Dollar Remains Directionless as Markets Await Tariff Decisions and Fed Signals

Economic

Forex

Summary:

The U.S. dollar traded within a narrow range on Tuesday, caught between global tariff uncertainty and investor caution over potential shifts in Federal Reserve policy, with the upcoming August 1 tariff deadline...

Dollar Movement Stalls Amid Tariff Ambiguity

Currency markets remained subdued on Tuesday as the U.S. dollar hovered within a tight trading band. The primary cause of this indecision stems from growing uncertainty surrounding impending U.S. tariff decisions. With just over a week remaining before the August 1 deadline for countries to strike trade deals with Washington, traders are hesitant to take directional positions, awaiting clarity on whether tariffs will be enacted or extended.

The dollar index, which measures the greenback against six major peers, edged slightly higher to 97.94 after falling 0.6% in the previous session. This minor rebound was largely technical, reflecting the yen’s Monday rally rather than a shift in sentiment. The dollar’s muted tone indicates how sensitive FX markets have become to geopolitical developments rather than traditional macroeconomic drivers.

Yen Gains Fizzle as Japanese Political Risk Rises

The Japanese yen, which climbed 1% on Monday following the upper house election in Japan, gave up some of its strength and was last trading slightly weaker at 147.65 per dollar. While the election outcome though damaging to Prime Minister Shigeru Ishiba’s coalition was largely anticipated, analysts see a risk that prolonged political instability could hinder Tokyo’s ability to reach a timely trade agreement with the United States.

Lee Hardman of MUFG noted that the relief rally in the yen may prove short-lived, as uncertainty around Ishiba’s leadership may raise questions about Japan’s policy consistency. A delayed or weakened Japanese response to tariff negotiations could present downside risks to the yen and Japan’s export-dependent economy.

Broader FX Market Trapped Between Trade and Central Bank Uncertainty

The lack of significant movement in other major currencies mirrors the same cautious positioning. The euro dipped 0.12% to $1.1684, with investors eyeing the upcoming European Central Bank meeting, where policymakers are expected to keep rates unchanged. Sterling edged 0.03% lower to $1.3488, as broader dollar dynamics outweighed domestic factors.

In the background, the EU is preparing additional countermeasures against the United States as hopes for a trade resolution dwindle. This ongoing friction adds another layer of complexity to global FX markets, particularly for the euro, which remains up 13% year-to-date but vulnerable to policy shocks.

U.S. Politics and Fed Independence Cloud Outlook

Another source of volatility is speculation surrounding the Federal Reserve’s independence. President Trump’s repeated criticism of Fed Chair Jerome Powell and his resistance to rate cuts have stirred concerns about political interference. While Treasury Secretary Scott Bessent reaffirmed the need to evaluate the Fed’s institutional role, markets are wary of any changes that could undermine the central bank’s autonomy.

Despite these concerns, economists such as Jonas Goltermann of Capital Economics maintain that solid U.S. data and a potential inflation rebound fueled in part by tariffs could keep the Fed on hold into 2026. If this scenario materializes, shifting interest rate differentials could support a medium-term dollar rebound. However, Goltermann warned that any sustained dollar recovery remains exposed to political unpredictability.

Commodity Currencies Drift as Risk Sentiment Weakens

In the Asia-Pacific region, risk-sensitive currencies softened. The Australian dollar dipped 0.05% to $0.6522, and the New Zealand dollar declined 0.14% to $0.5960. The moves were modest but reflect a broader unease about global demand, especially with trade tensions threatening growth among commodity exporters.

The dollar’s indecisiveness reflects a market in wait-and-see mode, shaped by the convergence of trade policy, central bank credibility, and political risk. With the August 1 tariff deadline looming and negotiations still unresolved, currency markets are likely to remain range-bound. A decisive move will only come when trade outcomes, Fed direction, and geopolitical developments align or clash. Until then, investors are hedging exposure rather than placing bold bets.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Gerik

Economic

Push for Structural Reform over Reactionary Regulation

U.S. Treasury Secretary Scott Bessent has signaled a decisive shift in regulatory philosophy, criticizing what he described as an outdated and reaction-driven financial oversight framework. Speaking at a Federal Reserve regulatory conference, Bessent emphasized the need for a “long-term blueprint” focused on innovation, competitiveness, and resilient growth. His remarks come as the Trump administration pursues a broader deregulatory agenda aimed at dismantling elements of the post-2008 financial regime.

Bessent criticized the layering of capital requirements over the past decade, claiming they have imposed unnecessary constraints on financial institutions, reduced lending, and distorted market dynamics by encouraging credit migration to non-bank lenders. He argued that these rules originally designed for risk mitigation now operate as a brake on economic expansion.

Critique of the Dual Capital Requirement Proposal

Central to Bessent’s address was a forceful rejection of the dual capital requirement structure proposed in 2023. Designed in the aftermath of high-profile bank failures, including that of Silicon Valley Bank, the framework would have required banks to comply with the higher of two risk capital calculations. While never implemented, it would have led to higher capital buffers across the sector.

Bessent condemned the proposal as unprincipled and overly punitive, claiming it lacked a clear calibration method and was motivated by a desire to inflate capital reserves rather than refine risk sensitivity. He contended that this structure would have hindered reform by entrenching legacy rules as the effective regulatory floor for most large banks.

According to Bessent, the dual approach contradicts efforts to modernize capital regulation and undermines the flexibility needed to tailor requirements to the actual risk profile of institutions. He advocated for a simpler, more coherent regime that aligns regulatory burdens with both bank size and business models.

Expanding Relief to Community Banks

Beyond the large banks typically at the center of regulatory debate, Bessent also proposed extending capital relief to smaller community banks. He floated the idea of a voluntary opt-in mechanism for banks not currently subject to modernized standards, allowing them to access reduced capital thresholds. This move, he suggested, would free up capital for lending and investment in underserved regions without compromising financial stability.

This proposal echoes broader Trump administration goals to support local financial institutions and promote credit availability in rural and economically fragile communities. By tailoring regulation based on institutional scale, Bessent seeks to bridge the divide between prudential oversight and economic vitality.

Balancing Deregulation and Stability

While advocating for reform, Bessent acknowledged the need to preserve core elements of financial safety, consumer protection, and systemic resilience. He stressed that regulation can be both rational and effective, arguing that modernizing oversight does not equate to weakening it. The Treasury, he noted, would play a more active role in coordinating reform efforts across agencies, aiming to overcome institutional inertia and avoid gridlock between regulators such as the Fed and the OCC.

Bessent’s comments also included a broader call for reviewing the Fed’s role and structure, emphasizing the importance of maintaining monetary policy independence while increasing institutional accountability.

Bessent’s remarks reflect a significant recalibration of U.S. financial regulation under the Trump administration. By rejecting complex and rigid capital frameworks in favor of streamlined, growth-oriented rules, the Treasury is advancing a vision of financial reform that prioritizes lending, institutional flexibility, and market competitiveness. However, balancing this agenda with the imperatives of risk containment and systemic integrity will define the success and sustainability of this deregulatory pivot. As the debate unfolds, regulators and lawmakers alike will confront the challenge of ensuring that reform does not lead to vulnerability.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Commodity

Trade War Risks Pressure Demand Expectations

Global oil benchmarks edged lower on Tuesday as investor sentiment weakened due to the intensifying trade standoff between the United States and the European Union. Brent crude futures declined by 0.35% to $68.97 per barrel, while U.S. West Texas Intermediate (WTI) fell 0.31% to $66.99. The more actively traded September WTI contract dropped by 0.35% to $65.72.

Investor concerns are rising that the imposition of a 30% U.S. tariff on EU imports, expected by August 1 unless a deal is struck, could suppress economic activity across two of the world’s largest fuel-consuming regions. With the EU now preparing broader countermeasures, the potential for retaliatory trade actions further clouds the global growth outlook.

This weakening in macroeconomic expectations has translated into lower anticipated demand for crude, exerting downward pressure on prices. Market participants now appear more focused on demand-side risks, shifting away from the supply-centric concerns that had dominated earlier in the year.

Middle East Ceasefire and Rising Supply Ease Geopolitical Risk

The market’s recent stabilization is also linked to reduced geopolitical tensions following the June 24 ceasefire between Israel and Iran. The truce helped remove immediate fears of a regional supply disruption in the Middle East, a key production hub. Since then, oil prices have largely moved within a narrow trading band, with Brent fluctuating within a $5.19 range and WTI within $5.65.

In parallel, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have been gradually unwinding previous output cuts. Saudi Arabia, the group’s de facto leader, increased crude exports in May to their highest level in three months, according to Joint Organizations Data Initiative (JODI) data released Monday. This increase in supply has softened the bullish case for oil in the near term, as more barrels are entering a market already grappling with demand uncertainty.

Dollar Weakness Offers Limited Cushion

Despite downward pressure from trade concerns and rising supply, a softer U.S. dollar has helped prevent a steeper slide in oil prices. With the greenback declining against major currencies this month, non-dollar buyers face lower costs, providing some offset to the broader bearish narrative.

Nonetheless, the dollar’s weakness has not been enough to reverse sentiment, as traders increasingly view trade policy as the dominant market driver. The balance of market risks has shifted from production shocks to policy-induced demand contraction, particularly as tariff deadlines approach with limited signs of diplomatic progress.

Oil markets remain trapped between opposing forces: a stable supply outlook and a deteriorating demand narrative. While geopolitical risks have eased and currency moves offer some technical support, the overarching uncertainty surrounding U.S. trade policy with the EU has overshadowed fundamentals. Until clarity emerges from the tariff negotiations, crude prices are likely to remain range-bound, with modest downside risk prevailing in the near term.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

FastBull Featured

Daily News

[Quick Facts]

1. Iranian Foreign Minister: Iran has not halted Uranium Enrichment Program.

2. Trump tax reform bill to increase U.S. deficit by 3.4 trillion dollars.

3. Next round of Ukraine-Russia Peace Talks scheduled for Wednesday in Turkey.

4. Powell faces criminal charges from Trump's Ally.

5. Shigeru Ishiba's prospects for governance appear bleak.

[News Details]

Iranian Foreign Minister: Iran has not halted Uranium Enrichment Program

According to CCTV News, Iranian Foreign Minister Abbas Araghchi stated on July 21st that uranium enrichment-related facilities in Iran have been "severely damaged" following a U.S. attack. He also noted that the uranium enrichment program has not been suspended, emphasizing that Iran cannot give it up as it is extremely precious to the country and tied to national dignity.

Trump tax reform bill to increase U.S. deficit by 3.4 trillion dollars

According to the latest estimate from the U.S. Congressional Budget Office (CBO), the tax and spending bill signed by President Donald Trump recently will increase the U.S. deficit by $3.4 trillion over the next decade and result in millions losing health insurance. An assessment released by the CBO on Monday showed that the bill will reduce revenue by $4.5 trillion and spending by $1.1 trillion by 2034. The latest analysis does not incorporate so-called dynamic effects, such as potential impacts on economic growth or interest rates in the future. Trump signed the "One Big Beautiful Bill" on July 4th after months of consultations with congressional Republicans. The bill covers most of Trump's economic agenda, including permanently extending his 2017 income tax cuts and some corporate tax reductions, raising the state and local tax (SALT) deduction cap, and providing temporary tax breaks for tip and overtime income.

Next round of Ukraine-Russia Peace Talks scheduled for Wednesday in Turkey

Ukrainian President Volodymyr Zelenskyy, citing the Chairman of Ukraine's Security and Defense Council, stated that the next round of peace talks between Ukraine and Russia is planned for Wednesday in Turkey. In an evening video address, Zelenskyy said, " Today, I discussed with (Ukrainian Security Council chief) Rustem Umerov the preparations for the exchange and another meeting in Turkey with the Russian side. Umerov reported that the meeting is scheduled for Wednesday." Umerov currently serves as the Secretary of Ukraine's Security and Defense Council and chaired the first two rounds of talks with Russia.

Powell faces criminal charges from Trump's Ally

U.S. Representative Anna Paulina Luna has presented criminal charges to the Department of Justice, alleging that Federal Reserve Chair Jerome Powell committed perjury twice. In her letter, Luna wrote, " On June 25, 2025, Chairman Powell provided testimony under oath before the U.S. Senate Committee on Banking, Housing, and Urban Affairs regarding the renovation of the Federal Reserve’s Eccles Building. In his statements, he made several materially false claims." Luna further stated, " Powell characterized the changes that escalated the cost of the project from $1.9 billion to $2.5 billion as minor. However, documents reviewed by congressional investigators indicate that the scope and cost overruns of this project were neither minor in nature nor in substance." Perjury is punishable by fines and up to five years in prison.

Shigeru Ishiba's prospects for governance appear bleak

Analysts attribute the recent electoral defeat of Japan's ruling Liberal Democratic Party (LDP) - Komeito coalition primarily to public discontent over rising prices, weak policy responses, and voter attrition due to the aging image of traditional parties. These factors have also exposed deeper crises in the coalition's policy implementation and public communication. Lu Hao, Director of the Department of Comprehensive Strategy at the Institute of Japanese Studies, Chinese Academy of Social Sciences, noted that while Ishiba may continue as prime minister, his prospects for governance are highly uncertain, and it will be difficult to quell doubts about him from both within and outside the ruling camp in the short term. Meanwhile, trends toward conservatism and populism in Japan's political landscape are expected to intensify.

[Today's Focus]

UTC+8 17:15 BoE’s Bailey, Crozier & Wilkins Testify on Financial Stability Report Before UK Parliament

UTC+8 20:30 Fed Chair Powell Speaks

UTC+8 01:00 Fed Governor Bowman Speaks

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Internal Divergence Reflects Policy Uncertainty

The Reserve Bank of Australia (RBA) surprised markets this month by holding the cash rate at 3.85%, resisting what would have been a third rate cut in just four meetings. Minutes from the July 7–8 meeting reveal a board divided, with six of the nine members favoring a pause, citing the need for more data before shifting further. The split highlights rising internal tensions between a proactive easing stance and a more gradualist approach.

Those in favor of holding rates argued that the current rate remains “modestly restrictive” and that cutting too quickly could misjudge the neutral level of interest rates. The majority emphasized that monetary easing should proceed “cautiously” as the economy rebalances and inflation eases. In contrast, the three dissenting members believed the evidence already justified further cuts, citing progress toward returning inflation to target and weakening economic indicators.

Markets Wrong-Footed by Cautious Stance

The central bank’s decision defied widespread market expectations. Traders had priced in a near-certain cut after the May monthly inflation report showed the trimmed mean an indicator closely watched by the RBA falling to a 3.5-year low of 2.4%. The economy’s stagnation in Q1 and signs of sputtering public demand added to the case for more accommodative policy. However, the board's minutes suggest concern over reading too much into monthly inflation swings, especially with underlying components like housing potentially showing stronger June-quarter pressures.

The RBA acknowledged that financial markets have occasionally mispriced policy intentions in the past, reinforcing its desire to act independently of speculative sentiment. This view was supported by data showing stronger-than-expected private sector activity and a surprisingly resilient labor market, despite soft headline GDP figures.

Inflation, Employment, and Global Risk in Focus

While acknowledging muted GDP growth in the first quarter, the RBA pointed to robust private demand, which came in above projections, as a counterbalance. Labor market conditions, too, remained tight by historical standards, although the RBA noted emerging signs of softening particularly following a weaker-than-expected jobs report just after the meeting, which could now factor into the August decision.

The board also recognized ongoing volatility in monthly inflation readings and the risk of overstating the disinflationary trend. Housing costs, in particular, may exert upward pressure in the near term. Globally, the risk of a severe downturn has diminished slightly, but the outlook remains clouded by uncertainties in US trade policy and other geopolitical variables.

Forward Guidance and Market Projections

Looking ahead, financial markets now see a 91% probability of a rate cut at the RBA’s next policy meeting on August 12, spurred by weakening job market data. Futures markets are also pricing in a gradual easing cycle, with the cash rate expected to bottom near 3.10% by early 2026.

Nonetheless, the RBA’s July minutes make clear that policy will remain data-dependent. The bank is prepared to ease further if inflation remains subdued and economic momentum slows, but it will do so methodically rather than reactively.

The RBA’s decision to pause reflects a nuanced strategy aimed at navigating between easing inflation and underlying economic resilience. With mixed signals from key indicators and growing concerns over premature action, the central bank has opted for prudence. While rate cuts remain likely, the path forward will depend on incoming data particularly on inflation, labor market trends, and global risks. This calibrated approach underlines the RBA’s commitment to long-term stability over short-term accommodation.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Winkelmann

Economic

(July 22): Japanese government bonds are vulnerable to further selling following a historic election defeat for Prime Minister Shigeru Ishiba, although the immediate reaction Tuesday has been damped by a rally in global debt markets.

Benchmark 10-year bonds fell only slightly as trading resumed in Tokyo, pushing yields up by 1.5 basis points. Stocks opened higher on post-election relief, even as their outlook remains at the mercy of tariffs. The yen dipped and faces downside risks in the coming days and weeks from the prospect of more government spending.

While Ishiba hanging on as leader for now provides a measure of continuity for markets, he will also need to find ways to placate opposition lawmakers seeking tax cuts and households wanting relief from inflation. Any concessions to these pressures can be expected to quickly translate into higher bond yields.

With Japan’s markets closed for a national holiday on Monday, investors expressing an initial view on the election did so largely through the yen, which advanced about 1% against the dollar after weakening for most of July. The currency weakened about 0.1% to trade around 147.54 as of 9.27am in Tokyo.

“Concerns over fiscal expansion continue to simmer in the market, and in light of the election results, JGBs could come under selling pressure,” said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management. “I anticipate a bearish steepening of the yield curve, driven especially by super-long bonds.”

Benchmark 10-year bond yields rose to 1.535%, while the 5-year bond yields rose a basis point to 1.05%.

Yields on longer-maturity JGBs of 20 to 40 years dipped slightly on Friday but have been in an acute uptrend over recent months. The moves in Japanese yields, which have flowed through into global markets, reflect concerns among investors that the government is spending beyond its means.

A lack of clarity around fiscal and economic policies is likely to dim the global appeal of Japanese assets, at least in the short term, said Dilin Wu, a research strategist at Pepperstone Group Ltd. She added that political uncertainty may complicate Tokyo’s trade negotiations with Washington, denting market sentiment.

“A triple dip scenario is still on the table,” according to Wu, referring to the risk of the yen, bonds and stocks all falling. Despite Ishiba’s insistence that he’ll remain in charge, “investors are likely to question how much political capital he has left,” she said.

While Japan’s benchmark Topix stock gauge has bounced back from its sharp decline in the wake of US President Donald Trump’s tariffs salvo in April, it remains well off the record high set in mid-last year.

“For Japanese equities, the picture is more complex,” said Hebe Chen, an analyst at Vantage Markets in Sydney. “A weaker yen may offer short-term support to exporters, but the deepening political noise threatens to erode broader investor confidence.”

The yen could also be hit Tuesday, particularly if long-term government bonds sell off, said Hiroshi Namioka, chief strategist and fund manager at T&D Asset Management. “There’s a significant possibility of yen depreciation,” he said. “Although I expect super-long JGB yields to rise, it’s for negative reasons. That could prompt yen selloffs.”

Nick Twidale, chief analyst at ATFX Global Markets, said he expects selling in Japanese stocks Tuesday, and an overall weakening in the yen, despite its “initial haven move” higher on Monday.

“There’s plenty of volatility to come on both the domestic front and the trade front,” said Twidale. “I don’t think policy uncertainty bodes well for Japanese equities, plus we still have the US tariffs hanging over their heads and the new political setup could make things more tricky,” he added.

Source: Theedgemarkets

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Stocks

Asian Markets Resilient as Trade and Earnings Dominate Sentiment

Asian share markets began the week on a positive note, hovering close to four-year highs, driven by optimism over upcoming corporate earnings and guarded hope surrounding US trade negotiations with key partners. The MSCI Asia-Pacific index (excluding Japan) briefly reached its highest point since October 2021 during early trading on Tuesday before stabilizing. The index has already gained nearly 16% year-to-date, signaling broad regional confidence despite global macroeconomic headwinds.

Wall Street's strong overnight performance acted as a catalyst, with the S&P 500 and Nasdaq posting record highs. Gains were led by tech giants, notably Alphabet, ahead of a busy earnings season that investors expect to reflect resilient profitability in the face of policy and trade uncertainty.

Japanese Market Reacts Modestly to Political Shifts

Japanese equity markets reopened following a national holiday, facing the aftermath of a weakened ruling coalition in upper house elections. Prime Minister Shigeru Ishiba’s commitment to stay in office soothed short-term concerns, and equities managed modest gains. However, the Japanese yen’s earlier rally of 1% on Monday suggested that currency markets are pricing in potential fiscal expansion risks linked to Ishiba’s weakened mandate.

Economists, including Kristina Clifton of the Commonwealth Bank of Australia, have warned that more aggressive fiscal policies could eventually weigh on Japanese government bonds and the yen. She suggested that growing concerns over fiscal imbalances may exert longer-term downward pressure on both yields and currency valuation.

Tariff Negotiations Shape Global Currency and Commodity Trends

Investor attention remains sharply focused on ongoing US trade negotiations with the European Union and Japan. Talks have stalled, and with President Donald Trump threatening 30% tariffs on EU imports beginning August 1, the prospects for a resolution are dimming. EU officials are considering a broader set of countermeasures, increasing the risk of a full-scale trade clash. These negotiations are seen as critical for global trade dynamics, and the outcomes could significantly influence currency movements and asset allocation.

The euro maintained its recent strength, trading at $1.1689 after a 0.5% gain in the previous session. Despite staying below its four-year high reached earlier this month, the euro’s 13% appreciation in 2025 reflects growing investor interest in non-dollar assets amid US trade tensions. Meanwhile, the US dollar index stood at 97.905, still under pressure from geopolitical uncertainty and policy concerns.

Federal Reserve Independence in the Spotlight

Adding to the market's cautious undertone are renewed questions about the autonomy of the Federal Reserve. Recent reports suggesting that President Trump considered firing Fed Chair Jerome Powell have unsettled investors, though the idea was reportedly shelved to avoid market turmoil. U.S. Treasury Secretary Scott Bessent’s comments that the Fed’s institutional role should be reassessed only deepened market unease.

Markets widely expect the Fed to hold rates steady at its July meeting. However, forward guidance particularly from Chair Powell’s scheduled remarks will be pivotal in shaping expectations. Goldman Sachs now anticipates three 25-basis-point cuts starting in September, contingent on subdued inflation expectations and no further erosion of central bank credibility.

Oil Prices Slip on Trade Concerns

In commodities, crude oil prices edged lower as fears of a trade conflict between the U.S. and the EU raised concerns about global fuel demand. Brent crude futures dipped 0.35% to $68.97 per barrel, while U.S. West Texas Intermediate fell 0.31% to $66.99. The pullback in prices highlights the sensitivity of commodity markets to trade policy shifts, especially among major consuming regions.

While investor appetite remains supported by strong earnings prospects and steady global liquidity, political volatility and unresolved trade tensions are capping further upside in Asian markets. With Japanese fiscal uncertainty, US-EU tariff risks, and growing scrutiny of the Federal Reserve’s independence, markets are likely to remain reactive to policy signals in the coming weeks. The confluence of macroeconomic and geopolitical factors continues to drive both optimism and caution in equal measure.