USD Rises on Tariff Threats; Asia Mixed, FOMC Eyed

On Wednesday, the EUR/USD pair declined to approximately 1.1705 during Asian trading. The Euro's weakness against the US Dollar stemmed from fresh tariff threats issued by US President Donald Trump. Trump's latest actions include a warning of a 50% tariff on copper imports and hints at imposing levies on semiconductors and pharmaceuticals. Despite mentioning positive trade talks with the European Union and China, Trump also indicated an EU tariff letter could be sent within days, which intensified trade war fears and dampened appetite for riskier assets like the Euro.

Attention now turns to the US Federal Reserve's (Fed) latest meeting minutes, due for release later today. This report is crucial for clues regarding potential interest rate reductions, especially given the Fed's current "wait-and-see" approach. The Fed maintained its key borrowing rate at 4.25% to 4.5% last month, but markets are broadly anticipating 50 basis points worth of Fed rate cuts by the end of this year, with the first cut expected in October.

Gold prices fell by almost 1% on Tuesday to touch a one-and-a-half-week low around $3,287, appearing vulnerable to further declines. This weakness stems from growing investor conviction that escalating US tariffs will fuel inflation, compelling the Federal Reserve to maintain higher interest rates for longer. This outlook has notably boosted US Treasury bond yields and kept the US Dollar near a two-week high, undermining non-yielding Gold's appeal.

President Trump recently unnerved investors by threatening steep new tariffs, including 50% on copper and up to 200% on foreign drugs, set to begin August 1. Despite broad concerns over the economic fallout from these trade policies, which are evident in weaker equity markets, safe-haven Gold is not finding support. Furthermore, an upbeat US jobs report for June has eased fears of a slowing economy, effectively ruling out a July Fed rate cut.

Gold traders remain cautious, however, awaiting the upcoming FOMC meeting minutes for crucial insights into the Fed's future rate-cut path, which will significantly influence the US Dollar and provide fresh impetus for the precious metal.

On Tuesday, the US 500 moved moderately lower, as investors evaluated the economic implications of new U.S. tariff policies. President Trump confirmed no extensions for tariffs set for August 1, and announced new levies, including a 50% tariff on copper and a striking 200% on pharmaceutical imports. These inflationary threats could influence the Federal Reserve's decision on interest rates, potentially delaying cuts until next year. Markets still anticipate 50 basis points of Fed rate reductions by year-end, beginning in October.

In corporate news, Amazon (AMZN) was down 1.76% as its extended Prime Day sales event commenced. SoFi Technologies Inc. (SOFI) surged 3.64% to a fresh record high after expanding into alternative investments. Apple is reportedly in talks to acquire U.S. broadcast rights for Formula 1, capitalizing on the success of its "F1: The Movie" and the sport's growing popularity, partly fueled by Netflix's "Formula 1: Drive to Survive" series.

Looking ahead, traders await the Federal Reserve's June meeting minutes for insights into the central bank's policy outlook and its perception of the U.S. economy. Further guidance may come from Fed policymakers speaking later this week.

Oil prices saw slight gains on Tuesday, with WTI and Brent reaching two-week highs, but faced pressure on Wednesday. This downturn is attributed to lingering uncertainty over new U.S. tariffs and anticipated increases in crude inventories.

The U.S. administration's recent tariff delay, now final for August 1, offered some hope for major trade partners like Japan, South Korea, and the European Union, implying potential deals could still be reached. However, new proposed levies, including a 50% tariff on copper and significant tariffs on pharmaceuticals, are broadening trade tensions and raising concerns about their impact on global oil demand.

Adding to the bearish sentiment are expectations of rising crude inventories in the U.S. Industry data suggests a potential build of around 7.1 million barrels, although fuel product stocks were lower. Official data from the U.S. Energy Information Administration (EIA) is due later today.

On the supply side, OPEC+ is reportedly set for another significant output boost for September, following a 548,000 barrels per day increase approved for August. This unwinds voluntary production cuts and adjusts quotas, further contributing to market supply. Despite these increases, some analysts note oil prices have shown surprising resilience.