The US Dollar (USD) is trading a little more defensively overall this morning as markets digest the latest round of US tariff news—a hefty 50% on copper and 50% on Brazil, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD edges lower alongside US stocks and bonds

"Deadlines are tight (August 1), leaving little room for off-ramps to be located and while markets may understand that these announcement are just gambits in more extended trade negotiations, the persistence with tariff action may be wearing on investor patience. Global stocks are mixed and major bond markets are a little softer but there is a moderate 'sell America' vibe to price action again today—the USD is weaker alongside moderate losses for US equity futures and Treasurys."

"UK stocks and bonds are outperforming their peers although the GBP is a middling performer among the G10 currencies. The USD’s broader July rebound is showing signs of faltering, with the DXY struggling to hold gains above the mid-97 zone which is about where we anticipated the early July bounce might meet resistance. FOMC minutes released yesterday reflected the split opinions amongst policymakers that we are all familiar with. Two officials were open to a July cut, 'most' expected lower interest rates this year and 'some' saw no easing at all in 2025."

"Inflationary risks from tariffs remain a concern but there is little clarity on when or for how long the impact will be felt. September FOMC pricing is still only a bit better than a coin toss but swaps continue to anticipate 50bps of cuts by December. The US releases weekly claims data at 8.30ET while Musalem (voter) and Daly (non-voter) are both talking on the economic outlook. The Treasury auctions USD22bn in 30Y bonds (results at 13ET). On the charts, the DXY, has slipped back to the lower end of the short-term bull channel (97.3) that developed around the turn of the month. A break lower may signal the resumption of broader pressure on the USD ahead."