Market Report.
📈 Consumer prices rose 0.3% in June, putting the 12-month inflation rate at 2.7%, the highest since February. There are signs that President Trump’s tariffs are starting to impact prices, with increases seen in tariff-sensitive categories like apparel and household furnishings, while vehicle prices fell.
📉 President Trump used the report to renew his calls for the Federal Reserve to cut interest rates, arguing that lower rates would save the U.S. $1 trillion per year. The Fed has so far resisted calls to cut rates, with Chair Jerome Powell insisting the economy is strong enough to wait and see the full impact of tariffs on inflation.
💰 The administration argues that a tax bill nearing passage in Congress will boost investment and strengthen the economy, and that while tariffs could result in a one-time price increase, they should not drive up inflation over the longer term.
📊 In order for the administration to finance the large and growing deficits anticipated from his spending and tax-cut measure, US President Trump has stated that the Federal Reserve should set its benchmark interest rate at 1%.
🕰️ Markets expect the Fed to hold rates steady at its July meeting and then cut by 0.25 percentage points in September.
👔 U.S. Treasury Secretary Scott Bessent stated that a “formal process” is already starting to identify a potential successor to Federal Reserve Chairman Jerome Powell. Bessent said there are “a lot of great candidates” being considered, and the process will move at the speed of President Trump.
🤔 Bessent expressed the view that it would be confusing for Powell to remain at the Fed after his term as chair ends, as traditionally the Fed chair also steps down as a governor. Bessent said there has been “a lot of talk of a shadow Fed chair causing confusion in advance of his or her nomination,” and that it would be “very confusing for the market for a former Fed chair to stay on.”
🔄 President Trump said that Treasury Secretary Scott Bessent could be a candidate to replace Federal Reserve Chairman Jerome Powell, but suggested that might not happen as he likes the job Bessent is doing. Trump has repeatedly criticized Powell and urged him to resign, and suggested that the cost overruns on a $2.5 billion renovation of the Fed’s headquarters could be a “firing offense.”
👥 Other potential candidates to replace Powell include former Fed Governor Kevin Warsh and Trump’s top economic adviser, Kevin Hassett.
🇬🇧 Meanwhile, inflation in the United Kingdom is also picking up, and its central bank is likely to follow the same strategy. The Fed and the BoE are keeping interest rates in a very similar levels, unlike the ECB, which has repeatedly raised interest rates to keep its economy afloat.
📈 Inflation in the United Kingdom rises to 3.6%, compared to the expected 3.4%. The Bank of England cut rates for the last time in May, after a three-month pause without touching rates.
📉 Bank of England policymaker Catherine Mann said that inflation pressures remain a challenge, despite a recent fall in the pace of pay growth. Mann noted that while wage increases have slowed, prices are still “well above” the BoE’s 2% inflation target, making it important to use interest rates to bring inflation back down. Mann voted to keep borrowing costs steady at the BoE’s last two Monetary Policy Committee meetings, even when a majority of her colleagues backed a rate cut.
📉 Financial markets are currently betting on the BoE cutting rates by 0.25 percentage points to 4% when it next announces its policy decision on August 7, and see rates potentially falling to 3.75% by the end of 2025.
🤝 Trade War: President Trump announced a preliminary trade deal with Indonesia that will set a 19% tariff on the Southeast Asian country’s exports to the U.S. Trump said Indonesia will gain access to the U.S. market, which it did not have before, and that Indonesia has committed to purchasing $15 billion in U.S. energy, $4.5 billion in U.S. agricultural products, and 50 Boeing aircraft.
📜 Commerce Secretary Howard Lutnick suggested that as part of the deal, Indonesia would drop its tariffs on U.S. goods, with the U.S. maintaining a 19% tariff on Indonesian imports. Indonesia is one of the top 25 trade partners of the U.S., with over $38 billion in goods traded between the two countries in 2024 and a $17.9 billion U.S. trade deficit.
💸 Plans for crypto dollars continue to move forward: President Trump said a group of House Republicans who had earlier blocked several cryptocurrency regulation bills from moving forward had changed their minds after a White House meeting and would now vote to advance the legislation.
📜 The bills, including the GENIUS Act which passed the Senate last month, aim to regulate stablecoins, establish rules for crypto assets, and prevent the Federal Reserve from creating a central bank digital currency.
🤝 The House had initially failed to approve the rules of debate for the legislation, with 13 Republicans voting with Democrats to block the bills from moving forward, in a rare instance of House Republicans refusing to take direction from Trump. However, Trump said the holdout Republicans had agreed to vote in favor of the rule after a meeting in the Oval Office, and that House Speaker Mike Johnson would call for the vote as early as possible.
📉 Crypto-linked stocks had dropped after the initial failure of the rule vote, but the anticipated reversal could help restore confidence in the industry’s legislative agenda in Washington.
🏦 JPMorgan Chase CEO Jamie Dimon says he doesn’t personally understand the appeal of stablecoins, but his bank can’t afford to stay on the sidelines and will get involved to understand the technology. JPMorgan has announced it will launch a more limited version of a stablecoin that only works for its own clients, but Dimon says the bank will also explore true stablecoins that are more universally accepted.
🏦 Other major banks like Citigroup and Bank of America have also indicated they are exploring the issuance of their own stablecoins or getting involved in the stablecoin space.
Geopolitics:
🌏 Despite it being one of his campaign promises, made by Elon Musk, Trump now says that the Epstein case is a boring issue that should not interest anyone, fueling speculation that he himself may have been involved in the human trafficking ring. Musk has promised that if his American Party wins the elections, the list of clients of this ring will be published.
🗣️ “I don’t understand why the Jeffrey Epstein case would be of interest to anybody. It’s pretty boring stuff. I think really only pretty bad people, including fake news, want to keep something like that going.” Trump said.
🚫 House Republicans have unanimously voted to block the release of the Epstein files. According to the Daily Mail, Congress is trying to stop Ghislaine Maxwell from revealing Jeffrey Epstein’s client list.
⚠️ Warmonger Lindsey Graham appears to threaten Putin with death. ‘If Putin and others are wondering what will happen on day 51 (after Trump’s 50-day ultimatum), I suggest they call the Ayatollah.’ US Senator Lindsey Graham said. The United States and Israel tried to kill the Ayatollah, but failed.
💣 According to the Ukrainian press, Trump is considering supplying Tomahawk missiles to Ukraine to bomb Moscow and Saint Petersburg.
Market View:
📉 The ongoing debate continues over what will happen with interest rates in the United States. Yesterday’s inflation data discouraged stock markets. The Mini S&P 500 futures are declining towards the 6,265-point level, an area where support seems to have formed since the beginning of the month. Futures for the action month are also falling, although to a lesser extent, dropping below the 23,000-point level and currently trading at 22,980 points.
💵 The US dollar is strengthening, with its index climbing above 98.50 following the US inflation data. This has caused pairs such as EUR/USD to lose support and fall below 1.1650, currently trading at 1.1625. The GBP/USD pair, which briefly dropped below the 1.34 level, is now attempting to recover and trade above that level.
🏅 Consequently, gold futures have declined below $3,365 per ounce, a level they had reached earlier this week, and are currently trading near $3,350 per ounce.
📉 European equities are declining, pressured by Wall Street corrections. DAX 40 futures are attempting to stay above the 24,000-point level, while EuroStoxx 50 futures are losing ground, falling below the 5,350-point level.
🛢️ The crude oil market is returning to its support zones, with Brent crude trading near the $69 level, as it has on previous occasions.
📈 Lastly, Bitcoin, after reaching a new all-time high over the weekend, has been correcting but is now forming a base and starting to recover. It is currently climbing towards $118,300.
