical tensions and anticipation ahead of the FOMC Minutes release.
A German official warned the U.S. about tariffs, signaling readiness to retaliate if trade talks don’t benefit the Eurozone. This, combined with a rise in German Government Bond Yields—an unusual move if traders were concerned about the ECB’s rate path—pressured EURUSD. The currency pair reversed its previous day’s bounce from a week’s low and is now on track for its first weekly loss in three weeks. Recent mixed EU data and growing recession fears in the bloc added to the downside pressure, despite ECB officials pushing back against growth concerns. It’s worth noting that a likely hawkish tone of the FOMC Minutes also weighs on the Euro ahead of the release.
The US Dollar’s strength, risk-off sentiment, and the UK’s fiscal issues weighed on GBPUSD, but the pair took a breather on Wednesday after three consecutive losses. Cable buyers might be finding hope in US-UK trade deal optimism.
Meanwhile, USDJPY rose for the third day in a row, hitting its highest level in two weeks. Concerns over the US-Japan trade deal and mixed Japanese data challenge the Bank of Japan’s (BoJ) rate hike plans. Stronger Japan bond yields and discussions around the US Dollar maintaining its global reserve currency status, despite challenges from China, the Eurozone, and some Middle Eastern countries, are also supporting the Yen pair.
A firmer US Dollar, coupled with a generally negative market mood, overshadowed positive China inflation data and the Reserve Bank of New Zealand's (RBNZ) decision to keep rates unchanged. As a result, AUDUSD reversed its gains from the previous day’s RBA decision to hold rates steady, while NZDUSD dropped after an initial surge on the RBNZ's inaction.
Meanwhile, USDCAD rose, reversing its earlier pullback, as crude oil struggled to maintain its two-day winning streak. This came despite positive Canada Ivey PMI data and optimism surrounding the US-Canada trade deal.
Crude oil is set for a weekly gain, despite today’s indecision following two days of gains. The commodity overlooked a surprise build in U.S. weekly inventories (from the private API report), OPEC+ supply increase, and a firmer USD, ahead of official U.S. crude oil inventory data.
Meanwhile, gold prices dropped for the third day in a row, approaching key support levels near $3,278 and $3,244. This came despite strong inflation data from China, a major gold buyer, and a report from the World Gold Council (WGC) highlighting the biggest inflow into physically backed gold ETFs in five years.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) are struggling to hold onto the previous day’s gains, weighed down by a firmer US Dollar and overall market pessimism. Caution also builds ahead of “Crypto Week” starting on July 14. However, recent whale buying and ETF inflows, along with positive technicals, continue to offer hope to crypto buyers.
The upcoming release of the FOMC Minutes will be closely watched, as recent comments from policymakers have been slightly hawkish, despite Trump’s push for lower rates and his political interference in replacing Fed Chair Jerome Powell. If the minutes align with market expectations, the US Dollar could gain additional support, putting further downside pressure on EURUSD and Gold, and boosting USDJPY.
Meanwhile, Antipodean currencies are likely to remain under pressure, but Crude Oil could maintain its recovery if official US inventory data surprises with a smaller-than-expected build. Cryptocurrencies may continue their gradual recovery, driven by industry optimism supported by the US SEC and Trump. Equities could also hold their ground near record highs if the Trump administration offers any relief, even a small one, amid tariff threats.
Beyond the Fed Minutes and risk news, speeches from central bankers in the US, Europe, and the UK could provide further insights for traders.
May the trading luck be with you!
