Weekly Wrapup: Tariff Tempests, Yield Shifts & a Volatile Greenback (July 7 – July 11 2025)
Weekly Wrapup: Tariff Tempests, Yield Shifts & a Volatile Greenback (July 7 – July 11 2025)
1. Macro Front-Page
A five-day barrage of tariff headlines from Washington dominated the narrative. President Trump’s escalation sequence—25 % levies on Japan and South Korea (July 8), a surprise 50 % copper tariff (July 9), and letters pledging broader duties by August 1—kept every asset class on edge. By Thursday the White House added Brazil and the BRICS bloc to its target list, then hardened its tone again on Friday, insisting “simple tariffs” beat drawn-out negotiations. Traders spent the week toggling between safe-haven scrambles and relief rallies each time a deadline shifted.
Against that backdrop the Fed’s policy path blurred. FOMC minutes released Wednesday revealed only “a couple” of officials willing to cut in July, while the majority signalled a lengthy hold. Yet public remarks from Governors Daly, Waller and Musalem kept the door to autumn easing ajar. The mixed messaging capped yields early but could not fully offset the tariff-driven risk bid later in the week, leaving the curve whipsawing rather than trending.
2. Currencies — Dollar Whip, Yen Resurgence, Euro Resilience
Dollar Index (DXY): Opened the week bid on tariff angst, printed its best three-session run by Tuesday, then surrendered gains as Friday’s risk aversion morphed into yield-driven profit-taking; net result was a modest 0.3 % decline.
USD/JPY: Monday’s tariff letters catapulted the pair through 146.00, but narrowing JGB–UST spreads and a Friday safe-haven lunge saw spot tumble 0.4 % to 145.10. The chart pack on page 2 of the 11 July brief shows repeated failures to clear the 148.00 barrier.
EUR/USD: Faced divergent forces—higher U.S. yields versus narrowing Bund–UST spreads. Bears scored on Thursday with a drop to 1.1660, yet by Friday bulls reclaimed 1.1750 as option-expiry gravity around 1.18 loomed. The bearish outside candle captured in the EUR/USD panel on page 2 of the 10 July report underscores the week’s tug-of-war.
GBP/USD & Crosses: Fiscal jitters and construction PMI softness tugged cable to a two-week low near 1.3580 mid-week, but forward-rate parity with the Fed lent support into Friday’s close.
Commodity FX: AUD held firm on iron-ore optimism and the RBA’s steady hand; CAD tracked crude’s seesaw but ended flat.
3. Commodities — Copper Shock, Oil Fade, Gold Bid
The 50 % copper tariff jolted metals: Comex futures screamed 10 % higher intraday Tuesday as traders repriced supply chains, while USD/CLP spiked on Chile exposure. Brent crude slid nearly 3 % on Monday’s risk-off but clawed back to finish virtually unchanged; the weekly candle still signals hesitation as traders weigh demand erosion against supply tightness. Gold spent the interval lurching between 3 330 and 3 415 $/oz; dips toward the 200-day average attracted ETF inflows, confirming its role as policy-error insurance. The XAU/USD chart on page 2 of every CMS brief highlights a classic rising-channel grind.
4. Rates & Credit — Auctions, Curves, and Fed Chatter
U.S. Treasury supply loomed large: $119 bn in 3-, 10- and 30-year paper met solid demand despite the macro noise. Early-week tariff shocks pushed 10-yr yields to 4.27 %, yet Wednesday’s cautious FOMC minutes allowed a 7-bp retracement before Thursday’s jobless-claim beat nudged yields right back up. The 2s–10s spread swung from +50 bp to +44 bp before walking back to +48 bp—an illustration of curve compression each time growth fears overshadowed inflation angst. Investment-grade spreads widened 3 bp mid-week but reversed by Friday as stocks stabilized.
5. Equities Snapshot
S&P 500 logged a net 0.2 % gain—hardly heroic, but notable given volatility spikes around each tariff headline. Sector rotation was dramatic: defensives (utilities, staples) out-performed on Monday, cyclicals rallied Tuesday on commodity inflation, and semiconductors rebounded Thursday after Copper-gate cooled. European indices fared worse; the DAX lost 0.7 % as German industrial orders cratered 1.4 % month-on-month, a datapoint buried beneath the tariff cacophony but captured in the July 7 brief.
6. Key Risks Heading into Mid-July
Tariff Countdown: August 1 now anchors every scenario analysis. Markets must discount both direct inflation pass-through and retaliatory blowback.
Powell’s Tenure: Persistent hints of a leadership shake-up inject uncertainty into forward-guidance reliability.
Treasury Supply vs. Deficit Math: With Secretary Bessent flagging heavier short-bill issuance, duration risk could steepen curves suddenly.
Euro-Area Growth Stumbles: Sharp misses in German factory orders and soft PMI prints threaten to sour the euro’s budding momentum.
7. Tactical Takeaways
FX: Fade fresh dollar spikes into tariff headlines; upside EUR option structures near 1.19 offer attractive convexity.
Rates: Maintain 5s/30s steepeners but hedge with payer spreads if Core CPI surprises next week.
Commodities: Long copper volatility remains compelling; consider gold dips to 3 330 $/oz as strategic buys.
Equities: Keep barbell—defensives for policy shocks alongside commodity producers for tariff windfalls.
