US Stocks Choppy Ahead of Tariff Deadline – Dow Down 0.4%
US stock markets traded in choppy conditions yesterday ahead of today’s (possible) tariff deadline, with President Trump advising that it may not be firm while also talking about putting a 50% levy on copper. The Dow closed down 0.37%, while the S&P and Nasdaq closed close to flat, finishing the day down 0.07% and up 0.03%, respectively. Treasury yields were also muted, the 2-year dropping just 0.4 of a basis point to 3.891%, and the 10-year adding 2 basis points to move up to 4.399%. FX markets traded within recent ranges, the DXY down just 0.02% on the day to 97.49, although the Aussie noticeably jumped after the Reserve Bank of Australia held rates at 3.85% against market expectations for a cut. Oil prices pushed higher again to hit a 2-week high, with Brent up 0.53% to $69.95 and WTI up 0.28% to $68.12. Gold pulled back further on the back of potential tariff delays, losing 1.03% to move down to $3,301.27 by the New York close.
RBA Surprises Markets by Holding Fire on Rates
The Reserve Bank of Australia surprised markets by keeping interest rates on hold at 3.85% yesterday as it prioritized inflation concerns against deteriorating data. The market had priced in a 95% chance that they would cut rates by 25 basis points, so the decision was a major shock to many, and the Aussie dollar rallied a swift 50 pips on the news. There is some hope for Australian households, as Governor Michele Bullock advised that this was more about timing rather than the direction of rate moves; however, yesterday’s call has certainly put markets on notice, which are now pricing in an 85% chance of a cut at the next meeting in August. Market concern now comes from the change of tone from the RBA, which had been resiliently hawkish over most of the year before turning dovish in May, and then delivering no cut at the July meeting. This uncertainty makes longer-term trades more difficult; however, it could be good news for shorter-term traders, as we could see more volatility in the Aussie, which has been relatively quiet for most of the year.
Tariffs and Central Banks in Focus Today
It could be a very busy day ahead for financial markets, with tariff updates due out alongside some key central bank updates. The Asian session could be lively as it initially reacts to tariff news from the preceding US session before focus moves swiftly over to fundamentals. Chinese inflation data is due out early in the day, with the CPI (exp +0.2% y/y) and PPI (exp -3.2% y/y) set for release. The focus will then swiftly move south for the Reserve Bank of New Zealand’s latest rate call, with the central bank expected to halt its easing cycle by keeping rates steady at 3.25% following six consecutive cuts. The European session will see the Bank of England’s meeting minutes released, which could move UK markets. The New York session will have a heavy focus initially on tariff updates from the White House, and traders are expecting plenty of volatility on this; however, focus will shift back to underlying fundamentals later in the day when the FOMC releases its latest meeting minutes.
