US equity markets struggled for direction yesterday, trading in a choppy range as investors weighed conflicting signals around trade policy and potential tariff deadlines. President Trump added further uncertainty by suggesting the looming tariff date might be delayed, while simultaneously floating the idea of imposing a steep 50% levy on copper imports.
The Dow Jones Industrial Average closed down 0.37%, reflecting cautious sentiment, while the S&P 500 edged lower by 0.07%. The Nasdaq Composite managed to hold marginal gains, finishing the day up 0.03%.
Treasury yields were similarly subdued, with the 2-year note yield dipping a modest 0.4 basis point to 3.891%, while the 10-year benchmark yield added 2 basis points to settle at 4.399%.
In currency markets, the dollar traded largely sideways as traders waited for clarity on tariffs and central bank policy. The DXY dollar index slipped 0.02% to 97.49. The Australian dollar, however, broke out of recent ranges after the Reserve Bank of Australia surprised markets by holding interest rates steady, prompting a swift 50-pip rally in the currency.
Commodities were mixed. Oil prices advanced to two-week highs, with Brent crude climbing 0.53% to $69.95 and WTI crude adding 0.28% to reach $68.12. Gold prices retraced recent gains, falling 1.03% to $3,301.27 amid signs of potential tariff postponement.
RBA Surprises Markets by Holding Fire on Rates
The Reserve Bank of Australia startled traders by leaving its benchmark rate unchanged at 3.85%, citing persistent inflationary pressures despite a weakening domestic backdrop. Markets had overwhelmingly expected a 25-basis point cut, pricing in a 95% probability heading into the decision.
The Aussie dollar rallied strongly on the announcement, jumping 50 pips as traders scrambled to adjust positions. While RBA Governor Michele Bullock emphasized that the decision reflected timing considerations rather than a shift in policy direction, the move has significantly altered expectations: futures markets are now pricing in an 85% chance of a cut at the next meeting in August.
The RBA’s shifting tone — from steadfast hawkishness earlier this year to a dovish tilt in May, followed by no action in July — has added a layer of complexity for market participants. Longer-term positioning is likely to be more challenging, but the added policy uncertainty could generate fresh opportunities for short-term traders, particularly in the Australian dollar, which has traded in a narrow range for much of the year.
Tariffs and Central Banks in Focus Today
Looking ahead, traders are bracing for what could be a highly active day across global markets as multiple key events converge.
During the Asian session, initial moves are expected as markets digest overnight US tariff developments. China’s inflation data is due early, with consensus forecasts pointing to a modest 0.2% year-on-year increase in CPI and a 3.2% contraction in PPI.
Attention will then turn to New Zealand, where the Reserve Bank of New Zealand is expected to pause its easing cycle and leave rates unchanged at 3.25% after six straight cuts.
The European session should bring further volatility, with the release of the Bank of England’s meeting minutes likely to set the tone for UK assets.
In the US, markets will be closely watching for any fresh tariff announcements from the White House, which could trigger significant intraday moves. Later in the session, focus will shift to underlying fundamentals with the release of the latest FOMC Meeting Minutes, as investors continue to hunt for clues about the Federal Reserve’s policy path into the second half of the year.
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