Morning Wrap: Global Markets Eye US-China Tariff Deadline, Dollar Slips Further

Highlights

• Markets shift focus to July 9 expiry of US-China mutual tariffs despite Middle East ceasefire

• US dollar extends decline; EURUSD reaches levels not seen since 2021

• Central bank commentary and rate expectations remain in spotlight across US, Europe, and Australia

While geopolitical tensions between Israel and Iran appear to be contained under a continuing ceasefire, financial markets have started to pivot focus towards a major trade policy deadline. On July 9, mutual tariffs between the United States and China are set to expire, renewing uncertainty in global trade relations.

Japan’s Economic Revitalization Minister, Akazawa, expressed firm opposition to a proposed tariff on autos, declaring that Japan cannot accept the imposition of a levy at such a scale. This stance highlights rising global sensitivities around trade disruptions as key economies brace for shifting policy tides.

Wall Street Closes Flat as Investors Await Policy Signals

US equities finished the prior session with muted movement. The S&P 500 held near its previous close, while the Nasdaq managed a slight uptick. In contrast, the Dow Jones edged lower. These marginal shifts reflect cautious sentiment as investors monitor data and central bank commentary.

Asia saw more dynamic trading with Japan’s Nikkei 225 advancing, joined by a modest lift in China’s Shanghai Composite. However, equity benchmarks in Australia, South Korea, and Hong Kong's Hang Seng CE registered modest declines.

US Dollar Weakens Further; Market Watches Fed Commentary

The downtrend in the US dollar extended, with the EURUSD pair reaching highs not seen since 2021. JP Morgan projects further depreciation of the greenback in the coming months, while the USD/CNH has also retreated to its lowest level since last November.

Federal Reserve Chair Jerome Powell reiterated that further clarity is needed on how trade tariffs may affect inflation before proceeding with additional monetary easing. Meanwhile, reports suggest former President Donald Trump could announce his preferred Fed Chair candidate as early as this autumn, potentially adding a layer of political complexity to monetary policy leadership.

Nvidia Rallies; Chinese Economic Outlook Strengthens

In corporate developments, Nvidia touched a new peak during yesterday’s trade. The surge followed broad strength in the semiconductor sector and optimism around AI-driven growth prospects.

In macroeconomic news, Citigroup has upgraded its forecast for China’s economic growth, supported by remarks from the Chinese Premier signaling intensified efforts to boost domestic consumption.

Global Central Banks and Rate Outlooks Remain in Focus

Multiple central bank officials are set to speak today, including representatives from the Federal Reserve, European Central Bank, and Bank of England. Market participants will be tuning in for cues on the direction of global monetary policy.

Domestically, Deutsche Bank projects a rate cut by the Reserve Bank of Australia in July. On the US front, J.P. Morgan expects a delayed policy move from the Federal Reserve, pushing its outlook for a rate adjustment to later in the year. Nomura forecasts rising global bond yields amid concerns over economic softening.

Tensions Linger Around Iran’s Nuclear Program

Iran’s Supreme Leader Ayatollah Ali Khamenei has not made a public appearance in over a week. According to intelligence sources, Iran’s nuclear infrastructure has sustained significant damage. However, some assessments suggest the setback may only result in a temporary delay. The US administration has reiterated its stance that any recommencement of uranium enrichment would cross a critical threshold.