This week's macroeconomic event focus: Non-farm payrolls may be enough to prevent The Federal Reserve (FED) from raising interest rates, with the July 9 tariff deadline approaching.

As the employment data in the United States becomes clearer, non-farm data may be sufficient to prevent The Federal Reserve (FED) from raising interest rates. This week, the market focus shifts to the reciprocal tariff deadline set by President Trump himself (July 9), and the new uncertainty may impact the TradFi and Crypto Assets markets.

The U.S. employment report may be enough to prevent The Federal Reserve (FED) from raising interest rates

FPMarkets analyst Aaron Hill stated that although the US Dollar Index faced another decline last week, it successfully rebounded from its lowest level, boosted by Thursday's employment data. The data showed that the US added 147,000 jobs in June (market expectation was 110,000). The US stock market also benefited from the optimistic employment data, with both the S&P 500 Index and the Nasdaq Index reaching historical highs. Despite the recent rebound of the US Dollar Index from a low of 72.70, touching what I consider the heavyweight long-term channel support level, the market's optimism towards the dollar seems to have weakened, given that Trump is approaching the tariff deadline.

Aaron said: "The strong reaction of the US dollar to the employment report released last Thursday for June initially caught me off guard. Since the data from that report exceeded the market's expected median and unofficial data (approximately 96,000), I originally anticipated a larger follow-up rise for the US dollar. Although the dollar immediately rose by 0.5% after the report was released, this week's gains were quickly reversed, ultimately closing slightly above the level prior to the report's release."

However, a closer examination of the employment data reveals that a significant portion of overall job growth has come from the government sector, which added 73,000 jobs; the growth in the education sector is particularly notable (adding 40,000). However, the growth rate of private sector jobs is at its lowest level since the end of last year, adding only 74,000 jobs. This figure is below May's 140,000 and well below the market's general expectation of 105,000. Therefore, this indicates that the pace of hiring is slowing down, but it has not collapsed and is still strong enough to give Federal Reserve officials confidence in keeping interest rates unchanged later this month. The latest policy meeting minutes released by the Federal Reserve on Wednesday will also be closely watched for more clues about future rate cuts.

Regarding when The Federal Reserve (FED) may initiate the rate cut process, the market is focused on the September meeting, where the market has priced in a 19 basis points rate cut expectation, totaling a 56 basis points cut for the year, which is consistent with the latest forecasts from The Federal Reserve (FED). However, I believe that the weakening inflation data this month may prompt the market to adopt a more dovish stance on interest rates, potentially fully absorbing the rate cut expectations for September.

This month will see the release of the Consumer Price Index (CPI) data for June (July 15), the Producer Price Index (PPI) data (July 16), and the Personal Consumption Expenditures (PCE) data at the end of the month. Notably, among all three key indicators, we found that price pressures in May increased slightly compared to the same period last year. Factors that may further drive up prices could include tariffs, with the upcoming deadline this week potentially impacting this.

Uncertainty is the new certainty.

Since April 2, when Trump announced the "Liberation Day" tariffs, and the three-month trade negotiation window announced on April 9, there have been very few agreements reached between the United States and its trade partners. Despite extensive media coverage and exaggerated rhetoric, the information we have regarding the eventual trade agreements is quite limited, and those agreements that are said to have been reached seem somewhat vague and limited.

Taking the UK as an example. Although Trump claims that the US-UK trade agreement is a "major trade deal," the agreement has still not been signed, finalized, and delivered. The tariff on automobiles has been reduced from 25% to 10%, but the tariffs on steel and pharmaceutical products have yet to be determined.

The United States recently signed another trade agreement with China, following meetings between the two countries in Geneva and the UK. However, this is more like an agreement aimed at halting the absurd reciprocity of tariffs that currently exists. Since then, the situation has gradually eased, but the key is that details regarding this trade agreement are still scant.

The European Union (EU) has proposed a 10% universal tariff on various export products in a bid to reach a trade agreement with the United States. However, the EU is seeking exemptions for key industries, including pharmaceuticals and alcohol. Negotiations are still ongoing, but European Commission President Ursula von der Leyen stated that it is "impossible" to reach a comprehensive EU-U.S. trade agreement before the deadline. She also pointed out that the goal is to reach a "principle agreement" that may be finalized before July 9.

In addition, there are Vietnam, Japan, Canada, and India. Trump announced a new agreement with Vietnam, imposing a 20% tariff on imports from Vietnam, a significant decrease from the previously threatened 46%. However, the final details are still under discussion. Meanwhile, trade negotiations with Japan have also shown signs of a rift, with Trump threatening to impose tariffs exceeding the initial 30% to 35% tariffs imposed on Liberation Day, criticizing Japan for being "very tough" and "very spoiled."

Canada has resumed trade negotiations with the United States, aiming to reach an agreement by mid-July after canceling the digital services tax that could affect major U.S. tech companies. As for India, the trade agreement has also not been finalized. India's Minister of Commerce and Industry Piyush Goyal recently commented, "National interest always comes first." He also added, "India never reaches any trade agreement based on deadlines or schedules... We will only accept it when the agreement is fully finalized and aligns with national interest."

Therefore, Trump stated during a speech on Thursday at Andrews Air Force Base in Maryland that letters would be sent to various countries notifying them that the deadline has passed and outlining the new tariff rates that will take effect on August 1. Nevertheless, Trump did not explicitly specify which countries would be affected and their respective tariff rates as usual. However, the President did mention that starting from last Friday, approximately 10 letters would be sent out daily, with tax amounts "ranging from 60% or 70% to 10% or 20%."

Given the progress since the announcement of the 90-day suspension period, despite officials claiming that "90 agreements will be reached in 90 days," I find it hard to believe that we will see a "series of trade agreements" reached before July 9, as U.S. Secretary of State Scott Pessin recently stated in an interview with Bloomberg Television. Of course, some countries will eventually sign agreements, but many countries also failed to reach agreements before the deadline. While extensions may be granted, these countries could potentially revert to the initial tariffs in effect before the 90-day suspension period, which may affect market trends.

Other Risk Events Worth Noting This Week

The Reserve Bank of Australia (RBA) is ready to cut interest rates again

The market widely expects the Reserve Bank of Australia to cut interest rates by another 25 basis points at 4:30 AM GMT on Tuesday, with the possibility of two more cuts this year. This week's rate cut will lower the cash rate from 3.85% to 3.60%, marking the third rate cut by the Reserve Bank of Australia this year following a 25 basis point cut in May.

The Reserve Bank of New Zealand (RBNZ) is expected to keep interest rates unchanged

According to market expectations, investors tend to believe that the Reserve Bank of New Zealand will press the "maintain interest rates" button at 2:00 AM GMT on Wednesday, keeping the cash rate at 3.25%. Previously, the Reserve Bank of New Zealand has cut interest rates three times this year, totaling a reduction of 100 basis points.

UK GDP

This Friday, the UK GDP data for May will be released. Economists expect that the UK's economic activity will grow by 0.1% year-on-year in May, up from -0.3% in April.

Canada Employment

The unemployment rate is expected to rise to 7.1% in June, the highest level since August 2021. Following an increase of 8,800 job opportunities in May, an additional 10,000 job opportunities are expected to increase last month.