Forex Today: Trump tariff letters keep markets on edge
Here is what you need to know on Thursday, July 10:
Market participants stay away from risk-sensitive assets on Thursday as they try to assess the potential impact of the United States' ever-evolving trade policy on growth and inflation outlook. In the second half of the day, weekly Initial Jobless Claims data will be featured in the economic calendar. Investors will also pay close attention to comments from Federal Reserve (Fed) officials.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.47% | 0.35% | 1.52% | 0.57% | 0.06% | 0.80% | 0.09% | |
| EUR | -0.47% | -0.10% | 0.81% | 0.08% | -0.34% | 0.32% | -0.39% | |
| GBP | -0.35% | 0.10% | 0.90% | 0.21% | -0.23% | 0.43% | -0.41% | |
| JPY | -1.52% | -0.81% | -0.90% | -0.72% | -1.23% | -0.49% | -1.35% | |
| CAD | -0.57% | -0.08% | -0.21% | 0.72% | -0.48% | 0.23% | -0.62% | |
| AUD | -0.06% | 0.34% | 0.23% | 1.23% | 0.48% | 0.77% | -0.17% | |
| NZD | -0.80% | -0.32% | -0.43% | 0.49% | -0.23% | -0.77% | -0.84% | |
| CHF | -0.09% | 0.39% | 0.41% | 1.35% | 0.62% | 0.17% | 0.84% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
US President Donald Trump shared a new set of tariff letters on Wednesday and reiterated his warnings of imposing an additional 10% tariff on any country that aligns with the BRICS group. Additionally, Trump said that the 50% tariff on copper imports will go into effect on August 1. Libya, Algeria and Philippines are among the countries that received letters notifying them of tariffs between 20% and 30%. Wall Street's main indexes registered moderate gains on Wednesday. Early Thursday, US stock index futures are down about 0.2% and the US Dollar (USD) Index stays flat on the day at around 97.50.
The minutes of the Fed's June policy meeting showed on Wednesday that most participants anticipated that rate cuts would be appropriate later this year, noting that any price shock from tariffs was expected to be "temporary or modest."
The Brazilian Real stays under heavy selling pressure on Thursday, with the USD/BRL pair rising more than 1% on a daily basis near 5.54. Trump said on Wednesday that Brazil will be subject to 50% tariffs if they don't stop the "Witch Hunt" against its right-wing former president, Jair Bolsonaro.
EUR/USD extends its sideways grind below 1.1750 after closing the day virtually unchanged on Wednesday. "We are working non-stop to find an initial agreement with the US to keep tariffs as low as possible and to provide the stability that businesses need," European Commission President Ursula von der Leyen said on Thursday.
GBP/USD holds its ground and trades slightly above 1.3600 after closing marginally lower on Wednesday.
Following a two-day rally, USD/JPY lost its traction and ended the day in negative territory on Wednesday. The pair struggles to find direction early Thursday and trades comfortably above 146.00.
After losing about 1% on Thursday, Gold failed to stage a decisive rebound on Wednesday and posted small gains. XAU/USD stays relatively quiet early Wednesday and trades near $3,320.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.