The anticipation surrounding the latest US tariff announcement has been heightened by reports suggesting that, as recently as yesterday, no final decision had been reached. The complexity of tariff structures and the urgency to implement changes promptly suggest a broad levy or a simple two-tier system. Treasury Secretary Bessent’s stance on targeting a limited number of countries appears to have lost influence in recent discussions. The expected economic impact includes rising prices and a slowdown in economic growth, primarily due to potential disruptions in the labor market. Instead of inflation falling naturally, the Federal Reserve may be compelled to reintroduce rate cuts to counteract economic deterioration.

Asia Pacific Markets

The performance of the yen remains closely tied to movements in US Treasury yields. After a sharp reversal last week, the dollar has weakened against the yen, reflecting a drop in the US 10-year yield. Market expectations regarding potential interest rate hikes by the Bank of Japan have diminished, with the likelihood of a second rate hike now considered slim. The swaps market anticipates a single hike later this year, though broader uncertainty surrounding US trade policies may influence this outlook.
Meanwhile, the Australian dollar continues to trade within a well-established range, with recent movements testing the middle of its band. Market participants remain cautious, as previous breakout attempts have been met with reversals. The Reserve Bank of Australia’s recent meeting concluded without significant surprises, and upcoming economic data releases, including trade and household spending figures, are unlikely to drive major shifts in the currency’s valuation.

European Markets

The euro faced selling pressure, slipping below the $1.0780 mark during North American trading. Despite minor recoveries, it struggled to hold above $1.08, weighed down by expiring options contracts and expectations of rising producer prices. The final PMI data for the eurozone is unlikely to alter investor sentiment significantly, as economic recovery in the region remains uneven.
Meanwhile, the British pound continues to consolidate within a tight range. Political uncertainty surrounding the UK’s relationship with the US adds to investor concerns, particularly given that Britain has not been exempt from the new tariff measures. The impact on the UK economy could further strain the government’s fiscal decisions amid an already fragile economic environment.

American Markets

Market participants are keenly awaiting the US government’s reciprocal tariff announcement, expected later today. The US Dollar Index remains within Monday’s trading range, hovering above 104.00, with resistance levels near 104.70 and 104.90. Upcoming economic releases, including private sector job estimates and factory orders, may introduce short-term volatility, but the focus remains on broader trade policies, the ISM services report, and the Federal Reserve’s stance on interest rates.