Markets steady ahead of US jobs data, tariff uncertainty, and currency volatility

Global markets traded in tight ranges on Tuesday as investors remained cautious ahead of key US labor market data, ongoing trade tensions, and central bank signals. Despite strong equity valuations, uncertainty surrounding tariffs, fiscal policy, and exchange rates continues to shape market positioning across asset classes.

Equities: Trading range-bound, eyes on economic data and trade

Stock markets were little changed as participants paused ahead of US payroll data due Thursday and the looming July 9 tariff deadline imposed by President Trump:

• S&P 500 futures rose 0.2%, holding near record highs.
• Nasdaq 100 futures gained 0.3%, supported by tech momentum.
• Euro Stoxx 50 futures added 0.5%, while broader European equities remained range-bound.
• MSCI Asia Pacific was flat, as gains in Chinese automakers offset weakness in Japanese equities.
• Nikkei 225 declined 0.5% after Trump renewed tariff threats on Japan and criticized its stance on US agricultural imports.

Investor sentiment remains cautious but resilient, with many expecting Trump to extend the tariff deadline, following his familiar pattern of threats followed by de-escalation.

US fiscal policy: Trump tax bill faces republican resistance

President Trump’s $3.3 trillion tax and spending bill faces mounting opposition in the House of Representatives despite passing the Senate last week:

• Several moderate and ultra-conservative Republicans threaten to oppose the bill due to concerns over deficit expansion, Medicaid cuts, and changes to state tax deductions.
• The Senate version passed narrowly with Vice President JD Vance casting the tie-breaking vote.
• House Speaker Mike Johnson faces pressure to rally Republican support, as losing more than three GOP votes would sink the bill.
• Markets are watching closely, as delays could affect fiscal stimulus expectations and broader sentiment.

Currencies: Dollar steady after heavy selling, euro rally raises ECB concerns

The US dollar stabilized after recent weakness, while euro gains triggered debate within the European Central Bank:

• Bloomberg Dollar Spot Index was little changed, hovering near a three-year low.
• Euro slipped slightly to $1.1789 after a 14% rally this year driven by dollar weakness and shifting capital flows.
• Yen weakened 0.2% to 143.77 per dollar.
• Offshore yuan held steady at 7.1652 per dollar.
• Sterling was unchanged at $1.3736.

The euro’s surge has helped curb inflation but sparked ECB concerns that excessive appreciation could hurt exports and derail the fragile recovery. Officials warn a move beyond $1.20 could complicate policy, with further rate cuts under discussion if currency strength persists.

Central banks: Fed, ECB in focus, rate paths data-dependent

Federal Reserve Chair Jerome Powell reiterated that tariffs have delayed rate cuts, but policy remains flexible:

• The Fed likely would have lowered rates further if not for inflation risks tied to Trump’s expanded tariffs.
• Powell signaled that all upcoming meetings are “live,” with July’s decision dependent on incoming data.
• Fed officials remain divided, with some supporting immediate cuts amid benign inflation and labor market data.
• ECB policymakers are increasingly watching currency moves, with further monetary easing possible if euro strength continues.

Commodities: Stable ahead of economic data

Commodity markets were little changed:

• Gold held steady after a 2% rally over the past two sessions.
• WTI crude oil rose 0.2% to $65.56 per barrel.
• Copper prices remain firm amid supply concerns and positive Chinese economic signals.

Cryptocurrency markets: Modest gains continue

• Bitcoin advanced 0.6% to $106,637.
• Ethereum climbed 1.1% to $2,442.

Digital assets continue to trade in tandem with broader risk sentiment and dollar moves.

Outlook and strategic considerations

• Jobs data critical: Thursday’s US payrolls report is expected to show a slowdown in hiring, with forecasts at 110,000 new jobs and unemployment ticking up to 4.3%.
• Tariff tensions: Trump’s July 9 deadline for higher levies on trading partners looms large, but expectations persist for an extension.
• Fiscal uncertainty: Republican infighting over Trump’s tax bill could delay fiscal support and fuel market volatility.
• Currency volatility: The euro’s rally and dollar weakness remain key themes, influencing central bank policies and investor flows.

Investor strategy:

• Stay cautious ahead of critical data and political events.
• Monitor trade developments and policy signals from the Fed and ECB.
• Maintain selective exposure to equities, especially tech and defensive sectors.
• Hedge currency risks, particularly in light of dollar volatility and euro strength.
• Watch for commodity market catalysts tied to geopolitical shifts and demand trends.

Markets remain in a wait-and-see mode with sentiment delicately balanced between optimism over resilient equities and concerns over tariffs, fiscal policy, and currency movements.

Prepared by Nour Hammoury, Chief Market Strategist at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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