Global markets edged lower as uncertainty grew around U.S. President Donald Trump’s tariff threats and his involvement in the Middle East and Ukraine-Russia conflicts, which have yet to ease tensions. Inflation data from the U.S. and the U.K. raised concerns over tariff-driven price hikes. While U.S. inflation was clearer, the U.K.'s strong results challenge the Bank of England’s (BoE) cautious statements. This supports the Federal Reserve’s cautious, data-dependent stance, even as Trump pressures for more rate cuts and wants to replace Fed Chair Powell. Fake news reports also falsely claimed Powell may resign by August.
On trade, Trump highlighted progress with Vietnam and Indonesia and praised trade negotiators. Mexico threatened major tariffs to avoid a 30% blanket tariff and a 17% anti-dumping duty on tomatoes from the U.S., effective August 1, if no deal is reached. The EU said its retaliatory tariffs would begin only after August 1 if negotiations fail. Trump also plans to meet U.K. PM Starmer in Scotland to refine a trade deal, while Canada’s PM Carney confirmed U.S. tariffs will stay and vowed to fight back if needed.
Trump denied directing Ukraine to attack Moscow, saying Zelensky should not target Russia and emphasized, “I am on nobody’s side. I want to stop the killing,” refuting a Financial Times claim.
China’s Vice Premier He Lifeng suggested more stimulus to boost spending, despite recent positive economic data.
U.S. CPI and Core CPI improved from prior readings, though Core CPI fell short of forecasts. Fed officials Logan, Collins, and Barkin backed the current cautious approach and dismissed preset rate cut paths. Canada’s inflation met expectations at 1.9% YoY, and Japan’s July manufacturing sentiment improved despite tariff worries. Japan’s ruling party faces election challenges on July 20, according to media reports.
BoE Governor Andrew Bailey called for global cooperation to reduce financial risks, expressed caution on a digital pound, and held steady on economic and monetary policy. Earlier, U.K. retail sales (BRC) rose, but Barclays noted weak consumer spending, underlining fiscal and political challenges for the new Labour government.
Australia and China are close to finalizing a Free Trade Agreement. Meanwhile, U.S. crude inventories unexpectedly rose, and Trump called for support to pass the crypto-focused GENIUS bill.
Against this backdrop, the U.S. Dollar Index (DXY) rose for four straight days before easing slightly. EURUSD, USDJPY, and GBPUSD all reflected dollar strength, while AUDUSD and NZDUSD dropped. USDCAD held strong amid weak oil prices, Canada’s key export.
Gold rebounded after two losing days, finding support at the 50-day SMA. Bitcoin pulled back from record highs and Ethereum hit a five-month high, though crypto markets remain volatile. Stocks in the U.S., Europe, the U.K., and Asia fell, while bond yields climbed.
Mostly strong U.S. inflation data, along with mixed geopolitical and trade developments—plus renewed EU-U.S. tariff tensions—kept pressure on EURUSD. The pair rose slightly, snapping a five-day losing streak and bouncing from monthly lows, but upside momentum remained weak. Disappointing EU/German ZEW Economic Sentiment and Industrial Production data failed to ease concerns among ECB bears, especially as recent ECB commentary remained cautious.
Meanwhile, USDJPY climbed for a fourth straight day, reaching its highest level since April 3. This rise came despite Japan’s improved July manufacturing sentiment (Reuters-Tankan). The gain likely reflects U.S.-Japan trade tensions, doubts over more BoJ rate hikes due to mixed data, and strong Japanese Government Bond (JGB) yields, amid concerns that Japan’s ruling party could face election setbacks.
GBPUSD posts its first daily gain in five, recovering from a three-week low as the U.S. Dollar pulls back after a strong rally. However, upside remains limited. BoE Governor Bailey continues to highlight inflation concerns, and although he avoids direct economic pessimism, sentiment remains weak. June’s UK inflation data was upbeat and supported the GBPUSD prices. Meanwhile, declining political confidence and growing fiscal issues in the UK raise fears of a BoE rate pause and a cautious outlook, further weighing on GBPUSD.
The Australian, New Zealand, and Canadian Dollars posted their first daily gains in four on early Wednesday, supported by a pause in the U.S. Dollar’s rally ahead of key U.S. PPI data. While momentum remains weak, China’s stimulus signals and hopes for more U.S. trade deals boosted AUDUSD, NZDUSD, and USDCAD. However, falling crude oil prices—Canada’s key export—continue to support USDCAD, despite the Bank of Canada’s recently optimistic tone and ongoing U.S.-Canada trade tensions.
Gold rebounded from a two-day losing streak as the U.S. Dollar retreated and market sentiment turned mixed. While the bounce from 50-day SMA support lacks strong momentum, demand reports from the World Gold Council (WGC), China’s stimulus signals, and ongoing global trade and political uncertainty are supporting gold's haven appeal.
Crude oil remains under pressure, extending losses after the U.S. API reported another surprise inventory build. Demand concerns and internal OPEC+ disagreements—where some members are secretly curbing output—are also weighing on prices, challenging recent supply-increase deals.
Bitcoin (BTC/USD) is struggling to recover after pulling back from a record high, while Ethereum (ETH/USD) remains volatile near its five-month peak. The moves come as Trump claims to have secured votes for the GENIUS Act, expected to pass on Wednesday.
Wednesday may have started quietly, but volatility is expected to rise with U.S. Producer Price Index (PPI) and Industrial Production data on the calendar. Traders will also watch second-tier European data and speeches from central bank officials across the U.S., U.K., and EU. However, Trump’s tariff moves and ongoing political drama—especially ahead of the August 1 deadline—remain key market drivers.
The U.S. Dollar is likely to stay firm amid cautious sentiment and reduced expectations for Fed rate cuts, supported by recent U.S. data. This may pressure EURUSD, GBPUSD, and commodity-linked currencies, while USDJPY and USDCHF could trade mixed due to safe-haven demand for the yen and franc.
Cryptocurrencies may hold gains, supported by strong institutional inflows and Trump’s push for crypto legislation. Meanwhile, equities could remain shaky and bond yields firm, reflecting the overall cautious tone in markets.
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