Asia Summary and Highlights 8 Jul

Asia Session

To most surprise, the RBA did not cut and suggest it could wait for more confirmation after the previous 50bps cut. It is hardly surprising as there is likely only three cuts left for the RBA till terminal rate with little urgency from current inflationary dynamic and we continue to expect only two 25bps cut in 2025.  AUD/USD got a shot in the arm and is trading 0.79% at 0.6541, NZD/USD also dragged 0.3% higher at 0.6012 while USD/CAD slips 0.18%.

After getting hit by a 25% tariff on all Japanese item, Trump says he may adjust tariffs for some countries and seems to suggest August 1 is not a hard deadline. It seems to be helping a partial reversal in JPY weakness as it gives both sides more time to negotiate on trade deals. The election on 20th July will likely keep the current government at bay unless they got a good deal. USD/JPY is trading 0.02% lower at 146.03. Else, EUR/USD is up 0.25% and GBP/USD is up 0.2%.

North American session

The USD saw some recovery from European lows in the North American morning, particularly in the riskier currencies though USD/JPY continued to move steadily higher. The afternoon saw Trump announce tariffs starting on August 1 firstly against Japan and South Korea, both at 25%, followed by announcements against other countries, including 30% for South Africa and 25% for Malaysia. The tariff levels announced were generally close those originally announced on April 2. 

USD/JPY saw only a limited response to the announcement but its rally extended above 146. The USD advanced elsewhere, EUR/USD falling below 1.17 before correcting to around 1.1725 assisted by a Reuters report that the EU would not be receiving a tariff letter from Trump.  Weakness in equities saw AUD and CAD test European lows versus the USD though GBP/USD found support below 1.36.