Asian shares dip, dollar struggles after Trump's tariff backflip

Asian shares saw slight declines amid thin trading conditions following the US holiday, while US futures rose after President Trump delayed threatened EU tariffs until July 9. Investors are focused on month-end rebalancing flows and Nvidia's earnings, expected to show a 65.9% jump in Q1 revenue, as well as upcoming speeches from Federal Reserve policymakers and the U.S. core PCE price index for insights into future U.S. interest rate policy. The dollar is headed for its fifth consecutive monthly decline, driven by concerns over U.S. policymaking and the deficit, potentially signaling a long-term shift away from the dollar as a safe-haven asset.

Analysis

Asian equity markets experienced a slight pullback amidst thin trading conditions, contrasting with a positive sentiment in U.S. futures, which rose (Nasdaq futures +1.26%, S&P 500 futures +1.11%) following President Trump's decision to delay the imposition of threatened 50% tariffs on EU imports until July 9. Investor focus this week is sharply on month-end rebalancing flows and the highly anticipated earnings report from Nvidia, where first-quarter revenue is projected to surge by 65.9%, reflecting strong AI-driven demand and a notably positive per-ticker sentiment of 0.7. Concurrently, upcoming speeches from Federal Reserve policymakers and the U.S. core PCE price index release are critical data points for discerning the future trajectory of U.S. interest rates, especially as a Bank of Japan conference highlights concerns over flagging global growth and sticky inflation. A significant development is the U.S. dollar's trajectory towards a fifth consecutive monthly decline, its longest losing streak since 2017, attributed to concerns over U.S. trade policies, a worsening fiscal deficit, and potential implications for U.S. asset sentiment, prompting suggestions of a long-term dollar regime change. This dollar weakness has correlated with gold prices reaching record highs this year, although gold recently traded 0.28% lower at $3,332.91 an ounce. Elsewhere, Japanese super-long government bond yields have retreated from recent all-time highs, and oil prices have eased slightly (Brent -0.1%, WTI -0.16%) as markets anticipate a potential OPEC+ decision on production levels.

Key Decisions for Investors

• Closely monitor Nvidia's upcoming earnings report, as the expected 65.9% Q1 revenue growth and high investor sentiment position it as a key barometer for tech sector performance and broader market sentiment.
• Evaluate U.S. dollar exposure and consider strategies for a potentially weaker dollar regime, given its ongoing fifth consecutive monthly decline driven by U.S. fiscal and policy concerns, and note the corresponding strength in alternative safe-haven assets like gold.
• Anticipate heightened market sensitivity to upcoming Federal Reserve communications and the U.S. core PCE price index, as these will be pivotal in shaping expectations for U.S. interest rate policy and influencing asset valuations.
• Exercise caution regarding trade policy developments; while the delay in EU tariffs to July 9 provides short-term relief, underlying uncertainties persist and could reintroduce market volatility as the deadline approaches.