Insights 
VT 
Today, the Canadian Services PMI is the main focus, amidst limited news and mostly stable market activity. The recent fluctuations from the NFP have subsided in both foreign exchange and US equity indices.
The White House plans to notify trade partners about new US tariffs. “10 or 12” letters are set to be sent today, with more expected before a July 9th deadline.
Tariff Expectations
Tariffs are expected to range from 60% or 70% to 10% and 20%. A deadline of August 1st has been set for these tariffs to be implemented, as indicated by Trump.
Businesses have been preparing for tariffs between 10-20%, so any higher rates could negatively affect growth. The impact may become more pronounced as the August deadline approaches, posing a potential risk.
In plain terms, the article outlines three main developments affecting the markets right now. First, traders are focusing on the Canadian Services Purchasing Managers’ Index. That’s one of those surveys that gives hints about how well a country’s service sector is doing—things like retail, banking, and other non-manufacturing activities. When new information about this comes out, it can sway the Canadian dollar, depending on whether the number is above or below expectations. At the moment, there isn’t much else coming out in terms of economic reports or headlines, so the Canadian figure is taking on more importance than it otherwise might.
Second, things had become a bit unsteady after the US jobs report, the Non-Farm Payrolls. But that jumpiness has faded now, and we’re once again seeing relatively calm movements in both major currencies and stock markets in the US. We interpret this as traders choosing to hold back until more definitive signals appear—risk appetite has cooled without being completely withdrawn.
Announcements and Market Reactions
Third, there’s the announcement that the US is preparing a batch of formal notices to trading partners. These inform other countries of tariff plans. According to the US administration, they intend to send around ten or twelve today, leaving room for more before the self-imposed deadline early next month. What’s at stake here is the level of duties being imposed. Business leaders had braced themselves for modest rate hikes up to 20%, having already adjusted models and supply chains accordingly.
But now, the prospect of rates as high as 60% or 70% being mentioned changes things. This isn’t just about trade risks increasing, it’s about the possibility of a swift cooling in business activity. Not months from now, but as early as August. That’s when these changes are expected to take effect.
From our perspective, the reaction function going forward will be different depending on positioning. Markets have stopped pricing in further immediate shocks for now, but that complacency may not last with hard dates approaching. For us, the key is not just the final tariff levels, but how firms respond—whether they cut imports sharply, scale back investment, or simply absorb the costs.
We note that Lighthizer recently stressed the envelope of letters is just the beginning, not the end, meaning the volume of affected trade could expand over time. This is a not-so-subtle cue that the scope may be wider than feared earlier. For derivative traders, that suggests forward volatility could begin ticking up again, not necessarily today, but as more countries respond—or retaliate.
Markets will almost certainly begin to reprice before the August 1st implementation, especially if higher tariffs begin to look more certain. That repricing, by its nature, will be uneven—some sectors and indices will be more exposed than others. Keep an eye particularly on companies with long supply chains anchored in Asia.
We continue to monitor implied vol moves as indicators of early positioning shifts. Future option flows, especially in sectors exposed to consumer durables and industrials, will give a better read on where hedges are building. For now, we’re seeing a short-lived dip in realised volatility, but that doesn’t match the potential for pricing shocks if announcements turn more hostile.
In sum, we are watching for front-loaded adjustments by businesses and investors—they will hint at whether the effects will compress into an early move or spread out in stages. Either way, market reactions will come, just not all at once.
