08/07/2025 - 07:38 UTCThe US Dollar (USD) gained against most major peers on Monday, with the dollar index (USDX) rising 0.6% to trade around 97.30 during Tuesday's Asian hours. This upward movement occurred as markets reacted to an escalating tariff offensive initiated by the White House. Late Monday, President Donald Trump signed an executive order delaying new tariffs from July to August 1. Despite this delay, the Trump administration announced new levies ranging from 25% to 40% on goods from various countries, including Japan, South Korea, Malaysia, Tunisia, South Africa, Laos, Myanmar, Indonesia, Bangladesh, Thailand, and Cambodia, with escalation threats for some. Adding to trade tensions, President Trump also threatened an additional 10% tariff on nations aligning with BRICS's "Anti-American policies."
Amidst these developments, the US Dollar faced pressure from growing expectations of deeper Federal Reserve rate cuts, though stronger-than-expected US jobs data tempered these concerns. Despite this labor market strength, the Greenback may remain vulnerable due to rising fiscal worries. These concerns are heightened after President Trump signed his signature "Big Beautiful Bill" into law on Friday, a sweeping package that combines significant tax reductions with increased government spending, potentially impacting long-term public finances.
Most Asian stock markets saw gains on Tuesday, largely shrugging off renewed threats of increased U.S. trade tariffs. Comments from President Donald Trump, indicating Washington's openness to further negotiation, provided a degree of reassurance. Broader Asian stocks demonstrated strength despite a weak lead from Wall Street overnight. Chinese stocks were upbeat. The China SSE and China SZSE indices rose 0.73% and 1.47% respectively as of 06:37 AM GMT Tuesday while the Hong Kong 50 index also increased by 0.46%. This positive sentiment stemmed from hopes that more countries will reach trade deals with Washington, and that President Trump will ultimately not proceed with his steep tariffs, especially after his comments postponing the July 9 deadline and signaling openness to alternative proposals.
On Monday, major US stock indices closed lower, reflecting renewed fears of a global trade war. This downturn followed recent tariff announcements, including a 25% levy on Japanese goods, which fueled concerns about potential impacts on the global economy. In corporate news, Tesla shares experienced a sharp decline of 6.75%, losing $68 billion in market capitalization. This drop came after CEO Elon Musk announced his intention to launch a new political party, raising investor concerns that his focus might further divert from the company at a time when the electric car manufacturer is grappling with declining sales and preparing for a shift towards autonomous vehicles. Meanwhile, Stellantis stock fell 1.46% after the U.S. National Highway Traffic Safety Administration (NHTSA) opened a recall query covering approximately 1.2 million of the auto giant's Ram trucks. The inquiry focuses on concerns related to the transmission system.
On the energy front, oil prices fell on Tuesday, giving back part of the gains seen in the previous session where both WTI and Brent rose by 2.84% and 2.76% respectively. This retreat came as investors reacted to the latest developments regarding U.S. tariffs and a larger-than-anticipated OPEC+ output increase for August. However, current demand still shows strength, particularly in the U.S., the world's largest oil consumer, which has helped support prices. For instance, data from travel group AAA last week projected a record 72.2 million Americans would travel over 50 miles for Fourth of July vacations.
Looking ahead, market participants will now keenly focus on the upcoming FOMC meeting, seeking crucial insights into the Federal Reserve's (Fed) future interest rate trajectory. The Fed is widely expected to keep interest rates elevated, anticipating worsening inflation due to higher import taxes and a still-resilient US labor market.
The USD/JPY pair surged past 146.00 on Monday, rising by 0.96%. This advance was primarily driven by escalating trade tensions between the US and Japan, alongside rising US Treasury yields. The move came as Japan prepared for a 25% tariff on its imports to the United States, set to begin August 1, following a letter from President Trump warning of the levy and potential escalation. This situation follows derailed trade talks last month, partly due to Japan's reluctance to import US rice.
In contrast to the rising trade friction, US Treasury yields continued their ascent. Supported by recent strong Nonfarm Payrolls figures and broader interest rate repricing, these indicators have largely removed the possibility of swift Federal Reserve (Fed) rate cuts. Market participants are showing greater favor for the US Dollar over the low-yielding Japanese Yen, with the 10-year US Treasury note yield climbing above 4.45% on Monday.
The Japanese Yen, conversely, remains soft due to the Bank of Japan's (BoJ) dovish stance and weak domestic economic indicators. Disappointing Japanese wage increases further tempered expectations for immediate BoJ policy normalization.
Gold prices remained largely stable in Asian trading on Tuesday. Initial safe-haven demand was spurred by U.S. President Donald Trump's renewed tariff threats. However, a strengthening dollar subsequently curbed further gains in the metal markets.
The yellow metal fluctuated between gains and losses Monday eventually ending the session 0.17% higher after Trump outlined steep tariffs against several major Asian and African nations. Yet, his simultaneous postponement of the tariff deadline to August 1 and signals of openness to more trade talks tempered the gold's upward momentum.
The dollar firmed in response to Trump's tariff threat, also benefiting from expectations of steady U.S. interest rates in the near term. This dollar strength, in turn, put pressure on metal markets. Spot gold is currently hovering near the $3,334 an ounce level. Trump's comments on Monday, indicating he was "not 100% firm" on the August 1 deadline and open to further dialogue, coupled with the deadline postponement, led to some speculation that the steeper tariffs might not ultimately be implemented.
Bitcoin continued its decline, falling 0.86% on Monday and extending losses into Tuesday. This downtrend was primarily driven by dampened risk appetite following new U.S. tariffs announced by President Donald Trump, compounded by uncertainty surrounding the tariff deadline.
The cryptocurrency has remained range-bound recently, with traders hesitant to take large positions amidst the unclear global economic policy landscape. Looking ahead, investor focus is shifting to "Crypto Week," beginning July 14. During this period, U.S. lawmakers in Washington are expected to advance at least three significant bills aimed at regulating digital assets.
Most altcoins also experienced declines within a range-bound session, reflecting the broader U.S. tariff uncertainty. Ethereum, the world's second-largest cryptocurrency, fell 1.1% on Monday, while XRP (world No. 3) was nearly unchanged. Solana dropped 1.87%, and Cardano lost 0.9%.
On Monday, major US stock indices, including the US 500, closed lower (down 0.52%) following the Fourth of July holiday. Renewed global trade war fears, sparked by new tariff announcements (like a 25% levy on Japanese goods), drove this decline. Despite an unofficial extension of the tariff deadline to August 1, uncertainty lingered.
Despite this dip, Goldman Sachs significantly raised its S&P 500 forecasts, now projecting 6,600 by year-end and 6,900 in twelve months. This reflects confidence in long-term earnings growth, supported by expectations of earlier Fed easing and the strength of large-cap stocks. Goldman anticipates the market rally will broaden, with a "catch up" more likely for the median S&P 500 stock.
In corporate news, Tesla shares plunged 6.75%, wiping out $68 billion in market cap. This sharp decline followed CEO Elon Musk's announcement of a new political party, fueling investor fears of diverted focus from the EV maker's challenges. Meanwhile, Stellantis stock fell 1.46% as the NHTSA opened a recall query for approximately 1.2 million Ram trucks due to transmission concerns.
The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.
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