The global financial markets experienced a relatively calm phase following a temporary trade truce between the United States and China. Here’s a breakdown of the key developments:
Market Reactions
- Global markets steadied after the U.S. and China agreed to a 90-day mutual suspension of tariffs.
- Asian stock indices surged, particularly in Japan.
- Despite this, U.S. and European stock futures declined, reflecting investor concern over lingering economic impacts from previous tariffs.
- After two days of negotiations in Geneva, the U.S. reduced tariffs on Chinese imports from 145% to 30%, while China lowered tariffs on U.S. imports from 125% to 10%.
- This announcement sparked a strong rally in global equity markets.
Economic Data in Focus
- Traders are now awaiting the release of the U.S. Consumer Price Index (CPI) later today, seeking clues about the Federal Reserve’s monetary policy direction.
- The market currently anticipates a 55-basis point interest rate cut by the Fed later this year, starting in September.
- A lower-than-expected inflation reading could weaken the U.S. dollar and support gold prices.
Commodity and Currency Movements
- Gold rebounded on Tuesday due to selective buying after falling to a one-week low in the prior session, following the trade truce announcement.
- The Japanese yen rose in the Asian session against major and minor currencies, rebounding from a six-week low versus the U.S. dollar.
- This yen recovery is supported by a pause in the U.S. 10-year Treasury yield rally, ahead of the key inflation data.
- Investor attention also turns to Germany’s investor sentiment index, which could influence European Central Bank interest rate decisions.
