Market Report.
💵 The U.S. dollar rose along with Treasury yields after reports that President Trump is preparing to nominate former Federal Reserve governor Kevin Warsh as the next Fed chair.
🏦 Warsh is seen as a relatively hawkish choice compared to the current Fed chair Jerome Powell, which is likely contributing to the rise in the dollar and yields. Trump had previously considered Warsh for the Fed chair position in 2018 but ultimately chose Powell instead, a decision Trump has publicly regretted.
📉 Warsh is more hard‑line than Hassett or parts of the FOMC when it comes to balance‑sheet discipline and anti‑inflation credibility. Even so, he has publicly supported interest‑rate cuts in the current environment. His form of hawkishness is better understood as “inflation is a choice”: a smaller balance sheet, less QE, and greater monetary orthodoxy — rather than a rigid commitment to keeping rates permanently high at all costs.
✅ Trump wants someone willing to cut rates, but who is also respected by the markets. Warsh fits that profile.
👥 Other candidates that had been on Trump’s shortlist include Fed Governor Christopher Waller, who dissented on the recent decision to keep rates unchanged, and BlackRock’s Rick Rieder.
💶 Meanwhile, the euro has surged against the dollar and other major currencies, raising alarm bells at the European Central Bank (ECB) and in European industry. ECB officials have signaled they may need to respond to “excessive” euro strength.
📈 The euro’s rise reflects and encourages a potential reversal of the overwhelming bias toward U.S. investments over the past decade, which could benefit Europe. However, a stronger euro also makes it harder for Europe to fund critical investments in defense, technology, and green energy.
🧩 However, ECB has plans. The euro zone needs to be self-sufficient in handling payments, and the digital euro will provide the necessary infrastructure for retail transactions, according to ECB Executive Board Member Piero Cipollone.
💳 The ECB is betting the digital euro will help counter the spread of stablecoins, which are digital assets mainly pegged to the U.S. dollar. The ECB’s plan is to structure the digital euro to provide both wholesale and retail payments services in online and offline mode, which has been criticized for potentially putting it in direct competition with commercial lenders.
🏛️ Banks will provide the digital wallet where people keep their digital euros, and payments can be made through a mobile application, keeping commercial banks central to the payments system and retaining sole access to their clients’ payments data.
🌍 The U.S. administration seems happy to unwind years of dollar appreciation as part of a global trade reset, but deflating just the currency part will be challenging without pulling the rug from the whole U.S. economic and asset-market performance.
⚠️ A weak dollar could hurt foreign demand for U.S. Treasuries, especially short-term debt, and lead to higher inflation – a headache for both the Federal Reserve and the administration.
📊 Another interesting piece of news published yesterday was the US trade balance. The U.S. trade deficit with its global trading partners nearly doubled in November, rising 94.6% to $56.8 billion from the previous month.
📦 About one-third of the increase in the deficit came from a widening of the goods deficit with the European Union, which rose by $8.2 billion. The goods deficit with China decreased by about $1 billion to $13.9 billion.
📰 According to Reuters, the data shows the U.S. trade deficit continued to widen despite the Trump administration’s efforts to use tariffs to address trade imbalances, suggesting the underlying economic factors driving the deficit remain in place.
🔍 However, We have a different point of view. The US trade deficit has been Donald Trump’s primary instrument of coercion against other countries through the use of tariffs. Once implemented, these tariffs have boosted US government revenues, while the trade deficit itself has remained largely intact. This means that tariffs can continue to be applied without materially undermining US consumption.
💡 Think about it carefully: this implies that Trump still has ammunition left to continue — and potentially escalate — this trade war.
⚔️ And, just as we warned in earlier reports, here it is: President Donald Trump warned the UK and Canada against striking fresh business deals with China, after their leaders visited Beijing this month. Trump said it is “very dangerous” for the UK and Canada to deepen their economic ties with China, in response to a question about UK Prime Minister Keir Starmer’s recent trip to China.
🇨🇳 Starmer’s visit to China this week has signaled a thaw in UK-China relations, as he sought to pursue a more “mature” relationship with Beijing. Macron’s visit to China is still pending, along with his invitation for Xi Jinping to participate in this year’s G7 summit in France.
🌎 The influence and pressure of the US on other Hispanic countries persists.
⚓ Panama’s top court has ruled that the contract granted to Hong Kong tycoon Li Ka-shing’s CK Hutchison Holdings to operate two ports near the Panama Canal is unconstitutional.
📉 The court’s decision, announced late Thursday on Instagram, has rattled investors, with CK Hutchison’s shares falling as much as 5.5% in Hong Kong trading on Friday, heading for their steepest drop since April.
📑 The article suggests this ruling by the Panamanian court could disrupt CK Hutchison’s plans to divest the port operations, which have been part of the conglomerate’s portfolio for years.
🧭 The court’s finding that the contract granting CK Hutchison the port concessions is unconstitutional indicates a potential shift in Panama’s stance towards foreign ownership and operation of critical infrastructure near the strategically important Panama Canal.
⛽ Additionally, President Donald Trump has threatened new tariffs on countries supplying oil to Cuba, escalating pressure against the Communist-run island, a long-time foe of the United States.
📜 The executive order authorizing this move stops short of specifying tariff rates or singling out any particular countries whose products could face U.S. tariffs.
🚨 Cuba’s state-run media has warned that this order threatens to paralyze electricity generation, agricultural production, water supply, and health services on the island, which is already suffering a crippling economic crisis.
🇲🇽 Mexico, Cuba’s top oil supplier after Venezuela cut off shipments, is reportedly reviewing whether to continue sending oil to Cuba amid fears of U.S. reprisals.
🗣️ Cuba’s government has accused the U.S. of seeking “a genocide of the Cuban people” and warned that “all spheres of life will be suffocated by the U.S. government.”
Geopolitics.
❄️ Greenland Prime Minister Jens-Frederik Nielsen issued a defiant message, insisting the territory would not yield to foreign pressure on its future. Danish Prime Minister Mette Frederiksen warned that “the world order as we know it that we have been fighting for 80 years is over and I don’t think it will return.”
🤝 Frederiksen said the best way forward for the U.S. and Europe is to stick together, and that they share concerns over Arctic security due to Russia’s actions. Greenland’s Nielsen acknowledged the need for more surveillance and security in the Arctic, but said the government is focused on pushing back against outside pressure and addressing the fears of the Greenlandic people.
🇩🇪 The comments come after Nielsen, Frederiksen, and German Chancellor Friedrich Merz held talks in Berlin on Tuesday.
📊 As we noted last week, is the US announcement of an agreement on Greenland reliable? Opinion polls show Greenlanders overwhelmingly oppose U.S. control, while supporting independence from Denmark.
🎬 U.S. President Donald Trump made the statement during the premiere of the documentary “Melania” at the renamed Donald J. Trump Kennedy Center for the Performing Arts in Washington, D.C.
🗯️ Trump’s Remarks:
🚢 The U.S. has deployed “very big, very powerful ships” toward Iran. He expressed hope that military force would not be necessary. “I told them two things, number one, no NUCLEAR, and number two, stop KILLING protesters”
🎯 According to Israel Hayom media, the U.S., UK, France, Israel, and four unnamed Arab countries have prepared a list of targets in Iran for potential strikes. American Special Forces aircraft, likely carrying Delta Force, are en route to Azerbaijan.
📉 S&P 500 futures have fallen below the 7,000‑point level, dropping to around 6,930 points, driven by market fears surrounding the potential appointment of a new Federal Reserve chair. At the same time, Nasdaq 100 futures have slipped below 25,700 points.
💱 The US dollar, which fell to 95.55 on the DXY index on Tuesday, has staged a modest recovery and is now trading around 96.50 points. This has weighed on the major currency pair, with EUR/USD, which approached the 1.21 area on Tuesday, retreating to approximately 1.1940.
📉 Meanwhile, European markets are also under pressure. DAX 40 futures have fallen below 24,460 points, while Euro Stoxx 50 futures have dropped to around 5,920 points.
🛢️ The oil market continues to strengthen amid rising tensions over a potential attack on Iran. Spot Brent crude climbed above $70 per barrel yesterday before pulling back to around $68.35.
🥇 Gold futures, which exceeded $5,600 per ounce on Wednesday, have corrected sharply, falling to around $5,175 per ounce.
₿ Bitcoin has suffered another heavy blow in recent hours, plunging to around $81,040 before rebounding to its current level near $82,750.
