The USD is little changed to start the US session vs the EUR, JPY and GBP. The price action has seen the USD move lower in the Asian Pacific session as reports of a growing divide at the Fed from the WSJs Timiraos weakened the greenback. However, those declines have since been reversed. The USD is now higher vs the EUR by 0.07% and by 0.10% vs the GBP. The USD is higher by a mere 0.03% vs the JPY to kickstart the trading day.
The video above outlines the key technical levels in play for the 3 major pairs – the EURUSD, USDJPY and GBPUSD – and explains the bias, the risks and targets for traders today.
In the news, late yesterday, the latest Fed meeting minutes reveal growing—but still cautious—openness among policymakers to cut interest rates later this year, though significant divisions remain. Most participants expect at least one rate cut in 2025, yet some officials believe no cuts may be appropriate at all, citing stubborn inflation, resilient growth, and elevated inflation expectations.
While the Fed staff outlook improved—with expectations for stronger real GDP growth and lower inflation—there’s still considerable concern over the potential inflationary impact of new Trump tariffs. Although a few participants see these price effects as short-lived, most see a risk of more persistent inflation, complicating the case for easing.
On the dovish side, only two participants—we now know them to be Christopher Waller and Michelle Bowman—explicitly support immediate cuts, and they appear isolated for now. The broader committee is waiting for clearer signs of economic weakness, particularly in the labor market, before easing.
As mentioned, last night (Asian Pacific session) in a WSJ article from Nick Timiraos, commented on the growing divide within the Federal Reserve is emerging over how to respond to President Trump’s tariffs and their potential inflationary impact. Chair Jerome Powell has hinted at a lower threshold for rate cuts later this year—especially if inflation readings remain mild and the labor market softens—even as some Fed officials argue that it’s too early to judge the tariffs’ true effects. This shift comes after earlier expectations that higher tariffs would push prices up sharply, possibly requiring higher rates to keep inflation in check. While Powell favors a measured approach, some Trump-appointed officials like Michelle Bowman and Christopher Waller are already pushing for cuts this month. The Fed now appears to be navigating a middle ground: not dismissing the inflation risks entirely but also remaining open to policy easing if incoming data supports it.
Key Takeaways:
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Fed unity is fracturing over how to handle the inflation risks posed by Trump’s tariffs.
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Powell has softened his stance, suggesting rate cuts could come if inflation and jobs data weaken—even without major deterioration.
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A rate cut is unlikely in July, but possible by late summer if conditions justify it.
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Tariffs originally derailed planned cuts earlier this year due to stagflation fears.
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Two key developments are shaping views:
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Tariff hikes were partially dialed back
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Tariff-related inflation hasn’t yet materialized, though increases are expected in July/August data.
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Powell is aligned with a “significant majority” of Fed officials who anticipate some cuts in 2025.
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He sees current rates as temporarily elevated to guard against inflation—leaving room to resume cuts.
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Fed is split into two camps:
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One group: cautious, fearing long-run inflation expectations could rise.
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Larger group: open to cuts if inflation proves tame or the labor market softens.
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Only Bowman and Waller (Trump appointees) openly back cutting now.
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Others, like Tom Barkin, caution that tariff price effects may still be in the pipeline, showing up in July/August data.
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Powell’s current position: watch the data, remain flexible, and don’t overreact.
OPEC+ is reportedly considering pausing its planned oil output increases starting in October, according to delegates cited by Bloomberg. Saudi Arabia already has a tentative plan to fully restore 2.2 million barrels per day (BPD) of halted production by September, with monthly additions of 550,000 BPD. However, delegates noted that the group is likely to hold off on the next phase of reversing production cuts—amounting to an additional 1.66 million BPD—for the time being.
Anxiety about tariffs remains high. In addition to announcing tariffs on small trade partners, he announced a 50% tariff on all imports from Brazil, effective August 1, partly in protest over the treatment of former Brazilian President Jair Bolsonaro, who faces trial for an attempted coup (Hmmm).
The tariffs are the highest among several announced this week, following a delay in implementing his “reciprocal” duties.
Trump also reiterated plans to impose a 50% tariff on copper imports, citing national security concerns. as the markets worry about 50% tariff on Brazil as Pres. Trump reacts to the countries.
In breaking news, Sec. like is to go to Japan next week in hopes of spurring on a deal. The top US trading partners:
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Mexico – ~$263B
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Canada – ~$255B
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China – ~$177B
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Japan – ~$83B
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Germany – ~$70B
US initial jobless claims will be released at 8:30 AM ET with expectations of 235K versus 233K last week. The continuing claims are expected to 1.974 million versus 1.964 million last week. The U.S. Treasury will auction off 30 year bonds at 1 PM ET.
In premarket trading for US stocks, the major indices are trading little changed:
- Dow industrial average -17.3 points
- S&P index unchanged
- NASDAQ index +9.09 points
Yesterday, Nvidia traded to a new record high and to a market capitalization of over $4 trillion before backing off into the close. The $163.93 is the $4 trillion market capitalization level. The price closed at $162.88, however in premarket trading the day, the shares are back above the magic level at $164.51. Shares of Taiwan Semiconductor (TSMC) are higher after better earnings and guidance. Their numbers are supportive of the AI trajectory.
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