The US dollar fell slightly after strong non-farm payroll data was released. Meanwhile, European stocks also dropped, with S&P 500 futures down by 0.6%. In the commodities market, gold rose by 0.3% to $3,336.22, while WTI crude oil fell by 0.9% to $66.42. Bitcoin decreased by 0.8%, now valued at $109,100. President Trump announced new tariffs, sending letters to 10-12 countries that will see increased tariffs starting August 1. This includes China, which confirmed tariffs of up to 34.9% on European brandy, affecting French cognac producers. These events contributed to a decline in risk sentiment, leading to lower European indices, particularly with French stocks taking the hardest hit.

Dollar And Commodity Movements

In the foreign exchange market, the dollar’s gains from the payroll data faded away. The EUR/USD rose to about 1.1775, while the USD/JPY fell 0.4% to 144.30. The USD/CHF was down by 0.2% to 0.7930. The dollar’s performance against commodity currencies showed minor shifts; USD/CAD increased by 0.1% to 1.3590, and AUD/USD decreased by 0.1% to 0.6560. Despite some recent strength, the dollar’s overall outlook remains mostly unchanged. Moving forward, markets will pay closer attention to trade news and evaluate the dollar’s strength amid changing US policies. These movements reflect a market struggling with policy changes and reduced summer trading activity. Although the non-farm payroll data initially boosted the dollar, that momentum quickly diminished due to concerns about new trade barriers. Traders reevaluated their outlook as they processed policy changes from Washington and growing tensions between Beijing and Europe. In practical terms, the initial positive response to strong employment figures faded into caution. While the labor data hinted at a still-strong job market, there was no sustained impact on interest rates or confidence in the stock market, leading to a rapid decline in momentum. Europe’s difficult trading day wasn’t unexpected. The new Chinese tariffs on imported brandy from Europe, especially the high duty rates, put pressure on exporters. French-listed companies faced the most significant declines, with the CAC 40 index suffering the biggest losses across Europe. Many analysts believe that tensions in key sectors like agriculture and luxury goods won’t ease soon, given the heightened rhetoric between governments.

Market Sentiment Shifts

The dollar’s overall direction has changed, influenced by daily trading flows and expectations regarding Fed policy adjustments. For example, the drop in USD/JPY aligns with lower US Treasury yields, suggesting some reassessment of future rate paths. Changes in currency pairs like USD/CHF and EUR/USD seem more mechanical than driven by new conviction. The lack of clear momentum in USD/CAD and AUD/USD highlights how different factors—oil for Canada and trade demand for Australia—create mixed signals. In the coming weeks, these challenges may test trading positions. Trading activity may remain light, but there’s little room for complacency. The upcoming tariff changes set for early August are now being considered more seriously, not just as potential risks but as actual cost pressures on specific sectors. There’s a growing concern that retaliatory moves could become less targeted, leading sensitive equity indices to see more pronounced adjustments during quieter trading periods. Commodity behavior is also worth noting. Gold’s modest rise aligns with demand for security in an uncertain market. Oil prices have declined somewhat, reflecting inventory builds and resilient supply. For now, both commodities are trading within manageable ranges, but multi-week options suggest increasing interest in protecting against a sharp drop in oil prices. Volatility in equity futures and currencies remains below expected levels, given the recent trade developments. This indicates a possible undervaluation in the market. As summer positions unwind towards the end of July with central bank meetings approaching, we could see renewed activity in hedging and movement in spreads. While changes are happening, they are not extreme. S&P futures fell in line with a general decline in cyclical stocks, and tech stocks have shown weaker involvement. Current trading patterns suggest that participants are focusing more on short-term political developments rather than broader economic signals, at least for now. As we keep an eye on trade changes, it’s essential to look for imbalances—instances where policy announcements significantly affect one market while leaving others relatively unchanged. These dislocations often present clear opportunities for short-dated options or calendar spreads. Overall, we have not yet seen a major trend shift, but rather a recalibration of short-term expectations. Variability in policy—both upward and downward—continues to be the main factor affecting pricing across asset classes. Create your live VT Markets account and start trading now.

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