During US trading on July 1, 2025, the US dollar started to weaken but later stabilized against major currencies. The JOLTS job openings report showed 7.769 million jobs, surpassing the estimate of 7.3 million. Meanwhile, ISM data came in slightly above expectations at 49.0. Central bank leaders, including Fed Chair Powell, conveyed a steady economic outlook, but did not rule out rate cuts. Powell mentioned that tariffs could drive inflation up and stressed the importance of addressing the unsustainable US debt. ECB President Lagarde confirmed that the euro area met its 2% inflation target, but warned against becoming complacent. She reaffirmed the ECB’s data-focused strategy and highlighted that transitioning away from the US dollar globally will take time. Bank of England’s Bailey noted ongoing inflation pressures and signs of an economic slowdown. BOJ Governor Ueda commented on inflation trends and approached future rate hikes cautiously. **Market Reactions** US yields increased, especially in the short term, after a mixed day for stocks. The Dow and Russell 2000 gained, while the S&P 500 and NASDAQ declined. Crude oil prices remained stable, gold prices rose, and Bitcoin fell. Political and trade tensions persisted, with President Trump involved in tariff discussions alongside Elon Musk. The trading session on July 1 presented many mixed signals, although many pointed in a specific direction. The US dollar initially slipped but regained strength later in the day, indicating some resilience, likely supported by stronger-than-expected labor market indicators. The JOLTS report revealed nearly 470,000 more job openings than anticipated, suggesting that employers continue to seek new staff, which may indicate that economic demand has not stalled despite tighter conditions. Additionally, the ISM’s slightly lower-than-50 reading still exceeded expectations. A reading below 50 typically signals contraction, but this outcome implies that the slowdown in US manufacturing might not be worsening, at least for now. This mild surprise likely brought some relief to US equity markets; however, the technology and broader indices struggled while smaller companies made small gains. The Russell 2000’s rise coincided with the increase in short-term yields. Such a rise in shorter maturities often indicates a reassessment of rate expectations, as investors become less certain about a sharp decrease in rates. Powell’s comments highlighted a complex inflation outlook. There is rising concern that tariffs could lead to price increases, and his remarks about the US’s fiscal position shifted attention back to structural issues rather than just short-term ones. His statements seemed to suggest there wouldn’t be immediate rate cuts but kept options open. **Global Economic Insights** From a European standpoint, Lagarde’s comments were consistent with previous messages. Even though inflation returned to their 2% target, this does not imply an immediate policy shift. The main takeaway was caution; reaching the target once does not mean the job is complete. She emphasized steady data interpretation, particularly considering global monetary shifts towards other currencies. Bailey from the Bank of England expressed that while inflation has softened, it remains a concern. He suggested that signs of economic slowdown are becoming apparent, and policy changes will be considered carefully. It’s essential to remember that falling inflation is positive, but both employers and consumers might continue facing tight conditions in the coming months. Japan’s Ueda shared a similar cautious stance. Inflation remains below that of peer countries, and policymakers are approaching rate decisions carefully. They are not making drastic changes but are also not rushing into action. The commodities market appeared calm overall. Crude oil prices held steady, showing little new supply-demand news. Notably, gold prices edged up, often signaling increased hedging activity among investors amid uncertainty, likely influenced by policy and political developments. The rise in yields indicates that fixed-income traders are lowering their expectations for immediate easing. A growing sentiment suggests that caution will characterize monetary responses in the near future. In risk assets, price changes were mixed. The Dow and Russell 2000 posted gains while the S&P and NASDAQ experienced slight declines. This split hints at a rotation of market sectors, with some indicating increased economic resilience while others might be reacting to expectations of higher discount rates. We can view the dollar’s initial drop and Bitcoin’s decline not as contradictions but as signals that the market is assessing what matters more: changing yields, cautious central banks, or geopolitical factors. Trade and policy discussions added noise to the overall market direction. In the short term, focus should be less on timing and more on adaptation. With rising yields and no immediate rate cut plans, it’s vital to closely monitor assets sensitive to rate changes. While clarity may be lacking, current conditions are likely to persist. Attention should remain on upcoming data, especially labor and services reports, and any unexpected shifts in energy markets that can still impact inflation indirectly. Create your live VT Markets account and start trading now.

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