Insights 
VT 
President Trump postponed a decision on imposing 50% tariffs on EU imports, moving the deadline to July 9th. This news has improved risk sentiments slightly, with firmer European stock and US equity futures, though Chinese markets showed losses as local electric vehicle stocks fell.
The USD is softer, but it remains above early lows, while the New Zealand Dollar is performing well. The Japanese Yen and South Korean Won are underperforming overnight. The Bloomberg dollar index reached its lowest point since December 2023.
Treasury Secretary Bessent attributed this trend to stronger other currencies rather than a weakened USD. Despite a public holiday in the US, low trading turnover today is likely, and the DXY index might stabilise intraday, but a soft Friday close indicates more potential losses.
Financial Market Impacts
Euro/Dollar seems poised in a consolidative phase around 1.1380, restrained by Trump’s tariff decision delay. The Pound/Dollar maintains a positive stance near 1.3550, thanks to improved market sentiment. Meanwhile, Gold remains above $3,330 per ounce, though further gains are limited. Bitcoin rebounds to $109,000, benefiting from the US-EU tariff delay relief.
Trump’s move to delay the 50% EU import tariff decision until the 9th of July injected a measure of calm into markets that had braced for sharper headlines. It offered a bit of clarity, or at least temporary breathing room, allowing equities across Europe and US stock futures to inch up. Volatility eased slightly, and that tends to put a cap on defensive demand, at least for now.
Elsewhere, weakness in Chinese electric vehicle shares continued to weigh on regional indices, hinting at underlying domestic rotations, possibly tied to slower consumption patterns or subsidy concerns. What was noticeable, however, was that the pressure didn’t spill over significantly into commodities or cross-asset risk. We saw more of an isolated response, which can sometimes offer more targeted opportunities, particularly in equity-linked derivatives rather than across broad indices.
The US Dollar shifted lower, though it held on above the session’s depths. The global currency mix arguably did some of the heavy lifting, with the Kiwi performing notably well. Bessent pointed to precisely this — that the story was less about USD weakness per se and more about relative gains elsewhere. Currencies like NZD gained on yield differentials and positive domestic data, which gained traction in an otherwise quiet day due to the US holiday.
Future Market Considerations
This softness in the Dollar, combined with lighter trading volumes in Treasuries, puts DXY in an interesting spot. The marginal Friday close showed further room for downside. That, to us, signals traders have not finished adjusting longer-term currency positioning, especially in light of shifting central bank expectations. If dollar selling persists, this might appear first in the options space before outright spot movements are resumed — something worth tracking intraweek.
For pairs like Euro/Dollar, price action showed little direction, with consolidation around 1.1380. The delay on tariffs keeps uncertainty in place, which means breakouts could get deferred. For now, volatility pricing continues to skew towards reversion rather than trend building. Sterling held its higher ground, resting above 1.3550. This reflects some renewed confidence, possibly from risk-on flows and potentially stabilising data expectations as we approach the UK’s next monthly figures.
Gold’s flat tone, despite holding above $3,330 per ounce, mirrored this cautious optimism. It’s not shedding ground, but it’s also finding the path higher more difficult. Any upward moves appear tied heavily to rates perspective rather than broader macro angst. Short gamma positioning on the metal has remained steady, reinforcing the notion that gains are being capped short-term.
Bitcoin’s bounce back toward $109,000 was swift but not erratic. Relief from the tariff pause offered room for crypto to breathe, particularly after days of tighter price bands. This kind of quick retracement, in our view, is often led by unwinds in leverage shorts. However, sustained recovery would rely more on broader risk acceptance and less on single-issue relief.
In the coming weeks, we see traders needing to balance between fading short-term reactions and recognising how structural policy shifts, like international trade decisions, can creep into asset valuations more subtly. Being nimble matters here — the risk-reward in holding firm positions on unresolved policy headlines remains skewed. Options markets are beginning to price a little more event-driven risk beyond sheer volatility metrics, which may offer more nuanced strategies than straight directional moves.
As July 9th approaches, we expect premium on short-dated protection to remain elevated, particularly in FX and commodities. Short-term implied ranges are unlikely to narrow without clarity on that front. In the meantime, keeping an eye on high-beta currency crosses and volatility in credit-sensitive assets may provide better forward visibility than waiting on headline shifts day-to-day.
