Key Market Insights:

• Trade Tensions Escalate: Even with repeated extensions, President Donald Trump has moved forward with reciprocal tariffs, signalling a continued focus on trade imbalances.



• Australia's Central Bank Holds Steady: In a move that caught many by surprise, the Reserve Bank of Australia decided to maintain its current interest rates, defying market expectations.

Market Recap

Trade Tensions Intensify:

President Trump has pushed back the general tariff deadline to August 1st. However, this extension was accompanied by the announcement of substantial new reciprocal tariffs on several nations. Notably, Japan and South Korea will face a 25% levy, South Africa 30%, and some countries like Laos and Myanmar will see even higher duties at 40%. The President indicated that these measures might not be the last, keeping trade policy in sharp focus.

Interestingly, market reaction to this latest tariff wave has been somewhat muted compared to previous announcements, suggesting that investors may be growing accustomed to these trade-related headlines. Despite this, the U.S. dollar, which saw some gains last week, did pull back. On the equity front, after reaching new highs, the S&P 500 experienced a modest dip of 0.8%, and Wall Street saw a decline of 300 points.

Australian Central Bank Holds Steady:

In a surprise move, the Reserve Bank of Australia (RBA) opted to keep its interest rate unchanged at 3.85%. This decision went against widespread market expectations for a rate cut. The RBA's statement highlighted a "cautious, gradual stance on easing," indicating a preference to observe economic data further before making any adjustments. This unexpected hold led to an appreciation of the Australian Dollar (AUD).

Today’s Market Update:

Here's an update on the latest market movements and what's driving them today:

Trade Policy Under the Microscope:

Despite recent tariff announcements, a pattern often termed "TACO trade" (referring to President Trump's tendency to soften initial aggressive trade stances) appears to be in play. A three-week reprieve has been granted for affected nations to negotiate, suggesting a window for potential adjustments to the new duties.

However, the economic impact of these tariffs is already being felt. We're seeing this particularly in Europe, where German exports to the US have declined more than anticipated. This development could prompt a re-evaluation of the Euro's strength and German bond

performance, as investors focus more keenly on how these trade measures are affecting the GDPs of major European economies.

Looking Ahead: Diplomatic Progress Takes Center Stage:

Today's economic calendar is light on scheduled data releases. Consequently, market attention is primarily fixed on ongoing trade negotiations and potential retaliatory actions or agreements with the United States. There are positive indications that the European Union is making headway towards securing a preliminary 10% tariff rate before the upcoming deadline. Separately, India is also reportedly nearing

a trade deal with the US.

These negotiations will be crucial in shaping the near-term global trade landscape and could significantly influence market sentiment. We will keep you informed as these discussions evolve.

8th July 2025

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