Fed’s Bostic Says Tariff Pass-through May Be Slow, Persistent

Central Bank

Summary:

Federal Reserve Bank of Atlanta president Raphael Bostic said tariffs may cause an incremental impact on prices instead of a one-time bump, which could result in more persistent upward pressure on inflation.

“There is a risk that seeps into the psyche of the consumer and the business leader,” Bostic said on Monday during an event in London hosted by MNI.

A divide has developed among Fed officials, likely over how tariffs are expected to affect inflation.

Projections released at the Fed’s policy meeting earlier this month showed 10 officials would look through the price impact from tariffs and expect to lower rates at least two times this year. But seven officials pencilled in no rate cuts for this year, suggesting they are more concerned that tariffs could lead to more persistent price pressures.

Two Fed governors, Christopher Waller and Michelle Bowman, have said they would back lowering rates as soon as July if inflation remains subdued. But many officials have pushed back on that idea, saying they expect to hold rates steady until the fall as they watch to see how much inflation will be affected by tariffs.

The Atlanta Fed chief said he pencilled in one rate cut for this year and three in 2026, but said there’s a high level of uncertainty around the projections.

Bostic repeated his view that there is not enough information available right now to consider an adjustment in rates. He added that the Fed has the “luxury” of being able to wait for more information because the US labour market still looks solid.

Source: Theedgemarkets

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Daniel Carter

Economic

Political

The White House will likely ask more countries to drop their digital services taxes as part of ongoing trade talks, a senior Trump administration official said Monday after Canada rescinded its DST over the weekend.

"My expectation is that the digital services taxes around the world will be taken off, and that that will be a key part of the ... ongoing trade negotiations that we have," National Economic Council director Kevin Hassett said on CNBC's "Squawk on the Street."

The remark from one of President Donald Trump's top advisors came the day after Canada walked back its DST in order to "advance broader trade negotiations" with the United States.

That reversal — just hours before the first collection under the new tax was due — came on the heels of Trump's surprise threat Friday to terminate all trade talks with Ottawa as long as the DST remained in place.

Negotiations with the U.S. have resumed, Canada said, since it scrapped the tax. Trump and Canadian Prime Minister Mark Carney now aim to strike a trade deal by July 21, according to a Sunday statement from the Department of Finance in Ottawa.

"I'm very pleased to see that Canada is removing its DST, which means that we didn't have to put in this really complicated retaliation to the tax code," Hassett said Monday morning.

"But you could expect that countries that have digital sales taxes of the future are going to be facing the wrath of [U.S. Trade Representative] Jameson Greer" over "these unfair trade practices," Hassett said.

In a little over a week, the Trump administration faces multiple self-imposed trade deadlines, when steep U.S. tariffs on a number of countries are set to restart.

Hassett said he believes the U.S. has "frameworks" for "a whole number of deals" that will be agreed to shortly after a major Trump-backed budget bill is passed through Congress.

The Trump administration is eager for the GOP-controlled House and Senate to pass a final version of the massive tax-and-spending legislation and send it to the president's desk before Friday.

If that happens, Hassett predicted that there will be a "marathon session" in the Oval Office in which Trump and his aides will tick down a list of countries and make final calls on U.S. tariff rates for each.

It is unclear whether Trump will stick to the July 8 and 9 tariff deadlines. "We can do whatever we want," he said when asked last week about whether he would stick with one of those dates.

Source: CNBC

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Adam

Economic

By Kathleen Brooks, research director at XTB

US stocks powered to record highs last week, on the back of a stunning rally since mid-April, which has added more than $10 trillion to the market cap of the S&P 500. The rally was unexpected for some, due to policy uncertainties, and elevated recession risks. The labour market is softening and inflation ticked higher in May. So, what is driving stocks higher and can it last?

Stocks have defied these fears, and although there are warnings about bubbles forming, futures markets predict another positive open for US and European stocks on Monday, due to progress with trade negotiations. Canada has dropped its 3% levy on the biggest US tech firms like Netflix, Amazon and Meta, to restart negotiations with its biggest trading partner. Added to this, Japan’s top trade negotiator has extended his stay in the US to advance discussions in the hope of signing a deal within days. The hope of rapid trade deals between the US and its main trading partners is acting as a positive tailwind to the market. Thus, momentum could be a big driver of markets in the coming days and weeks.

Earnings expectations

As we move into Q3, the focus will shift to the Q2 earnings season. Earnings estimates for the S&P 500 for Q2 is for growth of 5% YoY, which is the lowest since Q4 2023, according to FactSet. There have been large downward revisions to earnings estimates for this quarter, as analysts factored in global trade tensions and economic risks. Added to this, 11% of companies on the S&P 500 have issued negative EPS guidance for Q2.

Q2 earnings season will start in the next couple of weeks, and we will see if the bar has been lowered enough for companies to post positive earnings surprises, which will no doubt keep stock markets buoyant. Further out, analysts are more optimistic. Estimates are for S&P 500 companies to see a pickup in earnings in Q3.

Stock market rally: not just about tech

A temporary blip in earnings in Q2, if it happens, has not been enough to curtail the stock market rally. A feature of the recent stock market rally in the US is how broad-based it has been. The S&P 500, the equal-weighted S&P 500, the Russell 2000 and Nvidia have been moving in lockstep. The S&P 500 has risen by 10% in Q2, the Nasdaq by 17%, the Russell 2000 by 8% and the Russell 3000 by 10%. This suggests that the US stock market rally in 2025, although it was slow to get going, is broader based than the tech-fueled frenzy from 2024.

Dollar woes continue

Hopes that Trump’s tax cuts could be signed into law later this week are also fueling the rally, as the Budget Bill passed the Senate on Saturday. Interestingly, the Budget, which could add another $3.3 trillion to the US deficit over the next ten years, is not worrying the stock market, although it is weighing on the dollar. The dollar index has had its worst start to the year since 2005. The dollar is weaker again on Monday, and is the worst performing currency in the G10, as we wait to see if Trump can sign his Budget into law by the Independence Day holiday.

Technical signals for encouraging for the US stock market

The market breadth is also encouraging. 384 members of the S&P 500 rose last week, compared with 119 companies that declined, and only a small number of stocks are looking oversold on a technical basis. 50% of the S&P 500 are above their 200-day sma, which is a healthy number and suggests that there is room for other stocks to play catch up.

Crypto’s big influence on the S&P 500 rally

Although Nvidia is grabbing the limelight for rallying 15% in the past month, and is nearing a $4 trillion valuation, other stocks have outperformed Nvidia, and it is not even in the top 10 performers on the S&P 500 so far this quarter. The top performer is Coinbase, the crypto platform, which is benefitting from the surge higher in crypto currencies, including Bitcoin, which is a mere $3000 away from a record high. Coinbase is higher by 105% for Q2. The construction and engineering sector has also outperformed the semiconductor sector so far in Q2, and the entertainment and movies sector is also a top ten performer.

European stocks: why investors are cooling on defense names

There is also a shift going on in Europe. US stock indices outperformed their European peers in Q2, although on a currency adjusted basis, the surge in the euro and the pound vs. the USD boosted the currency adjusted returns on European indices. Over the last month, the outperformance of US indices compared to European indices has become more notable. European shares have been weighed down by a slowdown in the defense sector. Nvidia has outperformed Rheinmetall in the last few months, which has fallen 7%, while Nvidia has risen 15%. This leads to questions about whether the high valuations placed on some European defense stocks will weigh on the sector, and on European stocks more broadly as we move into Q3.

UK stocks back in focus

In the UK, Rolls Royce is still riding high, and is up 12% in the past month. This is because RR is more diversified than other European defense stocks. UK stocks could be having a moment, due to a multi-year valuation gap that is finally starting to interest investors, and because the UK has already sealed a trade deal with the US. Bloomberg’s ETF flow data shows a clear preference for UK equities within flows to Europe. In June, there was a net reduction in ETF flows to French ETFs, inflows into German ETFs have slowed sharply, while inflows into UK ETFs have reached their highest level so far in 2025. If this continues, then we could see UK equities outperform their European counterparts over the coning weeks, especially if the EU and the US experience trade tensions as we lead up to the deadline to agree reciprocal tariffs with the US.

Tarriff risks come back into focus

Overall, the focus is likely to shift as we move into July. Falling volumes will become apparent in the coming week, as US markets are closed on Friday for the 4th July holiday. Tariffs will come back into play. The US and China have made a trade deal, but the EU and the US have still not announced what a deal will look like. Trade talks with Canada are set to resume, after Canada pulled its digital sales tax that was due to come into effect today.

What next for the beleaguered dollar?

The dollar will also be in focus after it suffered more losses last week, even though it managed to claw back gains vs. some G10 currencies on Friday. The dollar index fell to its lowest level since 2022 last week, and momentum is firmly to the downside for the greenback. It is the weakest currency so far in 2025 vs. all the major currencies, and it is also weak vs. a large number of emerging market currencies. It is only making gains vs, the Argentine peso, the Turkish lira and is mostly flat vs the Hong Kong dollar.

The main story over the weekend, that the US Senate passed a vote to advance President Trump’s tax and spending mega bill, may not boost the dollar and could add as another downside pressure in the coming days.

Will the US Budget Bill spook the Treasury market and global bonds?

The Senate Budget bill could increase US government deficits by $3.3 trillion. Thus, it is worth watching US Treasuries and global bond markets at the start of this week. Treasuries fell and yields rose across the curve on Friday. The rise in yields in the US was copied across Europe, suggesting that Western sovereign bonds are moving in a unified group, and there are few safe havens. In the past month there has been a large increase in Treasury prices/ decrease in yields, some of this may be unwound as the realities of the US budget and what it means for the US deficit in the coming years hits the bond market.

Data watch: NFPs, PMIs and Eurozone inflation

Ahead this week, the focus will not only be on the passage of the US Budget Bill and ongoing US trade negotiations, but also on some key economic data. Central banks are set to ease monetary policy in the coming months; however, they have said that they remain resolutely data dependent. This week’s key economic releases, including global PMIs for June, US non-farm payrolls and the latest reading of Eurozone inflation will be critical for central bank policy makers.

US non-farm payrolls will be released a day earlier this month due to the Independence Day holiday on Friday. The Fed remains firmly in data-watch mode, and they have raised concerns about inflation feeding through from the effect of tariffs. However, there are some early signs that the US labour market may be softening. Initial jobless claims are slowly ticking higher, and a weak NFP number this week could tip the balance in favour of an early rate cut from the Fed. The market is still expecting a September rate cut, but there are some FOMC members who have been calling for a July cut. A collapse in job creation, could seal the deal on a summer rate cut.

A slowing jobs market could bring forward hopes of a summer rate cut

The market expects 110k jobs to have been created for June, which will be the lowest level since February. NFP figures are prone to revisions, so investors need to be wary about over-reacting to this data, since it may be revised in the future. However, a reading of 110k or below would be a sign that the US labour market is slowing sharply. Combined with last week’s downwardly revised Q1 GDP figure, it would suggest that the US economy is slowing sharply. Wage data is also worth watching, it is expected to show a solid 3.9% annual growth rate in average hourly wages, and the unemployment rate is expected to tick higher to 4.3% from 4.2%.

The biggest market reaction would come from a higher-than-expected reading for the unemployment rate, and a weak reading for NFPs. If this happens then we could see another leg lower for the dollar, but stocks may get a boost as this could lead to a surge in wagers that the Fed will cut rates in July, rather than wait for September to cut rates.

PMIs and Eurozone inflation may not derail the euro rally

The PMI data this week is expected to show that growth in Europe and the UK is showing tentative signs of picking up, however, survey data could be unreliable. If trade deals are not signed between the US and the Eurozone in the coming days then PMI data for July could fall through the floor.

Eurozone inflation data is also released this week. Core CPI is expected to remain steady at 2.3%, while headline CPI is expected to edge up a notch to 2% from 1.9%. The June inflation print is not expected to shift the dial for ECB rate cuts, and we do not think that this week’s data will get in the way of euro strength.

Source: xtb

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Adam

Commodity

WTI/CL Technical Analysis

The light sweet crude oil market is just simply hanging around to reach the $65 level, which is an area that previously had been significantly resistant. We fell precipitously to this level only to sit still. That, for me, is actually a very bullish turn of events as it looks like the market is done with a lot of the Middle Eastern noise and now, we’ll start to focus on demand and more fundamental, typical reasons.

All things being equal, this is a market that I think is looking for some type of catalyst, but there’s also the possibility that the traders are just simply exhausted at this point. If we can break above the $66.50 level, then I think light, sweet, crude opens up the possibility of a move to the $72.50 level. If we break down from here, then I think we just re-enter the previous consolidation.

Brent Technical Analysis

Brent markets look a bit the same. They’re a little, maybe a little bit softer than the light sweet crude market, but again, we are sitting on top of pretty massive support based on the previous consolidation. So, with this being the case, I think you’ve got a situation where traders will be watching if we can break above the $69 level, then potentially we go higher. With that, I think we’ve got a situation where the 200 day EMA may be targeted.

If we break down from here, I think there’s plenty of support at various levels, not the least of which would be $64, followed by $62. So we’ll have to watch. I think this is a market that is trying to find its floor as well. But we had so much drama over the last couple of weeks, it may need a few days just to simply catch its breath.

Source: fxempire

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Warren Takunda

Economic

China–U.S. Trade War

The European Union's trade chief will hold negotiations this week in Washington to avert higher U.S. tariffs just days before a July 9 deadline, saying he wanted a fair deal as the EU executive dismissed any forced changes to EU tech rules.

European Trade Commissioner Maros Sefcovic told reporters he would travel to Washington after talks in Turkey on Tuesday and seek meetings with U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick on Wednesday and Thursday.

Sefcovic said the EU had received the first drafts of proposals from the United States for an eventual agreement.

"The ninth of July is round the corner so for me, it's always a good sign when we move from the exchange of views into the drafting process," he said.

Sefcovic said the EU was pushing for a deal on import levies that was "fair for both sides" and gave more predictability to businesses.

Earlier, the European Commission, the EU's executive, pushed back against speculation that the 27-member EU's landmark tech regulatory regime could be included in the EU-U.S. negotiations and subsequently watered down.

EU concerns mounted after U.S. President Donald Trump broke off trade talks with Canada in response to Canada's digital services tax, accusing Ottawa of "copying the European Union". Canada subsequently rescinded the tax.

The EU has two pieces of recent legislation targeted by the Trump administration.

The Digital Markets Act (DMA) seeks to rein in the power of U.S. tech giants Alphabet , Amazon, Apple, Meta Platforms and Microsoft, as well as Booking.com and China's ByteDance.

The Digital Services Act (DSA) requires big online platforms to do more to tackle illegal and harmful content.

"Our legislation will not be changed. The DMA and the DSA are not on the table in the trade negotiations with the U.S.," Commission spokesperson Thomas Regnier told a daily news conference.

He said the EU would not accept interference from foreign governments in its landmark rules, which come with hefty fines for violations.

"We are not going to adjust the implementation of our legislation based on the actions of third countries. If we started to do that, then we would have to do it with numerous third countries," Regnier said.

The EU handed out its first fines to Apple and Meta earlier this year and both risk further daily fines if regulators find that they have yet to comply with the rules in the coming months.

Source: Reuters

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Thomas

Economic

It’s a widely held belief among economists that President Donald Trump’s tariffs will boost inflation notably over the next few months. But muted price increases so far have called that assumption into question, emboldening the White House and opening up divisions at the Federal Reserve.

Anticipation of firmer inflation has kept the US central bank from delivering interest-rate cuts this year as it waits to see what happens. The Trump administration is applying intense pressure on Fed Chair Jerome Powell to bring down borrowing costs, and two Fed governors in recent days have publicly diverged from Powell by asserting a cut could be appropriate as soon as July.

A pair of key reports in the coming weeks — the monthly jobs report due Thursday and another on consumer prices due July 15 — will be critical in determining the central bank’s next steps. Both are expected to finally begin reflecting the impact of tariffs, but any surprises could change the schedule for rate cuts.

“One of the things that makes it such a difficult situation is that we simply haven’t done this sort of experiment in the past,” William English, a professor at the Yale School of Management and former high-ranking Fed economist, said of the tariffs. “We’re outside the range of experience for a modern US economy, and so it’s very difficult to be confident about any forecast.”

Trump and his allies have escalated attacks on the Fed and Powell in recent weeks, motivated by data showing inflation remained tame through May despite the tariffs put in place. The president has lobbed several insults at Powell, calling him a “numbskull” and “truly one of the dumbest, and most destructive, people in Government.”

Other Trump administration officials and some congressional Republicans — oftentimes more reticent to weigh in on monetary policy — have joined in as well. Kevin Hassett, director of the White House National Economic Council, said on June 23 that there is “no reason at all for the Fed not to cut rates right now.”

Hassett, who is seen as a possible replacement for Powell when the Fed chair’s term expires next year, emphasized data due in the coming weeks: “I would guess that if they see one more month of data, they’re going to really have to concede that they’ve got the rate way too high,” he said.

Source: Yahoo Finance

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Warren Takunda

Cryptocurrency

Key points:

Bitcoin approaches the monthly and quarterly close with a sea of order-book liquidity piling up.

Shorts looked primed to be taken out, analysis argues, with a long-term resistance trend line in focus.

Fed Chair Jerome Powell is due for replacement, leading to hyper-bullish bets on risk assets.

Bitcoin dipped toward $107,000 after the June 30 Wall Street open as analysis eyed a major new “short squeeze.” Bitcoin Teases 'Brutal' Short Squeeze as Sellers Protect $108K_1

Bitcoin Teases 'Brutal' Short Squeeze as Sellers Protect $108K_1

BTC/USD 1-hour chart. Source: Cointelegraph/TradingView

BTC price surfs liquidity into crunch candle closes

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD reversing gains made into the weekly close, down 1.1% on the day at the time of writing.

With hours to go until the monthly and quarterly closes, traders expected volatility, while exchange order-book liquidity grew.

“With BTC spot edging toward $108k, we’re beginning to see a build-up in leveraged longs as perpetual funding rates flip from flat to positive across major exchanges,” trading firm QCP Capital noted in its latest bulletin to Telegram channel subscribers.

“Positioning appears to be chasing the move, as participants lean into directional bets ahead of quarter-end.” Bitcoin Teases 'Brutal' Short Squeeze as Sellers Protect $108K_2

Bitcoin Teases 'Brutal' Short Squeeze as Sellers Protect $108K_2

Bitcoin exchange order-book liquidity. Source: TheKingfisher/X

Discussing likely BTC price reactions, popular X trading account TheKingisher favored shorts feeling the heat — something which would ensue with only minor upside.

“Below us, a cluster of long liqs around 106k-107k. But above? A HUGE wall of short liquidations immediately above current price, peaking fiercely around 108k-108.5k!” part of a post summarized alongside cross-exchange liquidity data.

“That's a strong magnet. Short squeezes can be brutal if price pushes through 107.5k.”

Continuing, popular trader and analyst Rekt Capital had mixed news for bulls. BTC/USD, now faced an important final resistance battle to open the door to price discovery.

“After having launched from this local green area of support... Price is now pulling back into this region for another retest,” he added about the daily chart.

“Continued stability here would enable another challenge of the Main Downtrend dating back to late May (black).”

BTC/USD 1-day chart. Source: Rekt Capital/X

Fed’s Powell replacement may trigger “one of the biggest runs” for stocks

Ahead of a quiet four-day TradFi week in the US, bullish crypto cues nonetheless came thick and fast on the day.

A recommendation of a 40% crypto allocation by Ric Edelman, founder of $300 billion fund Edelman Financial Services, combined with news that Washington was set to seek a replacement for Jerome Powell, Chair of the Federal Reserve.

As Cointelegraph reported, Powell continues to field public criticism from US President Donald Trump over his refusal to lower interest rates, with the latter demanding that these fall from the current 4.25% to just 1%.

“If the new Fed Chair actually cuts rates to 1%, we are going to witness perhaps one of the biggest runs of all time in stocks and real estate,” trading resource The Kobeissi Letter predicted on the day.

“There has never been a time in history where the Fed cut rates to 1% with the stock market and home prices at all time highs.”