Markets in the first half or 2025: Down with the dollar, up with guns

Economic

Summary:

In H1 2025, markets surged despite turmoil: the dollar plunged over 10%, gold rose 25%, defense stocks soared, and emerging markets rallied. Trump's policies drove volatility, global shifts, and capital rotation.

After U.S. President Donald Trump's radical campaign pledges, investors knew markets would get bumpy this year as he returned to lead the world's biggest economy. But almost nobody predicted the outcome so far, especially the dollar's dramatic fall.

Run through the year's numbers without tracking the journey and many key markets look serene.

World stocks (.MIWD00000PUS), are at record highs, benchmark global borrowing costs are down and so-called market "fear gauges" like the VIX (.VIX) barely look like they have moved.

But look closer and the turmoil is clear: all of those markets have seen extreme swings over the last six months - and then there's the dollar. (.DXY), The world's reserve currency is down over 10%. That's its biggest first-half dive since the era of free-floating currencies began in the early 1970s, whereas gold is up 25% in its biggest rise since then, which marked the end of the bullion-linked Bretton Woods System.

Vincent Mortier, chief investment officer at Europe's largest asset manager Amundi, puts this down to Trump's trade war, and particularly to what the president calls his "Big Beautiful" fiscal bill that will keep the U.S. deficit at 6-7% and its $36.2-trillion debt pile ballooning.

"The big event of the first half for the market has been this U.S. weakness and this questioning of what should be the trajectory of the dollar," Mortier said, adding he expected the U.S. currency to keep dropping, albeit more slowly.

Also eye-catching have been the struggles of the "Magnificent Seven" tech giants. They have been a cash cow for portfolios for years, but have been left for dust so far this year by a 20% rally in Chinese rivals (.HSTECH), and a near 70% surge in European weapons makers. (.SXPARO), The latter move has been driven by Trump too. His signal that the U.S. will scale back Europe's military protection is forcing the region - and other NATO members - to rearm.

Germany's historic plan to revamp its self-imposed debt brake to allow higher defence spending initially interested the $140 trillion global bond market, although long-term U.S. debt concerns and record-high Japanese borrowing costs have driven most moves since.

Given the dollar's woes, benchmark U.S. debt will have lost money this year for most who sit outside the country.

Highlighting the volatility, 30-year Treasury yields surged past 5.1% to their highest since 2007 in May, but are already back at 4.8%. Switzerland, meanwhile, took its interest rates back down to zero this month.

Markets in the first half or 2025: Down with the dollar, up with guns_1

GREAT ROTATION?

The dollar's slump also means the euro is up 12.5% , Japan's yen is up nearly 8% and the Swiss franc is up 13.5%. It has also given emerging markets a chance to shine.

Trump's re-engagement with Russian President Vladimir Putin has helped the rouble surge a whopping 40%, although it remains heavily restricted by Western sanctions and still lags the 42% tear in gold producer Ghana's cedi.

In eastern Europe, Poland's zloty, the Czech crown and Hungarian forint are all between 13-17% stronger. Taiwan's dollar jumped 8% in just two days last month and even Mexico's peso and emerging market local currency debt are enjoying double-digit gains for the year, despite all the trade war trauma.

"This is the most prominent capital rotation we have seen for the best part of two decades," said PIMCO's head of emerging market portfolio management, Pramol Dhawan, referring to the move out of U.S. assets into emerging and other markets.

"And we still think we are in the early innings of this."

At the bottom of the FX pile are familiar names like Argentina's peso and Turkey's lira. The latter is down nearly 11% and much of that happened after Turkish President Tayyip Erdogan's main political rival was detained back in March.

Bitcoin has been volatile, as usual. It raced up almost 20% when Trump took office, dived nearly 30% when his plans for a U.S. cryptocurrency reserve failed to impress and has spent the last three months clawing it all back again.

Oil has yo-yoed too. It slumped 30% to below $60 a barrel in April after Trump's sweeping tariff plan fuelled global recession fears, but briefly soared above $80 this month when Israel and the U.S. bombed Iran.

Markets in the first half or 2025: Down with the dollar, up with guns_2

GOOD AS GOLD

Copper has defied the global economy worries to jump 11%, although it's the precious metals that have sparkled. Silver is neck-and-neck with gold, up 24%, while platinum is up nearly 50% after a string of 10-year highs.

There won't be much time for a second-half breather either. Trump wants to ram his "Big Beautiful Bill" though U.S. Congress by July 4's Independence Day holiday, while his ceasefire in the global trade war runs out five days later.

Things are already kicking off with neighbour Canada and as the deadline approaches - and with scant progress so far towards mutually-agreed baseline levies - questions remain how long markets can stay numb to the risks.

Markets in the first half or 2025: Down with the dollar, up with guns_3

Source: Reuters

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Adam

Cryptocurrency

Fundstrat’s Tom Lee is joining a little known bitcoin miner aiming to become the biggest publicly traded holder of ether.

Lee, a high-profile market strategist known for his prescient bitcoin price forecasts and stock predictions, has been appointed chairman of the board of directors of BitMine Immersion Technologies , effective Monday. The company also announced a $250 million private placement to implement a buying strategy around ether, which it aims to make its primary treasury reserve asset while continuing with its core bitcoin mining business.

Lee’s appointment comes amid a groundswell of interest around stablecoins following the successful IPO of stablecoin issuer Circle at the beginning of the month and positive momentum pushing potential stablecoin legislation through Congress.

“The financial services industry and crypto are converging and it really started with stablecoins, which is the ChatGPT of crypto because it’s viral adoption by consumers, business banks and now even Visa,” he told CNBC’s “Squawk Box” Monday. “Underneath the stablecoin industry is Ethereum – that is really the backbone and architecture of stablecoins so it’s important to create a project that accumulates Ethereum to essentially protect and have some influence on the network.”

The company will monitor the value of ether held per company share as a key performance metric going forward, Lee added, similar to MicroStrategy’s bitcoin-per-share metric “BTC Yield.” BitMine can increase the value of ETH held per share “by a combination of reinvestment of the company’s cash flows, capital markets activities, and by the change in value of ETH,” Lee said in a statement.

Companies are increasingly looking past bitcoin for crypto treasury management strategies. BitMine joins the publicly listed betting platform SharpLink Gaming , which initiated an ether treasury strategy in May and appointed Ethereum co-founder Joseph Lubin as chairman of its board of directors. DeFi Development is focused on a similar strategy for the Solana token.

Ahead of this transaction, BitMine had a very tiny market value of just $26 million with lightly traded shares that were down 45% on the year.

Source: cnbc

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Adam

Commodity

The natural gas market fell over 5.5% in the early hours of Monday, as we continue to see a lot of questions asked about natural gas demand, and of course, the geopolitical aspects of this market as well.

Natural Gas Technical Analysis

The natural gas market has fallen pretty significantly during the trading session on Monday, dropping over five and a half percent by the time New York gets on board. This is a market that is going to have to continue to deal with the idea of milder temperatures in the United States, so therefore, electricity demand probably drops. There is a significant amount of support underneath, especially near the $3.45 area or so, as the previous uptrend line is still holding intact. So, I’ll be watching that uptrend line because if we break down below it, it could open up the possibility of a bigger move to the downside.

Ultimately, I think this is a scenario where traders are looking at it through the prism of the seasonality, and of course, not liking natural gas, I’ve made no qualms whatsoever about natural gas being something that I never buy this time of year. I only look to fade signs of exhaustion, mainly due to the fact that air conditioning is not a thing quite yet in the United States for the most part. And of course, heating is no longer a thing.

Unless we get more trouble out of the Middle East, we probably continue to see a little bit of weakening when it comes to the overall uptrend in natural gas. Eventually though, if we can break down below the uptrend line, then I think $3 could be your target. Although it may take a while to get there due to a lack of Russian gas in the European Union.

Source: fxempire

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Devin

Central Bank

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.