The Asian stock market slipped on Wednesday while the dollar hovered near its lowest level in three and a half years, as investors weighed the possibility of U.S. interest rate cuts and the rush to finalize trade agreements before U.S. President Donald Trump’s July 9 tariff deadline.
Trump stated he had no plans to extend the deadline for countries to secure trade deals with the U.S. He also expressed skepticism about reaching an agreement with Japan, though he remained optimistic about striking a deal with India.
Asian shares dip as European market rises
In the Asian stock market, MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.13 percent after hitting its highest since November 2021 last week. Japan’s Nikkei dipped 0.52 percent, while the Taiwan weighted index gained 0.11 percent. South Korea’s Kospi Index also fell 0.77 percent to 3,065.71.
In the European stock market, Euro Stoxx 50 Futures were up 0.42 percent today, while FTSE futures rose 0.28 percent and DAX futures gained 0.32 percent
Fed rate cut prospects in focus
U.S. labor market data released on Tuesday showed continued strength, with job openings increasing in May. This has heightened the stock market’s anticipation around Thursday’s payrolls report, as investors look for clues on when the Federal Reserve might lower interest rates.
Fed Chair Jerome Powell, facing pressure from President Trump to cut rates immediately, reiterated the central bank’s cautious approach, stating it would “wait and learn more” about the effects of tariffs on inflation before making a move.
Markets are currently pricing in 64 basis points of rate cuts by the Fed this year, with only a 21 percent chance of a cut in July. This outlook has kept the dollar under pressure. The euro was last trading at $1.1794, just below the 3.5-year high it reached on Tuesday, while the yen edged down slightly to 143.66 per dollar.
Read: Dubai 24-carat gold price today drops to AED400.25 as U.S. data, Fed stance weigh in
Trump’s tax bill dampens U.S. assets’ appeal
In recent days, investor attention has shifted toward the advancement of Trump’s sweeping tax bill, which is projected to increase the national debt by $3.3 trillion while cutting taxes and scaling back social welfare programs. The bill is now headed to the House of Representatives for potential final approval, after narrowly passing in the Senate.
Concerns over the fiscal impact of the legislation, ongoing trade tensions and uncertainty surrounding the U.S. interest rate outlook have driven investors away from U.S. assets in search of safer alternatives. Many fear that Trump’s unpredictable trade policies could dampen U.S. economic growth.
The bill has also impacted the U.S. stock market, with the S&P 500 falling 0.11 percent and the Nasdaq Composite declining 0.82 percent.
As a result, the dollar has been impacted, declining more than 10 percent so far this year, its worst first-half performance since the 1970s. The dollar index, which tracks the greenback against six major currencies, stood at 96.705, hovering near its lowest level since March 2022.
Meanwhile, spot gold held steady at $3,340 per ounce after a 1 percent jump in the previous session. The yellow metal has risen 27 percent this year, supported by strong safe-haven demand.
