MNI EUROPEAN OPEN: Trump Threatens 35% Tariff On Canada

EXECUTIVE SUMMARY

• TRUMP READIES BLANKET TARIFFS AS HE BRUSHES OFF INFLATION WORRIES - NBC 
• TRUMP PUTS 35% TARIFF ON CANADA, EYES 15-20% TARIFFS FOR OTHERS - RTRS
• FED’S DALY: TIME TO THINK ABOUT ADJUSTING RATES - MNI INTERVIEW 
• MNI DISCUSSES THE OUTLOOK FOR CHINA’S STEEL MARKET - MNI INTERVIEW 
• RBA NEEDS COMMS OVERHAUL NOW IT HAS MPB - MNI INTERVIEW 

Fig 1: USD BBDXY Index Versus US 10yr Tsy Yield

Source: Bloomberg Finacne L.P./MNI 

EU

TRADE (MNI BRIEF): The European Commission has told member states there could be a framework trade agreement with the U.S. "within days," though a more comprehensive agreement would have to be negotiated later and would require EU countries to provide a new mandate to officials, an EU diplomat said on Thursday. 

UKRAINE (BBG): “Ukrainian President Volodymyr Zelenskiy said a meeting with US and European allies in Rome stoked optimism that Donald Trump’s administration will ramp up military aid to the war-battered country, including air defense.” 

ECB (BBG): “French Prime Minister Francois Bayrou called on the European Central Bank to do more to support the economy as his government struggles to contain its budget deficit and address slowing growth.” 

US 

TARIFFS (NBC): “President Donald Trump on Thursday said that he plans to impose blanket tariffs of 15% or 20% on most trade partners, dismissing concerns that further tariffs could negatively impact the stock market or drive inflation.” 

COPPER (BBG): “US President Donald Trump’s plans to impose 50% import tariffs on copper imports are set to include the kinds of materials used for power grids, the military and data centers.”

US/CHINA (BBG): “ US Secretary of State Marco Rubio will meet with his Chinese counterpart at a summit in Malaysia on Friday, the first in-person session between the two and a possible prelude to a presidential summit.” 

FED (MNI INTERVIEW): Federal Reserve Bank of San Francisco Mary Daly told MNI on Thursday the Fed should start thinking about cutting interest rates, potentially twice this year, and it's possible that a large tariffs-driven increase in inflation does not materialize. 

FED (MNI BRIEF): Federal Reserve Governor Chris Waller on Thursday again called for the central bank to consider lowering interest rates at its July 30 meeting and said his views are not politically driven. 

FED (MNI BRIEF): St. Louis Fed President Alberto Musalem said Thursday the Fed is well-positioned to respond to a softening labor market or higher inflation and should wait and see how the U.S. outlook evolves. 

OTHER

AUSTRALIA (MNI INTERVIEW): A former senior RBA official shares his view on the RBA's new voting structure.  On MNI Policy MainWire now, for more details please contact sales@marketnews.com.

CANADA (RTRS): “U.S. President Donald Trump said on Thursday the United States would impose a 35% tariff on imports from Canada next month and planned to impose blanket tariffs of 15% or 20% on most other trading partners.” 

JAPAN (BBG): " Japan has emerged as a prime destination for global investors as the trade war triggers a reassessment of capital flows into the US, according to Pacific Investment Management Co. "

CHINA 

MONETARY POLICY (SHANGHAI SECURITIES NEWS): “China’s monetary policy toolkit is well-stocked, with incremental measures such as innovative financial instruments likely to be rolled out in the second half of the year amid internal and external uncertainties, Shanghai Securities News reports, citing experts.”

STEEL (MNI INTERVIEW): MNI discusses the outlook for China's steel market. On MNI Policy MainWire now, for more details please contact sales@marketnews.com

MNI: PBOC Net Injects CNY50.7 Bln via OMO Friday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY84.7 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY50.7 billion after offsetting the maturity of CNY34 reverse repo today, according to Wind Information.
 

• The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4758% at 09:30 am local time from the close of 1.4945% on Thursday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 48 on Thursday, compared with the close of 49 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 7.1475 Fri; +1.22% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1475 on Friday, compared with 7.1510 set on Thursday. The fixing was estimated at 7.1781 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND JUNE BUSINESSNZ MANUFACTURING PMI 48.8; PRIOR 47.4

SOUTH KOREA JULY FIRST 10 DAYS EXPORTS Y/Y 9.5%; PRIOR 5.4% 
SOUTH KOREA JULY FIRST 10 DAYS IMPORTS Y/Y 1.8%; PRIOR 11.5%
 

MARKETS

US TSYS: Asia Wrap - Yields Edge Higher Led By The Long-End

The TYU5 range has been 111-02+ to 111-08 during the Asia-Pacific session. It last changed hands at 111-03, down 0-04 from the previous close. 

• The US 2-year yield has edged higher trading around 3.876%.
• The US 10-year yield has edged higher trading around 4.36%, up 0.01 from its close.
• The 10-year yield has topped out just above the 4.40% area, giving the bulls some reprieve. No clear direction though in the 10-year as it chops around in a wider 4.10% - 4.60% range for most of the year, with the 4.40% area being the pivot. A sustained close back above the 4.45% area could see more of the longs pared back but while this area holds they should be happy to stick with their position looking for a move back to the lower end of the range.
• The Real Fly on X: “FED'S GOOLSBEE SAID HE DOESN’T AGREE WITH CALLS TO CUT RATES JUST TO LOWER GOVERNMENT DEBT COSTS, EMPHASIZING THE FED’S MANDATE IS FOCUSED ON JOBS AND INFLATION. HE ADDED, “THE FED BUILDING IS NOT A LUXURY BUILDING.”
• (Bloomberg) -- “JPMorgan Chase CEO Jamie Dimon said on Thursday he thought the financial market was underestimating the possibility of U.S. interest rates climbing higher, a prospect he described as a “cause for concern.”
• Data/Events: Federal Budget Balance

JGBS: Bull-Flattener To End The Week, Tariffs Remain In Focus

JGB futures are slightly weaker, -7 compared to the settlement levels.

• The local calendar has been empty today.
• MNI Policy: BOJ to Reaffirm Downside Risks, Up FY25 Inflation - The BOJ's board is set to reaffirm downside risks to the economy and prices outlined in May 1 Outlook Report at its July 30-31 meeting, though officials may increase their median CPI forecast for FY25 from 2.2% partly due to a temporary surge in rice prices, MNI understands.
• (Bloomberg) Japan's top tariff negotiator Ryosei Akazawa may face pressure as US Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick visit Osaka, but it's unclear if they will meet with him for trade talks.
• Cash US tsys are slightly cheaper, with a steepening bias, in today's Asia-Pac session. This morning US equity futures gave back all their overnight gains as Trump set a 35% tariff rate for Canada starting on the 1st of August. That said, risk sentiment has since stabilised to a degree. Today's US calendar will see the Federal Budget Balance.
• The cash JGB curve has twist-flattened, with yields 1bp higher to 2bps lower.
• Swap rates are flat to 2bps lower.
• On Monday, the local calendar will see Core Machine Orders, Industrial Production, Capacity Utilisation and Tertiary Industry Index. 

AUSSIE BONDS: Cheaper On A Subdued Data Light Session

ACGBs (YM -4.0 & XM -4.5) are weaker on a subdued data-light session.

• Cash US tsys are slightly cheaper, with a steepening bias, in today's Asia-Pac session.
• This morning US equity futures gave back all their overnight gains as Trump sets a 35% tariff rate for Canada starting on the 1st of August. That said, risk sentiment has since stabilised to a degree. Today’s US calendar will see the Federal Budget Balance.
• Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at -4bps.
• The bills strip is -1 to -3 across contracts, with a steepening bias.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in August is given an 89% probability, with a cumulative 61bps of easing priced by year-end.
• As of writing, pricing across meetings is 9–19bps firmer than prior to Tuesday’s RBA decision.
• On Monday, the local calendar will be empty, ahead of Westpac Consumer Confidence on Tuesday.
• Next week, the AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond on Tuesday, A$800mn of the 4.25% 21 March 2036 bond on Wednesday and A$1100mn of the 1.00% 21 November 2031 bond on Friday.

BONDS: NZGBS: Closed Little Changed, 10Y Outperforms $-Bloc

NZGBs closed little changed after a subdued session of trading. Ranges across benchmarks were restricted to 2-3bps. 

• The NZGB 10-year did, however, outperform its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials tighter by 2bps and 4bps respectively.
• The New Zealand BusinessNZ manufacturing PMI pushed higher in June to 48.8, after a revised 47.4 read in May. The improvement is welcome, but we still sit below the 50.0 expansion/contraction line, while Feb highs of 54.0 for the index are also some distance away.
• Cash US tsys are slightly cheaper, with a steepening bias, in today's Asia-Pac session.
• “Risk sentiment has stabilised to a degree post the earlier Trump headlines around a 35% tariff on Canada. Subsequent headlines from US officials noted that Trump will keep the tariff exemption for USMCA goods.” (per BBG)
• Swap rates closed showing a modest twits-steepener, with rates 1bp lower to 1bp higher.
• RBNZ dated OIS pricing closed little changed across meetings. 18bps of easing is priced for August, with a cumulative 33bps by November 2025.
• On Monday, the local calendar will see the Performance Services Index and Card Spending data. 

FOREX: Asia FX Wrap - BBDXY Probing The 1200 Area Again

The BBDXY has had a range of 1195.93 - 1199.76 in the Asia-Pac session, it is currently trading around 1199, +0.22%. Price action is interesting though in that it is not violently moving lower from these bouts of strength as it did in the past. The price does look stretched and the market is short so a correction is not out of the question. "CHINA'S WANG YI: US ABUSES TARIFF, UNDERMINES FREE TRADE SYSTEM" BBG

• EUR/USD -  Asian range 1.1665 - 1.1707, Asia is currently trading 1.1675. The pair has again seen solid demand again just below the 1.1700 area in our session, can this hold overnight ? The price is still starting to look a little stretched in the short term and is vulnerable to any correction in the USD, first support is back towards 1.1600 then more importantly the 1.1450 area.
• GBP/USD - Asian range 1.3545 - 1.3586, Asia is currently dealing around 1.3555. Decent demand continues to be seen back towards the 1.3500 area. Price has rejected the move higher but the USD would need to gain momentum higher for GBP/USD to extend lower in the short-term. First support around 1.3500 a break below here would signal a deeper pullback to the more important 1.3350/1.3400 area.
• USD/CNH - Asian range 7.1679 - 7.1834, the USD/CNY fix printed 7.1475, Asia is currently dealing around 7.1700. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
• Cross asset : SPX -0.25%, Gold $3330, US 10-Year 4.36%, BBDXY 1199, Crude oil $66.75
• Data/Events : Germany wholesale Price Index, France CPI 

Fig 1: GBP/USD Spot Hourly Chart

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

JPY: Asia Wrap - USD/JPY Finds Demand, Back Challenging JPY longs Above 147.00

The Asia-Pac USD/JPY range has been 146.14 - 147.15, Asia is currently trading around 147.15, +0.60%. The pair has traded better bid for most of our session and is back to testing above the 147.00 area . The USD/JPY relentless march higher has been pretty telling, challenging a market positioned the wrong way. Price is now consolidating some of those recent gains, dips back towards 144.50/145.00 should now find support first up. The previous 2 forays towards the top of the range were both rejected very quickly; this time it seems to be hanging around for now implying it might have more to play out. The JPY crosses are breaking higher as well adding to the headwinds for JPY longs.

• MNI Policy: BOJ to Reaffirm Downside Risks, Up FY25 Inflation - The BOJ’s board is set to reaffirm downside risks to the economy and prices outlined in May 1 Outlook Report at its July 30-31 meeting, though officials may increase their median CPI forecast for FY25 from 2.2% partly due to a temporary surge in rice prices, MNI understands.
• "S.KOREA, US, JAPAN HOLD JOINT DRILLS, INVOLVING BOMBER: YONHAP" - BBG
• "TACHIBANA: SPEEDING UP PROCESS FOR RESUMING CHINA BEEF EXPORTS” - BBG
• USD/JPY has lost all downside momentum for now and is back in its wider 142.00 - 148.00 range. The Market is long JPY and should the USD manage to continue to correct higher the risk is a move back to the top end of the range to further challenge the conviction of the shorts.
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.30($648m).Upcoming Close Strikes : 146.50($1.25b July 16).

Fig 1 : USD/JPY Spot Hourly Chart

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

AUD: Asia Wrap - AUD/USD Finds Demand On Canada Tariff Dip

The AUD/USD has had a range of 0.6556 - 0.6595 in the Asia- Pac session, it is currently trading around 0.6580, -0.12%. The pair dropped quickly on Trump's announcement of a 35% tariff on Canada, risk later stabilised as new headlines expanded that Trump will keep tariff exemption on USMCA goods and AUD clawed back nearly all of its losses. The AUD outperformed across the board overnight and might point to some reduction of the market shorts it has been running, the CFTC data next week should offer a clue. Can the AUD/USD now break above 0.6600 and gain the momentum it needs to build for a bigger move higher back towards 0.6900/0.7000.

• (Bloomberg) -- “Risk Stabilizes, Trump Will Keep Tariff Exemption On USMCA Goods: Risk sentiment has stabilized to a degree post the earlier Trump headlines around a 35% tariff on Canada. Subsequent headlines from US officials noted that Trump will keep the tariff exemption for USMCA goods.”
• 'PRICED: IFC A$300 Million Tap of May 2030 Kangaroo Social Bond' -BBG
• The AUD/USD continues to hold above its support around 0.6500, looks like it's back to the 0.6500 - 0.6600 range and it should now take its cues from the USD. Watching to see if the market can build on this outperformance and break above 0.6600.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6650(AUD599m), 0.6700(AUD 315m). Upcoming Close Strikes : 0.6560(AUD631m July 15), 0.6495(AUD611m July15), 0.6700(AUD611m July 16).
• CFTC Data shows last week Asset managers pared back their shorts slightly -35992, the Leveraged community maintained their shorts -22903.
• AUD/JPY - Today's range 95.98 - 96.81, it is trading currently around 96.70, +0.40%.   The pair has again tested above 96.00 and this time looks to be building real 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.

Fig 1: AUD/USD spot Weekly Chart

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

NZD: Asia Wrap - NZD/USD Edges Lower On Canada Tariff, Testing 0.6000 Support

The NZD/USD had a range of 0.6008 - 0.6044 in the Asia-Pac session, going into the London open trading around 0.6015, -0.38%. The pair dropped lower on the Canada tariff headlines but unlike the AUD has not regained all its losses subsequent to clarification that USMCA goods will be exempt. The NZD/USD continues to find good demand towards the 0.6000 area and will need to hold above this support for the Bulls to gain confidence the NZD can build some momentum to push higher once more.

• (Bloomberg) -- “Risk Stabilizes, Trump Will Keep Tariff Exemption On USMCA Goods: Risk sentiment has stabilized to a degree post the earlier Trump headlines around a 35% tariff on Canada. Subsequent headlines from US officials noted that Trump will keep the tariff exemption for USMCA goods.”
• NZ PMI Up, But Still Well Off Recent Highs, New Orders Bounce: The New Zealand BusinessNZ manufacturing PMI pushed higher in June to 48.8, after a revised 47.4 read in May. The improvement is welcome, but we still sit sub the 50.0 expansion/contraction line, while Feb highs of 54.0 for the index are also some distance away.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : none.
• CFTC Data showed last Asset Managers have reduced their newly built longs in NZD +8515, the Leveraged community reduced their short last week -8424.
• AUD/NZD range for the session has been 1.0908 - 1.0938, currently trading 1.0935. The cross has broken out of its recent range and focus will now turn to the more pivotal 1.0900/50 area. 

Fig 1: NZD/USD Spot Hourly Chart

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

ASIA STOCKS: Little Spill Over From Canada Tariff Threat, China & HK Outperform

Fallout from Trump's 35% tariff threat on Canada has been negligible so far in Asia Pac markets. Markets seemingly happy to take increased tariff risks in its stride. Earlier reports (from an NBC interview) with US President Trump indicated a baseline reciprocal tariff in the 15-20% region (so higher than the paused 10% amount) US equity futures fell as these headlines crossed, but are up from lows. Eminis were last down by around 0.20% (we were off over 0.50% at one stage). In the region continued gains for Hong Kong and China markets have been the standout. 

• There look to be a number of factors driving the China/HK equity market rebound. Potential US-China talks cited as one positive, with US Secretary of State Rubio to meet with China's Wang Yi in Malaysia today cited as one factor (this could lead to a Trump-XI meeting later this year). Attractive valuations for China stocks relative to HK could also be in play. Goldman Sachs also raised Hong Kong stocks to market weight, and raised the outlook for the MSCI Asia Pac ex Japan index (via BBG).
• At the break, HK's HSI is up 1.9%, while the CSI 300 is up +1.1%, putting the index above 4050, which is fresh highs back to Dec last year.
• Elsewhere, Japan markets are mixed, the Topix +0.60%, but NKY 225 down slightly. The recent rally in South Korean and Taiwan stocks has slowed, but these bourses are still in the green at this stage.
• In South East Asia, the standout is Thailand markets, up over 1%, but after being out yesterday this could reflect some catch up.
• Other markets in the region are tracking higher, except for India. 

OIL: Consolidates In Asia After Overnight Move Lower

The overnight range for the CLQ5(WTI) contract was $66.45 - $68.65, it is currently trading around $66.76 in the Asia-Pac session. Oil had a decent move lower as Opec discussed a potential pause to further production increases, potentially pointing to lower energy demands.

• (Bloomberg) -- “President Donald Trump said he planned to make a “major statement” on Russia, as the US prepares to send more weapons to Ukraine.  In addition, Trump said he expected the Senate to pass a tougher Russia sanctions bill sponsored by Senator Lindsey Graham of South Carolina. ”
• “OPEC+ is discussing a pause in further supply rises from October after its next monthly hike, according to delegates familiar with the matter.”
• “In futures, oil steadied after falling more than 2% on Thursday as investors weighed the fallout from President Donald Trump’s tariffs and OPEC+ supply.” - BBG
• Brent front-month futures fell 2.2% to $68.64 a barrel on the ICE Futures Europe exchange. It is currently trading $68.80 as we head into the London session.

Fig 1: WTI Crude Future Hourly Chart

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

GOLD: Slightly Higher As Market Weighs New Tariffs Due On Aug 1

Gold is 0.3% higher in today’s Asia-Pac session, after closing 0.3% higher at $3324.05 on Thursday.

• Gold has struggled for direction as traders focused on tariff threats from President Donald Trump and the outlook for US monetary policy. The president proposed a slew of country-specific tariffs this week, including moves against Canada and Brazil, while pushing the overall deadline for implementation to Aug. 1. In addition, he’s planning a substantial levy on imports of copper.
• Elsewhere, investors were considering the outlook for US interest rates. Fed Bank of San Francisco President Mary Daly said she still views two reductions as likely, with a greater chance that the price effects from tariffs may be more muted than anticipated.
• Lower rates are typically positive for gold, which doesn’t pay interest.
• According to MNI’s technicals team, support to watch is the bear trigger at $3,248.7, the June 30 low. On the upside, a resumption of gains would refocus attention on $3,451.3, the June 16 high.

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
11/07/2025	0600/0700	***	GB	UK Monthly GDP
11/07/2025	0600/0700	**	GB	Trade Balance
11/07/2025	0600/0700	**	GB	Index of Services
11/07/2025	0600/0700	**	GB	Index of Production
11/07/2025	0600/0700	**	GB	Output in the Construction Industry
11/07/2025	0645/0845	***	FR	HICP (f)
11/07/2025	1130/1330		EU	ECB Cipollone At Ukraine Recovery Conference
11/07/2025	-	***	CN	Money Supply
11/07/2025	-	***	CN	New Loans
11/07/2025	-	***	CN	Social Financing
11/07/2025	1230/0830	***	CA	Labour Force Survey
11/07/2025	1230/0830	*	CA	Building Permits
11/07/2025	1230/0830	***	CA	Labour Force Survey
11/07/2025	1600/1200	***	US	USDA Crop Estimates - WASDE
11/07/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
11/07/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
11/07/2025	1800/1400	**	US	Treasury Budget