Global financial markets are showing mixed performance as investors remain cautious amid ongoing trade uncertainties and the absence of clear market drivers. US equities closed slightly higher overnight, reversing earlier losses, while Asian markets broadly followed suit despite weaker-than-expected Chinese manufacturing data. Overall, investor sentiment remains tentative, with no decisive shift toward risk or safe-haven assets.
In currency markets, the US Dollar has rebounded slightly after a brief selloff but remains the worst-performing major currency this week. The Canadian Loonie and Australian Dollar trail the Dollar’s recovery, while the Japanese Yen continues to benefit from safe-haven demand. The New Zealand Dollar and Euro hold firm, whereas the British Pound and Swiss Franc remain in the middle of the pack. This lack of clear direction reflects broader market indecision as traders await developments in key trade negotiations.
The underlying cause of market hesitation is persistent uncertainty surrounding global trade policies. According to Reuters, the Trump administration has urged trading partners to submit their “best offers” by Wednesday to expedite talks ahead of the July 9 expiration of the current 90-day tariff truce. The US is seeking commitments on tariff and quota concessions, along with concrete plans to address non-tariff barriers.
A draft statement from the US Trade Representative warns countries against assuming tariffs will be lifted even if legal challenges are successful. The administration plans to maintain tariffs through “other robust legal authorities” if needed, signaling that tariffs remain a central negotiation tool.
With both legal and diplomatic aspects unresolved, investors are adopting a wait-and-see stance. Until there is clarity on US trade policies—especially regarding China and the European Union—market participants are expected to remain cautious, managing risk rather than taking bold positions.
On the technical front, Gold’s upward momentum resumed after breaking resistance at 3365.92, aiming to retest the previous high of 3499.79. However, strong resistance at that level could limit gains and lead to sideways movement in the near term. A decisive break above 3499.79 would confirm the resumption of a larger uptrend.
In Asia, at the time of reporting, the Nikkei is up 0.07%, Hong Kong’s Hang Seng Index rose 1.10%, and Shanghai Composite gained 0.36%, while Singapore’s Straits Times declined by 0.26%. Japan’s 10-year government bond yield dropped 0.025 basis points to 1.484%. Overnight in the US, the Dow Jones Industrial Average increased by 0.08%, the S&P 500 by 0.41%, and the Nasdaq Composite by 0.67%. The 10-year US Treasury yield climbed 0.046 points to 4.462%.
Looking ahead, market focus shifts to Swiss CPI and the Eurozone’s preliminary inflation figures in the European session, with US factory orders slated for release later in the day.
BoJ Governor Signals Rate Hike Readiness Amid Tariff Impact
Bank of Japan Governor Kazuo Ueda told parliament that recent US tariffs could dampen Japanese corporate sentiment, potentially affecting winter bonuses and wage negotiations next year. He acknowledged a near-term slowdown in wage growth due to these external pressures but expressed confidence that wage momentum will eventually recover, supporting moderate household consumption growth.
Ueda reiterated that the BoJ stands ready to adjust its ultra-loose monetary policy by raising interest rates if economic forecasts materialize, while cautioning that economic uncertainty remains “extremely high.”
RBA Economist Highlights AUD’s Unique Resilience
Reserve Bank of Australia Chief Economist Sarah Hunter addressed the Australian Dollar’s unusual recent behavior, noting that its rebound against the US Dollar diverges from typical risk-off patterns. On a trade-weighted basis, the AUD has remained broadly stable despite appreciating against the USD and Chinese renminbi but weakening against other major currencies.
Hunter attributed this divergence to offsetting forces: global growth concerns weighed on the AUD relative to safe-havens and cyclical peers, while capital outflows from US assets weakened the Dollar. She cautioned that it is too early to say if this trend will persist but noted that portfolio rebalancing and perceptions of economic stability are supporting the AUD.
RBA Minutes Reveal Cautious 25bps Cut Decision
Minutes from the RBA’s May 20 meeting revealed a debate among policymakers over holding rates, a 25bps cut, or a more aggressive 50bps cut. Ultimately, a modest 25bps reduction to 3.85% was chosen, driven by steady inflation progress, weakening global and household consumption, and the view that a cautious cut was the “path of least regret.”
The board rejected a larger cut, citing limited evidence that global trade uncertainty was harming domestic activity and concerns that a bigger easing might fuel inflation. They deemed it premature to shift monetary policy to an expansionary stance, favoring a predictable approach.
China’s Manufacturing Contracts Sharply in May
China’s manufacturing sector unexpectedly contracted in May, with the Caixin PMI dropping to 48.3 from 50.4, missing forecasts of 50.6. This marks the first contraction in eight months and the lowest level since September 2022. Both supply and demand weakened, particularly from overseas markets. Employment declined, pricing pressures remained subdued, and logistics experienced delays. Although business optimism showed slight improvement, overall economic headwinds intensified at the start of Q2.
Fed’s Goolsbee Warns on Tariff Inflation Risks
Chicago Fed President Austan Goolsbee noted that tariffs typically cause a one-time price spike rather than sustained inflation. Using textbook theory, he explained a 10% tariff usually leads to a 10% price increase for imported goods lasting about one year before dissipating.
However, Goolsbee cautioned against underestimating risks, referencing pandemic-era supply chain disruptions that prolonged inflation unexpectedly. He highlighted the complexity of managing stagflation scenarios—where rising prices coincide with weakening labor markets—and the challenge they pose to monetary policy.
USD/CHF Outlook Remains Bearish
The USD/CHF currency pair continues its downward trend from a 2017 high of 1.0342, recently hitting a low near 0.8038. Technical support at this level could trigger a rebound, but a decisive break below would confirm a larger downtrend targeting 0.7382. The long-term bearish outlook persists as long as resistance near 0.8732 holds.
