[Market Volatility Subsides] Trump’s Tariff Threats and the Shifting Forex Landscape
The forex market opened the week with renewed turbulence triggered by former President Trump’s “tariff card.” His warning of imposing up to 30% tariffs on EU and Mexican imports initially rattled markets, but calm has gradually returned thanks to swift diplomatic responses from European leaders.
🌍 Trump’s Remarks Spark Euro Selloff, but Recovery is Limited
Trump declared that unless negotiations make progress, tariffs of up to 30% on EU and Mexican goods could be imposed starting August 1. This sent the euro sharply lower during the Oceania session, with EUR/USD plunging to 1.1651.
However, some buying emerged during Tokyo hours, pushing EUR/USD up to 1.1698 at one point. The euro softened again in early London trading but rebounded in response to a rise in German 30-year bond yields, now stabilizing in the upper 1.16 range.
🇪🇺 EU Response: Retaliation Measures Prepared
European leaders responded swiftly to Trump’s remarks:
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Ursula von der Leyen, European Commission President: “We want to continue dialogue, but we are fully prepared for retaliatory measures.”
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Italian Foreign Minister: “We already have a tariff list worth €21 billion ready.”
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EC Vice President Maroš Šefčovič confirmed that consultations with the U.S. would take place within the day, offering temporary reassurance to markets.
📆 Tomorrow’s U.S. CPI: A Turning Point for Rate Cut Expectations
Market attention is now firmly on June’s U.S. Consumer Price Index (CPI), set for release tomorrow. Trump has repeatedly claimed that “inflation is already well under control” and has escalated pressure on Fed Chair Powell to lower interest rates—or even resign.
Should the CPI come in below expectations, rate cut speculation could reignite, possibly leading to renewed dollar selling.
🛃 EU Trade Council: Focus on U.S. and China Policy
At the ongoing EU Foreign Affairs Council (Trade), the focus is on trade relations with both the U.S. and China. In particular, strategies for responding to potential U.S. tariff actions are seen as a top priority. Any developments here could influence forex market movements.
💱 Major Forex Trends (as of July 9, Midday)
💴 USD/JPY (Dollar-Yen)
A tug-of-war between dollar buying and yen buying keeps the pair fluctuating around the 147 level. In Japan, concerns are rising ahead of the July 20 upper house election, with ruling coalition losses seen as a possibility, stirring fears of “bad yen depreciation.”
At the same time, rising ultra-long JGB yields are also contributing to yen selling pressures.
💷 GBP (British Pound)
The pound weakened in early London trading. Bank of England Governor Andrew Bailey commented in a media interview that if employment deteriorates more than expected, “rate cuts could be deeper than previously assumed.”
As a result, the pound is trading softer across the board—against the dollar, euro, and yen.
📊 Today’s Economic Indicators: Low Market Impact Expected
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🇮🇳 India: June Wholesale Price Index (WPI), Consumer Price Index (CPI)
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🇨🇭 Switzerland: June Producer and Import Prices
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🇨🇦 Canada: May Wholesale Sales
These are not expected to significantly influence the forex market.
🎙 Key Events Today:
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Boris Vujčić (Croatian Central Bank Governor): Expected to speak on trade policy
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Piero Cipollone (ECB Executive Board): Speaking at a conference on Ukraine reconstruction
Their comments could provide insights on monetary policy or geopolitical positioning, attracting market attention.
✅ Summary: Trump’s Remarks Stir Markets, but Calm Returns
Although Trump’s comments caused temporary turbulence, measured responses from EU leaders and expectations for further dialogue have helped stabilize sentiment.
However, uncertainty remains high due to ongoing trade negotiations and critical U.S. inflation data.
Tomorrow’s U.S. CPI release could become a pivotal event shaping the dollar’s trajectory, making it a day to watch with caution.
