
The MSCI Asia Pacific Index swung between small gains and losses at the open after US stocks closed at a record Thursday in a shortened session ahead of Fridayโs Independence Day holiday. Trump said his administration may begin sending out letters to trading partners as soon as Friday, setting unilateral tariff rates, ahead of the July 9 deadline for negotiations.
Treasuries fell and the dollar rose Thursday in a sign traders see less pressure on the Federal Reserve to cut interest rates after US jobs growth exceeded expectations in June. Swap traders saw almost no chance of a July Fed cut, compared with a roughly 25% probability seen before the data. The chance of a move in September ebbed to about 70%.
โThe solid June jobs report confirms that the labor market remains resolute and slams the door shut on a July rate cut,โ said Jeff Schulze at ClearBridge Investments. โA wage-price inflationary spiral shouldnโt be a near-term concern, setting up something resembling a โGoldilocksโ scenario.โ
Meanwhile, Trump secured a sweeping shift in US domestic policy as the House passed a $3.4 trillion fiscal package that cuts taxes, curtails spending on safety-net programs. The 218-214 vote in the House Thursday sends the legislation to Trump, in time for a July 4 deadline he set.
The president said he plans to sign the bill on Friday at a 4 p.m. ceremony at the White House.A $5 trillion increase in the US debt limit in the package eliminates the risk of a market-rattling payment default the Treasury had forecast could come as soon as mid-August without congressional action.โThe removal of the risk that the Treasury Department would exhaust the capacity to fund itself is a highly welcome development for all market players,โ Chris Weston, head of research at Pepperstone Group, wrote in a note. โThe Treasury department will soon look to ramp up bill issuance.โ
In Asia, Hong Kongโs de-facto central bank bought the cityโs dollar again to defend its foreign-exchange peg. The Hong Kong dollar has had a wild ride recently with two previous rounds of intervention failing to send funding costs high enough to dampen bearish currency bets.
Separately, Treasury Secretary Scott Bessent on Thursday questioned Fed officialsโ judgment on rates, reiterating his view that two-year yields are a signal their benchmark rate is too high.
โThe committee seems to be a little off here in their judgment,โ Bessent said in an interview on Fox Business, referring to the Fedโs rate-setting Federal Open Market Committee.

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