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Richard Franulovich, head of FX strategy at Westpac, suggests that the Trump-Xi trade war truce has done little to arrest anxiety but fresh duties on $5bn in European imports (Airbus-related) underscore there’s no practical end in sight for Trump’s trade war either.

Key Quotes

“Yet Mester, Kaplan, Barkin and Daly have said it’s too soon to make a judgment on rate cuts, though admittedly none are 2019 voters. But even Bullard has pushed back against a 50bp rate cut and Powell noted that while they will “act as appropriate” there are risks with overreacting. If the Fed is minded to keep rates on hold in July, the window for a strong signal is shrinking (blackout period starts July 20), lest markets read silence as a nod to pricing.”

“We are not inclined to chase the USD much from current levels; key supports reside nearby around 95.0-95.5 and the Fed is unlikely to deliver on 100bp in cuts priced for the next year.”

“A July cut would not materially alter that picture; it is likely to be sold as an insurance move that restores a more even balance to the risks.”