- Trump’s tariff deadline is on Wednesday, when most countries are expected to face higher tariffs.
- Safe-haven currencies like the yen got a boost after the US Senate passed Trump’s bill.
- Data revealed that 147,000 new jobs were created in the US in June.
Currency futures collapsed against the dollar on Monday as market participants worried about Trump’s looming tariff deadline. With few trade deals so far, the deadline could result in increased tariffs for most countries. Meanwhile, the dollar strengthened in the previous session after the US released upbeat employment figures for the month.
Trump’s tariff deadline is on Wednesday, when most countries are expected to face higher tariffs on their exports to the US. Since April, the US president has held talks with various countries. However, he has only signed deals with China, the UK, and Vietnam. Other major partners like the Eurozone, Japan, and Canada are still liable to higher tariffs.
A surge in tariffs will increase the costs of imports to the US, which will likely lead to higher inflation. Higher inflation may prompt the Fed to maintain higher interest rates. As a result, Treasury yields are rising, which is pushing up the dollar.
Last week, safe-haven currencies like the yen got a boost after the US Senate passed Trump’s tax cuts and spending bill. The move increased worries about the fiscal health of the US economy. Consequently, the dollar declined.
Meanwhile, the dollar rebounded at the end of the week after data revealed that 147,000 new jobs were created in the US in June. This was bigger than the forecast of 111,000. At the same time, the unemployment rate came in at 4.1%, missing forecasts of 4.3%. The report showed resilience in the sector and eased pressure on the Fed to lower borrowing costs.
Nevertheless, the labor market has slowed down significantly since Trump started his tariff campaign. The resulting trade wars and economic uncertainty weighed on the economy.
RBA rate cuts (Source: RBA, Fed, RBNZ, BoC)
This week, market participants will focus on the Reserve Bank of Australia meeting. Economists believe the central bank will deliver its third rate cut. Moreover, they expect a more dovish tone since inflation has eased and the economy is slowing down.
Meanwhile, Canada will release its monthly employment figures. These will shape the outlook for Bank of Canada rate cuts. Weak figures will increase bets for a cut in July. On the other hand, strong figures might convince policymakers to keep pausing.
