Fed To Avoid Clear Signal On Rate-Cut Timing

Key Takeaways:

The U.S. SEC has approved in-kind redemptions for Bitcoin and Ethereum ETFs, allowing investors to redeem shares directly for BTC and ETH, aligning crypto ETFs with traditional commodities.This decision enhances efficiency and reduces costs for investors and issuers, potentially leading to future ETF expansions and increased market participation in the crypto sector.

SEC's approval of in-kind redemptions for Bitcoin and Ethereum ETFs marks a significant shift. Previously, crypto ETFs required cash redemptions, necessitating asset liquidation. In-kind options align these ETFs with longstanding commodity models like gold, streamlining processes and costs. The key players include SEC Chairman Paul S. Atkins and Director Jamie Selway. Both emphasize how the rule enhances operational flexibility and efficiency. This decision is anticipated to set a precedent for potential altcoin ETF models.

The immediate market impact includes reduced fees and better liquidity for Bitcoin and Ethereum ETFs. Such changes make these products more appealing to both institutional and retail investors. Analysts predict that market dynamics will shift favorably due to this. From a financial standpoint, the move enables direct settlements, increasing transactional efficiency. Bloomberg analysts foresee this approval paving the way for broader adoption of in-kind redemption models in cryptocurrency ETFs.

Source: CryptoSlate

President Donald Trump’s flurry of trade deal announcements are so far proving light on detail — with key aspects still under negotiation, partners giving mixed signals about what they signed up for, and big numbers shrinking under scrutiny.

Trump touted landmark agreements with Japan and the European Union in the past week, adding to pacts with a handful of smaller economies. An extension of the US-China tariff truce is also in the works. The administration is taking a victory lap, claiming vindication for Trump’s bargaining style as he prepares a raft of import-tax hikes before an Aug. 1 deadline.

“I think the trade deals are working out very well — hopefully for everybody, but for the United States they’re very, very good,” the president said Tuesday while flying home to Washington from Scotland.

Yet while the scale of America’s tariff wall is becoming clearer, other details remain fuzzy in the extreme – especially investment promised by counterparties, which on paper exceeds $1 trillion for the EU and Japan deals alone.

For Trump, these capital pledges are evidence that his protectionist agenda is on course to do what he promised it would: revive American manufacturing and create jobs. If actual investment falls short of the big numbers, tariffs could end up boosting revenue for the government – and costs for US consumers and companies – while failing to achieve those loftier goals.

Trump’s deal with Japan includes a $550 billion fund that the US called a “foreign investment commitment,” and the president said amounts to “a sort of signing bonus.”

But Japanese officials said only 1% or 2% of the total – a maximum $11 billion — would be investment, with the rest essentially made up of loans. And they said the 90%-10% profit split in America’s favor highlighted by Trump’s team only applies to that smaller investment portion.

At minimum, the two countries are describing the accord differently, raising the potential for future snags.

“It’s not that $550 billion in cash will be sent to the US,” Japan’s top trade negotiator Ryosei Akazawa said. But Commerce Secretary Howard Lutnick put it this way, speaking last week to Fox News: “This is literally the Japanese government giving Donald Trump $550 billion.”

Lutnick said Trump would increase tariffs again if Japan reneged on the fund. As for the EU deal, he acknowledged on Tuesday that there’s “plenty of horse-trading left to do.”

The EU pledged $600 billion in new investments. European officials say the target is just an aggregate of promises by companies, and the bloc can’t commit to a binding target. Neither side has spelled out the contents.

“Basically they’re going to build the factories,” Lutnick told Fox News Monday. “All the car companies committed they’re going to build the factories. The pharmaceutical companies have gone out and said they’re going to build these factories.”

The EU also promised energy purchases from the US worth $750 billion over the next three years — roughly triple the current pace. That target could strain the capacity of American exporters as well as European importers, some analysts say.

Aside from the tariff rates, much of the recent deals consist of “vague promises with large numbers attached that don’t have any mechanisms for follow-through,” said Alex Jacquez, who served on the Biden administration’s National Economic Council. “Nobody seems to believe that these checks as written are actually going to cash.”

There’s more clarity around the tariff numbers, though they’re still in flux too.

Trump will raise duties on most imports from Japan and the EU to 15% from the current 10%. Those partners will get a partial waiver on certain industry-specific US tariffs that carry higher rates worldwide – like for automobiles – but not on others like steel and aluminum, where talks on an exemption involving quotas continue.

The revised auto tariffs on Japan and the EU are not yet finalized but are expected to take effect on Aug. 1, according to a White House official.

Trump says there are more of these sectoral tariffs to come, and some of his recent deals may cause confusion by preempting yet-to-be-announced numbers.

For instance, he pledged 15% tariffs for the EU on semiconductors and pharmaceuticals — two sectors where rates haven’t been finalized. A senior US official also said that Trump agreed to grant Japan whatever the lowest rate is for those two categories, but that commitment isn’t in the public US fact sheet.

A White House official said that the lower 15% rates for pharmaceuticals and chips would only kick-in once higher levies Trump has threatened under Section 232 of the Trade Expansion Act take effect.

Other already-announced deals have raised questions too – like the one with Vietnam earlier this month, which appears to have surprised officials in Hanoi with a tariff of 20%, higher than they were said to have agreed to.

US and Chinese negotiators, after two days of talks in Sweden this week, said they’re on track to extend the tariff truce between the two countries. A wildcard there is Trump’s threat to impose new charges on countries that buy energy from Russia.

China is the biggest buyer of Russian oil — followed by India, which is still embroiled in talks with the US.

The fate of the two biggest US trade partners also seems to be headed down to the wire. Trump has downplayed the chance of a deal with Canada, though Canadian Prime Minister Mark Carney shrugged that off. Both Canada and Mexico face tariff hikes this week, but they won’t apply across the board. Goods compliant with the USMCA trade pact are poised to maintain their current exemption, a major relief for both countries.

Some critics say the administration’s deal-by-deal approach to tariff rates risks ending up as a patchwork that lacks coherence. US auto companies, for example, objected to the Japan agreement, saying imported cars that don’t have any US content are set to be taxed less than North American-built models that do.

For all the unresolved questions, the administration is casting Aug. 1 as something of a milestone in setting rates after months of threats. It’s just not likely to be the final word in Trump’s rolling dealmaking.

Several more pacts are very close, and tariff rates will either be agreed or imposed by Aug. 1, Kevin Hassett – head of the White House National Economic Council – said on Tuesday. But even after that, “people can continue to negotiate,” he said. “The president is always willing to negotiate.”

Source: Bloomberg Europe

Starmer said the two-state solution was 'under pressure like never before'

The United Kingdom will recognize Palestinian statehood in September unless Israel takes significant steps to end the "appalling situation" in Gaza and meets other conditions, British Prime Minister Keir Starmer said Tuesday.

"Our goal remains a safe and secure Israel alongside a viable and sovereign Palestinian state," Starmer said, according to a Downing Street statement.

He said that the UK government has always intended to recognize a Palestinian state "as a contribution to a proper peace process at the moment of maximum impact for the two-state solution," which he said is "now under threat."

"As part of this process towards peace, I can confirm that the UK will recognize the state of Palestine by the United Nations General Assembly in September, unless the Israeli government takes substantive steps to end the appalling situation in Gaza," Starmer said.

What else did Starmer say?

The UK leader also called on Israel to "agree to a ceasefire and commit to a long-term, sustainable peace, reviving the prospect of a two-state solution."

This includes, Starmer continued, "allowing the UN to restart the supply of aid, and making clear there will be no annexations in the West Bank."

He also reiterated his government's stance on Hamas, the Iran-backed Palestinian militant group that governs the Gaza Strip.

"Our message to the terrorists of Hamas is unchanged and unequivocal. They must immediately release all the hostages, sign up to a ceasefire, disarm and accept that they will play no part in the government of Gaza," Starmer said.

Amid heightened fears of mass starvation in the enclave, Starmer called for more aid to reach Palestinians in Gaza.

"We need to see at least 500 trucks entering Gaza every day. But ultimately, the only way to bring this humanitarian crisis to an end is through a long-term settlement," Starmer said at 10 Downing Street.

The British leader said his government supports mediation efforts by the US, Egypt and Qatar to secure "a vital ceasefire."

"That ceasefire must be sustainable and it must lead to a wider peace plan, which we are developing with our international partners," he added.

The UK, like the US, EU and Israel, has designated Hamas a terrorist organization, which would likely complicate any potential efforts to recognize a Palestinian state if the group were involved in governing.

Israel says UK stance 'rewards' Hamas

Starmer's announcement comes after French President Macron said his country would formally recognize Palestinian statehood in September.

International pressure on Israel to end its military campaign and allow the unrestricted entry of humanitarian aid into the besieged territory has been mounting in recent weeks as aid groups and the UN have warned of a famine in the Gaza Strip.

Israel has either downplayed or outright rejected claims of mass starvation in Gaza.

Israeli Prime Minister Benjamin Netanyahu said Starmer's announcement "rewards Hamas' monstrous terrorism and punishes its victims."

"A jihadist state on Israel's border TODAY will threaten Britain TOMORROW," Netanyahu warned in a post on X.

Israel's Foreign Ministry also rejected the UK's announcement, saying London's shifting position, "following the French move and internal political pressures, constitutes a reward for Hamas and harms efforts to achieve a ceasefire in Gaza and a framework for the release of hostages."

Source: DW

Oil held the biggest gain in six weeks after US President Donald Trump reiterated he may impose additional economic penalties on Russia unless a truce is reached with Ukraine.

West Texas Intermediate traded near $69 a barrel after closing 3.8% higher in the previous session. Brent settled above $72. Trump warned of “tariffs and stuff” if a ceasefire isn’t agreed in 10 days and said he wasn’t concerned about the impact on the market, suggesting the US could ramp up production.

“I don’t even worry about it,” he told reporters aboard Air Force One on Tuesday as he returned to Washington following a visit to Scotland. “We have so much oil in our country. We’ll just step it up, even further.”

Trump has vowed economic repercussions against Moscow in the past but held off, and his advisers have cast the penalties as likely secondary sanctions that target countries buying Russian oil. Still, given the US president’s desire for lower prices, there are questions about how far he will go.

Oil is on track for a monthly gain, and markets also remain focused on the US deadline to nail down trade deals by Aug. 1, and the upcoming OPEC+ meeting that will decide supply for September.

Source: Bloomberg

The Bank of Japan is expected to keep its benchmark interest rate steady and boost its inflation outlook Thursday, as investors look for hints of another rate hike this year after a US-Japan trade deal reduced some uncertainty.

All 56 economists forecast Governor Kazuo Ueda’s board will leave the central bank’s interest rate unchanged at 0.5% at the end of a two-day policy meeting, according to a Bloomberg survey this month. In the bank’s quarterly economic outlook report, the inflation projection for this fiscal year is likely to be revised higher, they said.

A primary focus for this gathering will be the extent to which the BOJ signals another rate hike this year, with traders now seeing a roughly 75% chance of a move by year-end. BOJ officials see the possibility of mulling of another hike after Japan’s trade deal with the US diminished a key source of uncertainty, people familiar with the matter said earlier.

With the key task of discerning the actual impacts of the tariffs still remaining, the BOJ won’t be looking to suddenly hike rates at this point. Deputy Governor Shinichi Uchida, a key policy architect at the bank, said last week that while the deal is a major breakthrough, uncertainty remains high.

Still, the search for rate hike hints from the BOJ is gradually gaining momentum, with October becoming more popular as the potential timing for the next increase. Last week Deutsche Bank Securities and Barclays Securities both brought forward their calls to October.

The US and Japan unexpectedly struck a pact on July 22, setting most tariffs at 15%. The lowering of auto levies from the 25% Trump imposed in April in particular is set to provide relief for a core part of Japan’s economy. That was followed by a similar agreement between the European Union and the US this week, easing concerns for the global economy.

The BOJ officials noted that the outcome of Japan’s negotiation was roughly within the range of their expectations and it’s probably unnecessary to make a drastic change to the central bank’s overall economic outlook, people familiar with the matter said earlier.

In its April outlook report, the bank said it expects economic growth to stall temporarily due to the tariffs, before picking up to bring underlying inflation to meet its goal sometime between October next year and March 2028.

BOJ watchers expect Ueda’s nine-member board to raise its median inflation forecast for this fiscal year to 2.5% from 2.2%, while keeping views for the following two years unchanged, according to a Bloomberg survey.

The pace of increases in the cost of living has stayed elevated, averaging 3.5% in the first three months of the fiscal year that began in April. Inflation has been driven by a surge in food prices and in particular rice, the nation’s staple food.

Former BOJ chief economist Hideo Hayakawa said that firmness in prices will allow the bank to raise its inflation projection for next year, but the bank will likely keep it below 2% to avoid fueling too much speculation over a rate hike.

The Federal Reserve is set to announce its policy decision hours before the BOJ, and its conclusion and signals could have major implications for the course of the yen. As of Tuesday the Japanese currency has dropped the most against the dollar in the past three months among major currencies, as the Fed and the BOJ have both remained in a wait-and-see mode.

Following repeated warnings from President Donald Trump that Japan shouldn’t seek a trade advantage via a weak currency, Ueda’s BOJ needs to strike a delicate balance to avoid sounding too cautious on raising borrowing costs.

This is the first BOJ gathering after Prime Minister Shigeru Ishiba’s ruling coalition sustained a historic defeat in an upper house election on July 20, reflecting high public discontent over inflation. With his government now lacking a majority in either house of parliament, the Japanese leader has been confronting resignation calls from both ruling and opposition party members.

As with most other central banks, the BOJ typically doesn’t comment on politics, but political instability could make navigating policy more complicated. After political parties pledged cash handouts or tax cuts ahead of the poll, the central bank will need to keep its eyes on fiscal policy’s impact on inflation and bond yields.

Ueda usually holds a press conference at 3:30 p.m. to elaborate on the BOJ’s thinking after the release of a policy statement and economic forecast around noon.

Source: Bloomberg

Source: Reuters