Dollar drops as tariff confusion reignites and trade talks drag on

The US dollar came under renewed pressure on Monday, slipping further as investors reacted to President Donald Trump’s latest tariff twist. Trump agreed to delay a planned 50% tariff hike on the European Union until July 9, responding to a direct request from European Commission President Ursula von der Leyen. While the move initially lifted market sentiment, traders remain uneasy amid Trump’s erratic messaging, having just days ago heard him declare there would be “no deal” and call for immediate tariff implementation.

Von der Leyen expressed optimism on social media, stating that the EU is ready to “move forward swiftly and decisively.” However, skepticism prevails in the markets, where Trump’s unpredictability and the broader reciprocal tariff regime — including a baseline 10% levy — keep risk appetite in check. The extension of the tariff deadline may offer breathing room, but it fails to meaningfully ease concerns over the trajectory of US-EU trade relations.

Gold retreats as trade optimism curbs safe-haven flows

Gold prices slipped below $3,340 per ounce at the start of the week, giving back some of last week’s nearly 5% gain. The decline comes as Trump’s delay of the EU tariff escalation dampens safe-haven demand. That said, lingering risks remain in play: Trump on Friday threatened to slap 25% tariffs on Apple if the company does not relocate iPhone production to the US, adding another layer of tension.

Gold’s recent strength had been fueled by tariff uncertainty and deepening concerns over the US fiscal outlook. Trump’s proposed “One Big Beautiful Bill,” which cleared the House and is now headed to the Senate, is projected to add $3 trillion to the deficit over the next decade, adding structural pressure on the dollar and keeping gold’s longer-term outlook supported.

Japan pursues a strategic deal with Washington

Amid the evolving global trade landscape, Japan is also advancing its bilateral dialogue with the US. Prime Minister Shigeru Ishiba noted Sunday that Tokyo aims to finalize a trade agreement before the G7 summit next month. Current negotiations are focusing on non-tariff barriers and shipbuilding cooperation, with potential US-Japan collaboration in repairing warships and developing Arctic icebreakers — sectors where Japan maintains technological leadership.

Nevertheless, Japan’s lead negotiator Ryosei Akazawa maintained a cautious tone, reiterating that “nothing is agreed until everything is agreed.” The next round of talks — expected to include a session with Treasury Secretary Scott Bessent — has yet to be scheduled.

Quiet calendar, loud politics

With US and UK markets closed for holiday and an empty economic calendar on Monday, market action is likely to be driven by headlines and positioning flows rather than data surprises. But as the week progresses, the Reserve Bank of New Zealand is expected to cut rates, while investors will be watching FOMC minutes, US PCE inflation, and other tier-one releases for clues on monetary policy direction.

Other notable data include:

• Australia’s monthly CPI and retail sales,
• Canada’s Q1 GDP,
• Japan’s Tokyo CPI, and
• US durable goods and consumer confidence.

Still, unless data deviates sharply from expectations, trade developments are likely to remain the key driver of sentiment this week.