The euro declined in the European market on Wednesday against a basket of global currencies, resuming losses that had temporarily paused on Tuesday against the U.S. dollar. The currency edged closer to its lowest level in two weeks, following a renewed wave of trade-related statements from President Donald Trump, who recently imposed 25% tariffs on Japan and other trade partners.

According to European sources familiar with the matter, cited by Reuters, the European Union is unlikely to receive a tariff letter from the U.S. and may be granted exemptions from the standard 10% U.S. tariff rate.

Recent inflation data from Europe have increased uncertainty over the possibility of an interest rate cut by the European Central Bank in July, with markets awaiting more key economic data from the eurozone.

Price Action

The euro fell by 0.2% against the dollar to $1.1701, down from the day’s opening price of $1.1724. The currency recorded an intraday high of $1.1729.

On Tuesday, the euro closed up by 0.15% versus the dollar, having earlier touched a two-week low of $1.1682.

U.S. Dollar

The U.S. dollar index rose by more than 0.2% on Wednesday, resuming gains after a brief pause in the previous session. The index is now nearing a two-week high of 97.84, reflecting broad-based strength in the U.S. dollar against both major and minor currencies.

President Donald Trump announced on social media that there would be trade-related announcements on Wednesday involving "at least seven countries," without providing further details.

He also threatened to impose a 50% tariff on imported copper and reiterated long-standing threats of tariffs on semiconductors and pharmaceuticals.

Tariff Exemptions

European officials told Reuters that the EU is unlikely to be included in the new tariff directives and may receive exemptions from the standard 10% base U.S. tariff rate.

European Interest Rates

Headline inflation in Europe rose by 2.0% year-on-year in June, in line with market expectations, and up from a 1.9% increase in May.

According to Reuters, a clear majority at the European Central Bank's latest meeting favored keeping interest rates unchanged in July, with some members calling for a longer pause.

Money markets currently price in a 30% chance of a 25 basis point rate cut by the ECB in July.

To reassess these probabilities, investors are closely watching upcoming economic data from the eurozone, as well as comments from ECB policymakers.

The New Zealand dollar declined in Asian trading on Wednesday against a basket of major and minor currencies, hitting a two-week low against its U.S. counterpart. The drop followed a widely expected decision by the Reserve Bank of New Zealand to leave interest rates unchanged at their lowest level in three years.

The RBNZ stated that it expects to ease monetary policy if inflationary pressures continue to decline as projected over the medium term.

The Price

The New Zealand dollar fell around 0.3% against the U.S. dollar to 0.5979, its lowest level since June 24, down from the day’s opening price of 0.5995. It recorded an intraday high of 0.6015.

On Tuesday, the NZD had risen by approximately 0.1% versus the U.S. dollar, marking its first gain in five days as it attempted to recover from recent lows.

Reserve Bank of New Zealand

As anticipated, the RBNZ held its benchmark interest rate steady at 3.25% on Wednesday, its lowest level since April 2022, following six consecutive rate cuts, the most recent of which occurred at the prior meeting.

The central bank has slashed rates by a total of 225 basis points since August 2024. However, with inflation at 2.5% and concerns that trade tensions could heighten price pressures, the bank adopted a more cautious tone.

The RBNZ noted that if medium-term inflationary pressures continue to recede as expected, the committee anticipates further cuts to the Official Cash Rate (OCR).

The central bank added that the economic outlook remains highly uncertain. Additional data on the pace of New Zealand’s recovery, inflation persistence, and the impact of tariffs will shape the future path of interest rates.

The statement also highlighted that while higher export prices and lower interest rates are supporting New Zealand’s recovery, growing global policy uncertainty and tariff measures are likely to dampen global economic growth.

The RBNZ explained that this is expected to slow the pace of New Zealand’s recovery, which would ease inflationary pressures.

Markets now expect that the continued weakness in the economy will give the RBNZ enough room to cut interest rates at least once more this year.

New Zealand Rate Outlook

Following the RBNZ meeting, the probability of a 25-basis-point rate cut at the August 20 meeting rose above 60%.

Futures pricing for New Zealand interest rates suggests an OCR of 3.0% by year-end.

To reassess these expectations, investors will closely monitor upcoming key economic data from New Zealand, particularly reports on inflation, unemployment, and GDP growth.

The Reserve Bank of New Zealand (RBNZ) announced its interest rate decision on Wednesday morning at the conclusion of its July 9 meeting, keeping the official cash rate unchanged at 3.25% — the lowest level since April 2022 — in line with market expectations.

The RBNZ stated that it expects to ease monetary policy if medium-term inflationary pressures continue to decline as anticipated.

The Australian dollar began Tuesday’s session on a higher note after the Reserve Bank of Australia surprised markets by keeping the interest rate unchanged at 3.85%, defying expectations of a 25-basis-point cut.

Meanwhile, investors await the release of the NFIB Business Optimism Index for June, the only item on today’s US economic calendar, as attention remains focused on news related to US tariff policies.

RBA holds steady despite market expectations

The RBA announced in its statement early Tuesday that it decided to maintain the benchmark interest rate, citing the need for more data to confirm that inflation is steadily moving toward the 2.5% target.

At the press conference following the meeting, Governor Michele Bullock said it was appropriate to take a “cautious and gradual approach to monetary easing,” while also noting that the bank could anticipate further rate cuts if inflation slows as expected.

The decision contradicted market expectations for a rate cut, prompting the Australian dollar to recover after losing nearly 1% on Monday.

As of 19:52 GMT, the Australian dollar was up 0.6% against the US dollar at 0.6531.

Trump extends tariff deadline and warns Japan and South Korea

Late Monday, the White House announced that President Donald Trump had signed an executive order extending the deadline for new tariffs until August 1.

Despite this extension, Trump confirmed that the US would impose 25% tariffs on imports from Japan and South Korea, warning that if any country decided to raise its own tariffs, the increase would be added directly to the 25% rate imposed by the US.

These statements triggered a broad sell-off on Wall Street Monday, with major indices closing sharply lower, while the US Dollar Index (DXY) surged to a two-week high, rising more than 0.5% during the day.

However, on Tuesday morning, the dollar index began to decline and is now trading below the 97.50 level, while US stock futures are showing slight gains.

Michele Bullock reveals division within the RBA board

During the post-meeting press conference, Michele Bullock revealed that the board had a “very active discussion” on whether to hold or cut rates.

She clarified that the division was not about the direction of monetary policy but rather the timing. “The group in favor of a cut saw the economic data as slightly weaker and was more concerned about downside risks, especially internationally,” she said.

RBA reform recommendations now taking effect

This internal divergence comes amid structural reforms at the central bank. A key recommendation from the RBA’s comprehensive 2023 review was to publish how board members voted on rate decisions—without naming individuals—to enhance transparency and accountability.

Most of the review’s 51 recommendations have already been implemented, including:

Creating two separate boards for the bank instead of one

Reducing the number of interest rate meetings from 11 to 8 per year

Extending monetary policy meetings to span two days instead of one

Holding a press conference after each rate decision

One of the main recommendations still in progress involves publishing the number of votes for, against, and abstaining from each interest rate decision in the post-meeting statement.

Canadian dollar

As of 19:53 GMT, the Canadian dollar rose by less than 0.1% against its US counterpart to 0.7311.

US dollar

At 19:10 GMT, the US Dollar Index was up by less than 0.1% at 97.5 points, after recording a high of 97.8 and a low of 97.1.

On Monday, President Trump announced that his administration would impose 25% tariffs on imports from South Korea and Japan starting August 1, as part of a broader batch of tariff notifications sent to several countries.

The White House confirmed that Trump would sign an executive order to extend the temporary freeze on reciprocal tariffs until August 1, giving targeted countries an additional three weeks to reach agreements.

Today, Trump reiterated that the final deadline for the new tariffs would not be extended beyond August 1.

US Treasury Secretary Scott Bessent commented that the tariff policy would generate more than $300 billion in revenue for the US by the end of the year.

In a separate development, Trump renewed his criticism of Federal Reserve Chairman Jerome Powell, calling for his immediate resignation.