MNI EUROPEAN OPEN: Trump Hints At More Tariffs

Jul-16 05:25By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

TRUMP SAYS DRUG TARIFFS PROBABLE BY AUG 1, DOWNPLAYS MORE DEALS - BBG
FED’S COLLINS FAVORS ‘ACTIVELY PATIENT’ APPROACH TO RATES - MNI
LOGAN SAYS FED IS WELL POSITIONED TO HOLD TIGHT ON RATES - MNI
CHINA TO OPEN CONSUMPTION MARKET - HE LIFENG - MNI BRIEF

Fig 1: USD BBDXY Index & Nominal US 10yr Tsy Yield

Source: Bloomberg Finance L.P./MNI

BOE (MNI BRIEF): The IMF needs to put the spotlight on countries running excessive deficits or surpluses, putting pressure on to tackle them, to lower the risk of nation states attempting to tackle them through tariffs and other trade restrictions which hit global growth, Bank of England Governor and Financial Stability Board head Andrew Bailey said in a speech.

MARKETS (BBG): " The UK’s Labour government will create a taskforce to help bring new listings to the London Stock Exchange, underscoring the concern around the lack of initial public offerings on the capital’s shrinking exchange."

GROWTH (BBG): "Chancellor of the Exchequer Rachel Reeves pledged to shake up post-crisis rules that are meant to shield consumers’ money from the vagaries of investment banking as the UK government looks to the finance sector to help spur economic growth."

UKRAINE/RUSSIA (RTRS): “U.S. President Donald Trump said on Tuesday that Ukrainian President Volodymyr Zelenskiy should not target Moscow and that Russian President Vladimir Putin should agree to a ceasefire deal by a 50-day deadline or sanctions will kick in.” .

FRANCE (BBG): " French Prime Minister Francois Bayrou proposed scrapping two national holidays, part of a drastic effort to repair public finances that’s set to unleash a parliamentary backlash in the fall."

TARIFFS (BBG): “ President Donald Trump said he was likely to impose tariffs on pharmaceuticals as soon as the end of the month and that levies on semiconductors could come soon as well, suggesting that those import taxes could hit alongside broad “reciprocal” rates set for implementation on Aug. 1.”

FED (MNI): Federal Reserve Bank of Boston President Susan Collins said Tuesday the impact of tariffs may be lessened somewhat by an ability of firms to absorb lower profit margins, but added that an “actively patient” approach to monetary policy is appropriate amid uncertainty.

FED (MNI): Federal Reserve Bank of Dallas President Lorie Logan said Tuesday U.S. monetary policy is well positioned to hold tight for some time at modestly restrictive levels, but noted a potential scenario of softer inflation and a weakening labor market calling for lower rates fairly soon.

FED (MNI POLICY): The Federal Reserve system could face wide ranging reforms under a possible leadership of former governor Kevin Warsh, including a repurposing of its 12 regional reserve banks to focus on specific areas of research in which they might have a competitive advantage, people familiar with his thinking told MNI.

INFLATION (MNI BRIEF): U.S. CPI inflation accelerated to 0.287% in June from 0.1% the previous month as tariffs began to have an impact on consumer prices, and core inflation to 0.228% from 0.1%, meeting analyst expectations. Over the past 12 months, headline inflation rose to 2.7% from 2.4% and core to 2.9% from 2.8%, the Bureau of Labor Statistics said Tuesday.

CRYPTO (BBG): " House Republican leaders’ plan to pass three industry-backed crypto regulatory measures appeared to be back on course Tuesday night after President Donald Trump said he had convinced holdout conservatives to move forward with the legislation."

OTHER

CANADA (MNI BRIEF): Prime Minister Mark Carney told reporters Tuesday no country has been able to lift all U.S. tariffs, a shift from prior "elbows up" talk focused on removing every sanction on Canada that he had called a violation of an earlier trade deal.

BRAZIL (BBG): “The Office of the US Trade Representative on Tuesday opened an investigation into Brazil over its trade practices and whether they are unfairly restricting US exports to the country, a week after President Donald Trump threatened a 50% tariff on the country.”

CHINA/AUSTRALIA (YICAI): “China and Australia will jointly review their decade-old Free Trade Agreement to identify areas for improvement or expansion, while continuing to implement the existing agreement, according to a Memorandum of Understanding signed by Commerce Minister Wang Wentao and Foreign Affairs and Trade Secretary Jan Adams, Yicai.com reported.”

CHINA

CONSUMPTION (MNI BRIEF): China is launching targeted campaigns to boost consumption and create broader markets for global enterprises, while leading developing countries to participate in global industrial and supply chains, said vice premier He Lifeng, at the China International Supply Chain Expo in Beijing on Wednesday.

PBOC POLICY (NATIONAL BUSINESS DAILY): “The People’s Bank of China still has room for cuts in the reserve requirement ratio and interest rates, given low inflation, stable yuan and major economies’ rate-cutting cycle, said Sheng Songcheng, dean at the China Chief Economist Forum Institute.”

PROPERTY (BBG): “ China Vanke Co. is seeking to extend some of its domestic bank loans by as much as 10 years, according to people familiar with the matter, a move that could help the state-backed developer reduce liquidity risks.”

MNI: PBOC Net Injects CNY444.6 Bln via OMO Wednesday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY520.1 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY444.6 billion after offsetting the maturity of CNY75.5 reverse repo today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4928% at 09:30 am local time from the close of 1.5696% on Tuesday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Tuesday, compared with the close of 51 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1526 Weds; +1.40% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1526 on Wednesday, compared with 7.1498 set on Tuesday. The fixing was estimated at 7.1901 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND JUNE NON RESIDENT BOND HOLDINGS 62.7%; PRIOR 61.9%

SOUTH KOREA JUNE UNEMPLOYMENT RATE 2.6%; MEDIAN 2.7%; PRIOR 2.7%
SOUTH KOREA JUNE EXPORT PRICE INDEX Y/Y -4.5%; PRIOR -2.6%
SOUTH KOREA JUNE IMPORT PRICE INDEX Y/Y-6.2%; PRIOR -5.1%

MARKETS

US TSYS: Asia Wrap - Quiet Session As Bonds Consolidate Overnight Move

The TYU5 range has been 110-08+ to 110-12+ during the Asia-Pacific session. It last changed hands at 110-11+, up 0-02 from the previous close.

The US 2-year yield is trading around 3.94%.
The US 10-year yield is trading around 4.477%.
The 10-year yield has broken above 4.45% in response to the CPI Data, this implies price is likely to turn its focus back to 4.65% and could see further paring back of longs. Support is now back towards the 4.35/40% area which has been the pivot in the larger 4.10% - 4.65% range.
(Bloomberg) -- “I think it sort of is,” President Donald Trump says when asked whether the renovations at the central bank were a fireable offense for Federal Reserve Chair Jerome Powell.
“LOGAN: BASE CASE CALLS FOR CONTINUED RESTRICTIVE POLICY, HAVE BEEN DISAPPOINTED BEFORE AFTER STREAKS OF LOW INFL. ALSO POSSIBLE SOFTER LABOR MKT COULD REQUIRE CUTS SOON.” - BBG
Bloomberg - “Term premium has been rising in several government bond markets, especially the UK, Japan and France. All three have large legacy debt loads, significant fiscal deficits and mushrooming interest payment costs. Even the US facing a mini-fiscal crisis cannot be completely ruled out, given its enormous borrowing and falling revenues relative to its deficit.”

Fig 1: 10-Year US Yield Hourly Chart

Source: MNI - Market News/Bloomberg Finance L.P

JGBS: Cash Bond Twist-Flattener, 40Y Rallies Strongly, 40Y Auction On July 23

JGB futures are weaker but off session lows, -8 compared to the settlement levels.

Cash US tsys are flat to 1bp richer, with a flattening bias, in today's Asia-Pac session after yesterday's post-CPI sell-off.
Cash JGBs have sharply twist-flattened across benchmarks, with yields 1bp higher to 6bps lower.
(Bloomberg) "JGB 40-year yields are lower today, reversing most of the climb seen on Tuesday as the longest duration bonds continue to suffer from illiquidity and tepid demand. However, yields are still higher by around 33 bps this month."
The MOF plans to auction Y400.0 Bln of 40-Year JGBs on July 23.
Swap rates are flat to 1bp higher. Swap spreads are tighter out to the 20-year.
Tomorrow, the local calendar will see Trade Balance, Weekly International Investment Flow and Tokyo Condominiums for Sale data alongside 1-year supply.

AUSSIE BONDS: Modestly Cheaper, June Jobs Data Tomorrow

ACGBs (YM -3.0 & XM -3.0) are cheaper with narrow ranges.

Cash US tsys are flat to 1bp richer, with a flattening bias, in today's Asia-Pac session after yesterday's post-CPI sell-off.
Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at -7bps. At -7bps the differential is positioned near the middle of the +/- 30bps range that has held since November 2022.
The bills strip cheaper with pricing -3 to -4 beyond the first contract (-1).
RBA-dated OIS pricing is firmer across meetings today and remains 17–21bps above levels seen prior to the 8 July RBA decision. A 25bp rate cut in August is given an 88% probability, with a cumulative 54bps of easing priced by year-end.
Tomorrow, the local calendar will see June Employment and Consumer Inflation Expectation data.
(Bloomberg Economics) -- Australia’s labour market report for June is likely to show a lift in jobs and a slight increase in the unemployment rate. We expect a 20k increase in jobs, after a weaker-than-expected 2.5k decline in May.
The AOFM plans to sell A$1100mn of the 1.00% 21 November 2031 bond on Friday.

BONDS: NZGBS: Closed Near Session Bests With A Steeper Curve

NZGBs closed slightly mixed with a steepener 2/10 curve. Benchmark yields finished 1bp lower to 1bp higher.

NZGBs held by international investors increased to 62.7% from a month earlier in June.
The fortnightly whole milk powder auction saw prices rise 1.7% versus the previous auction result, per GDT. This put prices back to $3928, from $3859 prior. It was the first rise since early May for the auction outcome.
Swap rates closed little changed.
RBNZ dated OIS pricing closed slightly firmer across meetings. 18bps of easing is priced for August, with a cumulative 32bps by November 2025.
Tomorrow, the local calendar will see June food price data, with Q2 CPI on Monday.
(Bloomberg Economics) -- New Zealand’s June price data are likely to show inflation holding in the Reserve Bank of New Zealand’s 1%-3% target band. In May, food prices rose 0.5% month on month, following a 0.8% gain in April. In year-on-year terms, prices climbed 4.4% after rising 3.7% in April.
Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 1.75% May-41 bond.

FOREX: Asia FX Wrap - BBDXY Surges Above 1200, Can It Build On This ?

The BBDXY has had a range of 1206.31 - 1208.31 in the Asia-Pac session, it is currently trading around 1207, -0.05%. The BBDXY surged higher with US yields in response to the CPI print. “Today’s inflation print showed that tariffs are having an impact on core goods and that impact is likely to get larger from here, limiting how much the Fed can cut and boosting the dollar,” said a currency strategist at Barclays” - BBG

EUR/USD - Asian range 1.1601 - 1.1616, Asia is currently trading 1.1615. The pair is testing its first support around the 1.1600 area. The price still looks a little stretched in the short term and is vulnerable to any correction in the USD, first support around 1.1600 then more importantly the 1.1450 area.
GBP/USD - Asian range 1.3382 - 1.3401, Asia is currently dealing around 1.3385. Price has rejected the move higher and Bailey’s hint that bigger rate cuts are on their way if the job market deteriorates further has added further headwinds. The pair has moved very quickly to test important support around 1.3350/1.3400. I would think there could be demand first up around here but a sustained break below and a deeper pullback towards 1.3000/1.3200 could be on the cards.
USD/CNH - Asian range 7.1733 - 7.1757, the USD/CNY fix printed 7.1526, Asia is currently dealing around 7.1840. Sellers should be around on bounces while price holds below the 7.2000 area and the PBOC manages the fix lower. Above 7.2000 and we could see a test of the USD Shorts.
Cross asset : SPX -0.15%, Gold $3335, US 10-Year 4.475%, BBDXY 1207, Crude oil $66.76
Data/Events : Italy CPI & Trade Balance

Fig 1: GBP/USD Spot hourly Chart

Source: MNI - Market News/Bloomberg Finance L.P

JPY: Asia Wrap - USD/JPY Is Not Backing Off, Eyes The 150.00 Area

The Asia-Pac USD/JPY range has been 148.71 - 149.18, Asia is currently trading around 149.10, +0.15%. USD/JPY surged higher overnight with US yields in response to the US CPI showing clear signs that tariffs are beginning to impact the core goods data. The USD/JPY relentless march higher has been pretty telling, challenging a market positioned the wrong way. This time USD/JPY has not given the JPY longs any respite and the powerful move back above 148.00 does not bode well. Dips should now be well supported in the short-term, will Asset Managers start paring back their extensive JPY longs now ? The first decent buy zone is now back towards the 147.00 area.

(Bloomberg)- Short-dated options bets turned net bearish on the yen to the dollar on Tuesday for the first time since September of 2022 as the Japanese currency hit its lowest spot level since the aftermath of Liberation Day. The moves indicate the downdraft in the Japanese yen is set to extend.
“Japan’s bond market is facing a potential Liz Truss moment as the risk of a ruling coalition defeat in Sunday’s election fuels concerns over fiscal policy. Yields on bonds with maturities of 20 years and beyond have risen at least 20 bps this month, part of a wave of selling in global bond markets as investors increasingly worry about government finances.” - BBG
USD/JPY is now breaking above the highs of this year's range and implies the move could have more to play out. The Market is long JPY and should the USD continue to correct higher the risk is a move back above 150.00 to further challenge the conviction of the shorts.
Options : Close significant option expiries for NY cut, based on DTCC data: 149.00($910m).Upcoming Close Strikes : 145.50($1.29b July 21).
CFTC data shows Asset managers reduced their JPY longs slightly +89331, while leveraged funds have almost squared their newly built JPY longs +5224.

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

AUD: Asia Wrap - AUD/USD Finds Some Demand Towards 0.6500

The AUD/USD has had a range of 0.6512 - 0.6534 in the Asia- Pac session, it is currently trading around 0.6525, +0.18%. The USD has surged higher on the back of the US CPI showing clear signs that tariffs are beginning to impact the core goods data. US yields and the USD have both reacted as the market further reduces rate cut expectations for the year. This has seen currencies take a hit across the board, the AUD/USD has fallen quickly back to the lower end of its recent 0.6500/0.6600 range, its fortunes clearly tethered to the USD and if it can continue to pressure a short market then the AUD/USD could probe its support just below 0.6500. A Sustained break through this level opens up the potential for a further pullback towards the 0.6350 area.

“The Australian dollar was bought by exporters ahead of Thursday’s local jobs report, according to Asia-based FX traders.” - BBG
(Bloomberg Economics) -- Australia’s labor market report for June is likely to show a lift in jobs and a slight increase in the unemployment rate. We expect a 20k increase in jobs, after a weaker-than-expected 2.5k decline in May.
Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD452m), 0.6575(AUD670m). Upcoming Close Strikes : 0.6480(AUD786m July18), 0.6500(AUD639m July 21), 0.6600(AUD725m July 21)
CFTC Data shows Asset managers added to their shorts slightly -38252, the Leveraged community pared back their shorts to -19061..
AUD/JPY - Today's range 96.94 - 97.24, it is trading currently around 97.20, +0.25%. The pair has had a good move above 96.00 and looks to be building momentum to extend higher. The market has been caught wrong-footed in both legs of this pair and price action suggests a potential move back to 99.00/100.00. With the risk backdrop souring it is unusual to still see this pair so well bid, this continues to point to a market that is paring back positioning. A Deeper correction in risk though would start to provide headwinds to further gains.

Fig 1: AUD/USD spot Hourly Chart

Source: MNI - Market News/Bloomberg Finance L.P

NZD: Asia Wrap - NZD/USD Has Broken Support, Risk Is A Move Back To 0.5850

The NZD/USD had a range of 0.5944 - 0.5966 in the Asia-Pac session, going into the London open trading around 0.5945, +0.01%. The USD has surged higher on the back of the US CPI showing clear signs that tariffs are beginning to impact the core goods data. US yields and the USD have both reacted as the market further reduces its rate cut expectations for the year. NZD/USD has broken below its recent support just below 0.6000 and the price action now suggests we could have a look back towards the important 0.5850 support area. Look for supply now on bounces back towards 0.6000 to cap initially.

(Bloomberg Economics) -- New Zealand’s June price data are likely to show inflation holding in the Reserve Bank of New Zealand’s 1%-3% target band. In May, food prices rose 0.5% month on month, following a 0.8% gain
"NZ JUNE GOVT. BONDS HELD BY FOREIGNERS RISE TO 62.7%" : BBF
NZ Milk Prices Rise At Auction For The First Time Since May : Overnight the fortnightly whole milk powder auction saw prices rise 1.7% versus the previous auction result, per GDT. This put prices back to $3928, from $3859 prior.
Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6000(NZD382m). Upcoming Close Strikes : 0.5932(NZD317m July18). - BBG
CFTC Data shows Asset Managers added slightly to their newly built longs in NZD +9229, the Leveraged community added slightly to their shorts last week -8654.
AUD/NZD range for the session has been 1.0942 - 1.0970, currently trading 1.0970. The cross has broken out of its recent range and is now trying to push through the more pivotal 1.0950 area. Dips back to 1.0850/1.0900 should now be supported as the pair tries to build momentum to move higher.

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

ASIA STOCKS: Taiwan, Indonesia Firmer, Philippines Down, Modest Shifts Elsewhere

Asian equities are trading in a mixed fashion so far in Wednesday trade. There is a modestly negative bias for US and EU futures as markets digest Tuesday's US CPI data. US Tsy yields are little changed so far today though. The best performer in the region has been Taiwan, while the Philippines bourse has fallen but close to 1.8%.

China and Hong Kong markets are mixed. The CSI 3000 is down modestly, but still above 4000 at this stage. Sell-side analysts are upgrading their full year China growth projection after yesterday's Q2 GDP beat. Still, concerns around retail spend and the property sector is likely tempering optimism.
The Hong Kong's HSI is marginally higher, last under 24700, which marked earlier highs for the index and coincided with highs back in March. We may need to see a fresh positive catalyst from here to propel sentiment higher.
Japan markets are little changed, while Taiwan's Taiex has risen through 23000, last up nearly 1%. Broader tech optimism is aiding sentiment. Still, the Kospi is struggling so far today, the index back under 3200.
In SEA, the Philippines market is off by around 1.8%, having failed to hold above 6500 in recent session. The firmer US yield backdrop, coupled with uncertainty around Fed easing timing, has pushed most USD/Asia pairs higher, which could also be weighing on market sentiment in the Philippines.
Other trends are mixed, with Indonesian stocks up around 0.60%, aided by the 19% tariff deal with the US (which is lower than tariff rates in some other parts of the region).

OIL: Modest Gain for Oil in Asia Today as Equities Mixed

After two days of falls, oil ticked marginally higher in the Asia trading day today.
WTI is up +0.39% at US$66.78 bbl
Brent is up +0.22% at US$68.86 bbl.
The price for brent futures is in backwardation at present, with some 90c of difference and points to the potential to pay a premium to ensure supply. Whilst this technical remains in place, oil could remain supported over the coming days.
For the month WTI is up +2.7% and WTI up +1.7% as signs emerge that major economies are beginning to re-establish their oil reserves at lower prices.

Gold Posts Modest Gains in Asia Trading Day

Gold edged higher by +0.36% in the Asia trading day after two consecutive days of losses.
At US$3,336.40 gold remains close to the June high of $3,3432.34.
With the two day sell off, gold briefly dipped below the 20-day EMA of $3,333.78 but with today's gains trade back above all major moving averages.

Source: Bloomberg Finance LP / MNI

Gold is up over 28% year to date with underlying options in exchange-traded SPDR gold shares indicating that bullish positioning relative to bearish ones has picked up considerably after reaching a low in early May. The improved sentiment suggests that some investors may be preparing for the next leg higher in the commodity with some forecasters saying that $4,000 is possible this year.

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
16/07/2025	0600/0700	***	GB	Consumer inflation report
16/07/2025	0800/1000	***	IT	HICP (f)
16/07/2025	0900/1100	*	EU	Trade Balance
16/07/2025	1100/0700	**	US	MBA Weekly Applications Index
16/07/2025	1215/0815	**	CA	CMHC Housing Starts
16/07/2025	1230/0830	***	US	PPI
16/07/2025	1230/0830	***	US	PPI
16/07/2025	1315/0915	***	US	Industrial Production
16/07/2025	1315/0915		US	Cleveland Fed's Beth Hammack
16/07/2025	1400/1000		US	Fed Governor Michael Barr
16/07/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
16/07/2025	1800/1400		US	Fed Beige Book
16/07/2025	2230/1830		US	New York Fed's John Williams
17/07/2025	0130/1130	***	AU	Labor Force Survey
17/07/2025	0600/0700	***	GB	Labour Market Survey
17/07/2025	0900/1100	***	EU	HICP (f)
17/07/2025	0900/1000	**	GB	Gilt Outright Auction Result
17/07/2025	-		EU	ECB Cipollone At G20 Meeting
17/07/2025	1230/0830	***	US	Jobless Claims
17/07/2025	1230/0830	**	US	WASDE Weekly Import/Export
17/07/2025	1230/0830	*	CA	International Canadian Transaction in Securities
17/07/2025	1230/0830	***	US	Retail Sales
17/07/2025	1230/0830	**	US	Import/Export Price Index
17/07/2025	1230/0830	**	US	Philadelphia Fed Manufacturing Index
17/07/2025	1230/0830	***	US	Retail Sales