Tariffs, Not Timing, Delay U.S. Rate Cuts as Trump Policies Redefine Economic Trajectory

Economic

Summary:

U.S. interest rates remain elevated not due to macroeconomic inertia, but because of tariff-induced inflation. Fed Chair Jerome Powell confirmed this on Tuesday...

Tariffs Blamed for Blocking Rate Relief

Jerome Powell’s confirmation that President Donald Trump’s tariffs are the primary obstacle to cutting interest rates has crystallized a hard truth for investors: policy choices, not economic fundamentals alone, are shaping the monetary trajectory. Without the inflationary push caused by these tariffs, the U.S. might already be experiencing a fed funds range of 3.75% to 4.25%, instead of the current 4.5% to 4.75%.

This divergence between reality and potential has created what CNBC describes as a “what-could-have-been” economic environment, where past projections of two 2025 rate cuts remain technically alive, but politically hamstrung. Tariffs, particularly in their unexpected size and reach, have lifted inflation expectations enough to stall Fed action.

Market Pullback from Record Territory

The S&P 500 edged down 0.11% Tuesday from its all-time high, a modest retreat but symbolic of growing caution. Tesla led declines after Trump’s suggestion that DOGE investigate subsidies received by Elon Musk’s companies, a move that added political uncertainty to an already volatile tech sector.

European markets fared little better, with the Stoxx 600 slipping 0.21% as euro zone inflation ticked up to 2%. A synchronous inflation uptick on both sides of the Atlantic has reintroduced fear of monetary stalling, even as growth cools.

Figma’s IPO and the Trump Megabill: Risk and Opportunity

Amid the macro backdrop, Figma filed for its long-awaited IPO, aiming to trade on the NYSE. With a previous valuation of $12.5 billion during a tender offer last year, Figma’s public debut is poised to test investor appetite in a cautious but hopeful equity market.

Meanwhile, Trump’s $3.3 trillion megabill narrowly passed the Senate after a tie-breaking vote from Vice President JD Vance. While controversial for its debt implications, several analysts believe the fiscal stimulus could temporarily lift U.S. growth, offsetting some rate hike drag and providing a mid-year catalyst for equities and consumption.

Bond Market: A Rare Window Opens

BlackRock’s Rick Rieder described current fixed-income conditions as a “generational opportunity” for income investors. With yields still historically elevated, especially for corporate and municipal bonds, the disinflationary outlook and potential rate cuts later in the year make this a rare alignment of income and price appreciation potential.

In a significant geopolitical and technological move, Huawei open-sourced its Pangu AI model series. This reinforces its transformation from a telecom provider into a full-spectrum AI player, seeking to dominate both hardware and software despite U.S. chip export controls. Paul Triolo of DGA-Albright Stonebridge describes Huawei’s repositioning as that of a “muscular technology juggernaut.”

By giving global developers access to Pangu’s capabilities, Huawei aims not just to survive export restrictions but to embed its systems into the core of global AI infrastructure, a strategy that mirrors China’s broader attempt to build tech sovereignty.

The global economy stands at the intersection of aggressive fiscal policy, unresolved trade tensions, and delayed monetary easing. While the U.S. market continues to flirt with record levels, the absence of expected rate cuts — due largely to tariffs — clouds what might otherwise be an unequivocally bullish landscape. With the July 9 tariff deadline looming, non-farm payrolls due Thursday, and OPEC+ set to meet this week, the path forward remains murky but charged with potential for both volatility and value.

Source: CNBC

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Kevin Du

Cryptocurrency

Bitcoin prices faced a correction on July 2, 2025, fueled by announced tariff measures from President Donald Trump, influencing market sentiments and trading activity on Indonesian exchange Tokocrypto.

This event highlights the enduring impact of geopolitical factors on cryptocurrency markets, with immediate market reactions suggesting increased volatility and strategic adaptability from exchanges like Tokocrypto.

Bitcoin's July 2025 Correction and Tokocrypto's Role

On July 2, 2025, Bitcoin's price experienced a notable correction driven by tariffs announced by Donald Trump. Tokocrypto, Indonesia's prominent exchange, remains pivotal in managing the dynamics caused by such macroeconomic influences.

Tokocrypto's market leadership, underscored by its acquisition by Binance, highlights its role in the cryptocurrency exchange ecosystem in Indonesia. It now serves over 1.5 million users, holding a significant national market share.

Geopolitical Tensions Shake Cryptocurrency Markets

Bitcoin's correction has sparked discussions about the exchange's strategic positioning to handle such market fluctuations. Traders and analysts watch for changes across other cryptocurrencies affected by broader market sentiments.

Historically, geopolitical changes like tariffs influence Bitcoin and Ethereum significantly. Such events might increase volatility on platforms aligned with asset diversification, as evidenced by Tokocrypto's recent expansion efforts in trading pairs.

Market Reactions to Trump’s Tariff Announcements

Similar historical events, such as trade tensions, often lead to corrections in Bitcoin prices, affecting the wider crypto market landscape. Layer 1 assets like BTC and ETH historically react to these catalysts.

Expert analysis from Kanalcoin suggests potential outcomes influenced by historical trends. Tokocrypto's resilience is noted, supported by its comprehensive asset offerings designed to offset short-term disturbances.

Source: CryptoSlate

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Gerik

Economic

Commodity

Stabilised Prices Reflect Reduced Geopolitical Tensions and OPEC+ Uncertainty

Global oil benchmarks remained largely unchanged in early Wednesday trade, with Brent crude inching up just one cent to $67.12 per barrel and U.S. West Texas Intermediate (WTI) slipping 5 cents to $65.40. The market appears to have entered a consolidation phase, supported by improving demand indicators out of China but weighed down by uncertainty ahead of the next OPEC+ policy announcement.

The recent lull in Middle East tensions has removed a key source of price volatility. Since the cessation of hostilities between Iran and Israel following their 12-day conflict, Brent crude has traded within a narrow band, ranging from $66.34 to $69.04 per barrel since June 25. The easing of fears over potential disruptions to supply in the oil-rich region has reduced the geopolitical risk premium that had been partially priced in earlier.

Phil Flynn, senior analyst at Price Futures Group, noted that oil prices are stuck in a “tight range” as traders balance diminished geopolitical concerns with anticipation over OPEC+’s next move on output quotas.

OPEC+ to Stay the Course with Measured Output Hike

Investor focus has shifted to the upcoming OPEC+ meeting on July 6, where the group is expected to continue its cautious approach to boosting supply. Four OPEC+ sources told Reuters the alliance, led by Saudi Arabia and Russia, is leaning toward a modest production increase of around 411,000 barrels per day for August. This would mirror the steady, incremental hikes seen over the previous three months.

Market data already reflects the outcome of prior decisions. Saudi Arabia raised crude exports by 450,000 barrels per day in June compared to May, reaching the highest shipment level in over a year, according to tracking data from Kpler. The ramp-up suggests that OPEC+ countries are executing their output strategies as planned, keeping supply increases closely aligned with market demand recovery.

Demand Side Supported by China, U.S. Outlook Clouded by Fed and Jobs Data

On the demand front, positive news came from China, the world’s largest oil importer. A private-sector PMI survey showed factory activity expanded in June, providing reassurance about China's industrial demand resilience. This helped balance concerns over the macroeconomic outlook in other regions.

In the United States, investor attention is turning to macroeconomic signals that could shape oil demand expectations in the second half of the year. Crude inventories reportedly rose by 680,000 barrels last week, according to preliminary API figures, with official confirmation due from the Energy Information Administration later Wednesday.

The broader market is also bracing for Thursday’s U.S. non-farm payrolls data, which will play a crucial role in shaping expectations for interest rate policy. Any signs of labor market cooling could strengthen the case for rate cuts by the Federal Reserve, potentially boosting economic activity and oil consumption.

Trump’s Trade Deadline Adds Further Market Sensitivity

U.S. President Donald Trump’s July 9 tariff deadline is another key event on the radar. His warning that negotiations with Japan may fail, despite expecting a deal with India, has heightened trade-related uncertainty. While trade disruptions typically weaken demand outlooks, some investors believe the associated inflationary risks could push central banks into dovish territory, indirectly lifting demand for commodities like oil.

Overall, oil prices are in a holding pattern as traders await clearer signals on both the supply and demand fronts. The upcoming OPEC+ meeting, U.S. jobs report, and developments in global trade talks will likely provide the direction the market has been lacking. Until then, prices are expected to remain rangebound, reflecting cautious optimism amid competing macroeconomic narratives.

Source: Reuters

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Gerik

Economic

Subdued Consumer Spending Signals Broader Economic Fragility

Retail trade in Australia showed limited momentum in May, growing a mere 0.2% from the prior month, falling short of the 0.4% market consensus. This marks the fourth straight month of subdued retail activity and underscores persistent consumer caution despite earlier monetary easing. According to the Australian Bureau of Statistics (ABS), total retail sales reached A$37.3 billion in May, reflecting a modest 3.3% annual increase—the slowest pace since November 2024.

The details reveal a shift in consumer priorities. While apparel and department store spending rebounded 2.9% and 2.6% respectively after sharp declines in April, these gains were outweighed by a rare 0.4% fall in food retail sales—the first monthly drop in the category this year. Café and restaurant spending was flat, highlighting a broader reluctance to engage in discretionary spending.

Markets Fully Price In RBA Cut Amid Weak Growth and Tame Inflation

With economic growth nearly stalling in the first quarter and inflation pressures easing, investors have ramped up bets on a July rate cut. Market pricing now reflects a 97% probability of a 25 basis point reduction next Tuesday, which would bring the RBA’s cash rate down to 3.60% from the current 3.85%. Some economists have even revised their forecasts, moving up expected cuts from August to July.

Oxford Economics Australia’s Harry Murphy Cruise remarked that "households have banked earlier interest rate cuts rather than spend them," reinforcing the argument for further stimulus. Consumer sentiment remains fragile, and growth in household consumption continues to lag behind the RBA’s own forecasts.

Australian Dollar Drops as Rate Cut Bets Firm

In reaction to the data, the Australian dollar slipped 0.2% to $0.6569, reflecting growing expectations of looser monetary policy. The weakness in the currency mirrors the broader economic theme of cautious consumption, lackluster wage growth, and the absence of strong fiscal tailwinds.

The Reserve Bank has already cut rates twice this year amid signs that global risks and domestic inflation are easing. Analysts now forecast the cash rate to reach 3.10% by year-end, with some expecting a floor as low as 2.85%, which would move policy into clearly stimulative territory.

Looking Ahead: Will Stimulus Be Enough to Reignite Demand?

The RBA is relying on a mix of past tax relief, easing price pressures, and falling borrowing costs to eventually lift household consumption. However, the subdued reaction to previous cuts suggests that confidence remains low and that monetary policy alone may be insufficient to drive a robust recovery.

Unless stronger signals emerge from wage growth or fiscal support, continued consumer restraint may persist well into the second half of the year, placing the burden squarely on the RBA to maintain accommodative policy. The upcoming rate decision will therefore serve not just as a response to data, but as a broader signal of intent to support demand in an increasingly fragile economic climate.

Source: Reuters

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FastBull Featured

Daily News

[Quick Facts]

1. U.S. Senate passes "Big, Beautiful Bill".

2. Trump announces Israel agrees to 60-day Gaza Ceasefire Plan.

3. Fed Chair Powell: Tariffs delaying rate cuts.

4. Trump rules out extending tariff deadline.

[News Details]

U.S. Senate passes "Big, Beautiful Bill"

On Tuesday, U.S. Senate Republicans narrowly passed President Trump's sweeping tax and spending bill by the slimmest margin. Dubbed an "economic nuclear bomb," this proposal would enact massive tax cuts, shrink the social safety net, increase military and immigration enforcement spending, and cause the national debt to soar by $3.3 trillion.

The bill has now moved to the House of Representatives for a final vote, though some Republican lawmakers have publicly opposed provisions in the Senate version. Trump hopes to sign it into law by July 4th Independence Day, with House Speaker Mike Johnson pledging to push for timely passage.

Trump announces Israel agrees to 60-day Gaza Ceasefire Plan

On July 1st, U.S. President Trump posted on his social platform Truth Social that American representatives held a "long and productive" meeting with Israeli officials regarding Gaza that day. Israel has agreed to implement the conditions required for a 60-day ceasefire.

Trump stated that during this period, the U.S. will work with all parties to end the conflict. He noted that Qatar and Egypt have invested tremendous efforts in advancing peace and will present this final proposal.

Fed Chair Powell: Tariffs delaying rate cuts

At a conference in Sintra, Portugal, Federal Reserve Chair Jerome Powell stated that the central bank likely would have lowered interest rates by now if not for President Donald Trump's tariffs and would currently be pursuing a more accommodative monetary policy.

When asked whether uncertainty caused by the U.S. administration's existing tariff system had led the Fed to delay rate cuts, Powell affirmed this view. He added that nearly all projections for U.S. inflation have risen significantly due to the tariffs' impact.

Powell acknowledged that despite increasing pressure from the U.S. administration, the Fed has entered a rate-holding pattern. He also noted that given the current economic uncertainties, the Fed is still observing developments to gather more information.

When asked about the likelihood of a July rate cut, Powell explained: "I wouldn't take any meeting off the table or put it directly on the table, " adding that a "solid majority" of the central bank's policymakers are forecasting rate cuts at some point this year.

Trump rules out extending tariff deadline

On Tuesday, U.S. President Trump made clear he would not consider delaying the July 9th deadline for reimposing reciprocal tariffs. He again threatened to terminate negotiations with countries like Japan and directly implement punitive tariffs. Trump added that the U.S. has already dealt with Japan and expressed uncertainty about reaching an agreement.

[Today's Focus]

UTC+8 17:00 Euro Zone May Unemployment Rate

UTC+8 19:30 US June Challenger Job Cuts Announcements (in 10K)

UTC+8 20:15 US June ADP Employment Change (in 10K)

UTC+8 22:30 US EIA Crude Oil Stocks Change (thousand barrels) through June 27th

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Samantha Luan

Economic

Political

Thailand’s ruling coalition was already fraying when a court suspended Prime Minister Paetongtarn Shinawatra on Tuesday, raising fresh doubts about her survival, the country’s economy and the future of a dynasty that has loomed over the Southeast Asian nation for decades.

In a blow to a country long plagued by political instability, the Constitutional Court sidelined the 38-year-old leader over a complaint linked to a leaked phone call in which she appeared to criticize the army and side with Cambodia in a border dispute — a potential breach of conduct under the constitution. She has 15 days to respond. For now, Deputy Prime Minister Suriya Jungrungreangkit leads a shaky coalition.

The developments couldn’t come at a worse time for Thailand: once feted as an Asian Tiger economy for its export-led growth, the country is mired in slow growth relative to its peers, with households burdened by debt, a budget bill outstanding and the imminent threat of Donald Trump’s tariffs weighing down expectations. The government slashed its 2025 growth forecast by a full percentage point to 1.3% in May.

Over at the central bank, Governor Sethaput Suthiwartnarueput is due to leave Sept. 30 and a successor has yet to be named.

“No one is at the helm and the Thai ship is going nowhere,” said Thitinan Pongsudhirak, a professor of political science at Chulalongkorn University in Bangkok. “The budget bill has to be passed, so that’s coming up with the wobbly, weak coalition government.”

Amid all the turmoil, the Bhumjaithai Party, the ruling coalition’s biggest partner, exited last month following weeks of infighting, and there’s no guarantee now others that had promised to stay won’t follow.

The court has yet to say how long it will deliberate, while a prolonged delay risks deepening the political vacuum, said Napon Jatusripitak, acting coordinator of the Thailand Studies Program at ISEAS-Yusof Ishak Institute.

“Thailand appears destined for a prolonged struggle to find a new prime minister and a political deadlock that could jeopardize the country’s already fragile economic situation,” he said.

Looming over everything is Thailand’s influential military, which has led about a dozen coups since the kingdom’s absolute monarchy was abolished in 1932 and has long been a key power broker in the country.

The military and pro-military political parties were the key forces behind Paetongtarn’s eventual ascension to power after a key opposition party couldn’t secure enough support to form a government following national elections two years ago. That uneasy alliance paved the way for Paetongtarn’s father, Thaksin Shinawatra, to return from a long exile.

Even with the court’s suspension, Paetongtarn isn’t totally sidelined from power. Hours before the ruling Tuesday, she was named culture minister in a reshuffle expected to keep her in government. The new cabinet will be sworn in Thursday. But the damage may be permanent. A recent poll showed Paetongtarn’s approval rating at 9.2%. Thousands have protested, calling for her resignation.

Paetongtarn said Tuesday she accepts the court’s ruling but gave little clarity on her future. “I’m still a Thai citizen,” she said. “I will continue to work for the country while my duties are suspended.”

Even so, fears are growing the government could collapse before the next budget passes. The 2026 fiscal plan, due by August, is at risk. Burin Adulwattana, chief economist at Kasikorn Research Center, said a lame-duck government would add uncertainty, hurting the baht and stocks.

“A key impact will be felt if the political turmoil leads to a budget delay,” he said. “Without it, the economy will have big trouble.”

The baht fell 0.2% on Wednesday morning. The yield on Thailand’s benchmark 10-year bonds was little changed after declining three basis points a day earlier. The benchmark stock index, the world’s worst-performing major equity market globally this year, rallied 1.9% Tuesday on expectations that Paetongtarn’s suspension will help reduce political tension.

Whether things play out that way is far from certain.

“This suspension exerts further downside risk to a growth outlook already mired in uncertainty from US tariffs,” said Lavanya Venkateswaran an economist at Oversea-Chinese Banking Corp. in Singapore. “The real question is what next. That needs to be answered sooner rather than later considering the stakes.”

If the court ultimately rules against Paetongtarn, she will be removed from office, triggering a parliamentary vote to pick a replacement from a list submitted before the 2023 election. Along with her father and aunt, Yingluck, Paetongtarn would be the third of the Shinawatra clan to be removed from office.

Possible successors include the Pheu Thai party’s Chaikasem Nitisiri, Bhumjaithai’s Anutin Charnviraku, United Thai Nation’s Pirapan Salirathavibhaga, and the Democrat Party’s Jurin Laksanawisit.

Former Prime Minister Prayuth Chan-ocha — who led the last coup — is also eligible. And while a military takeover is always possible in Thailand, frustration over the country’s economic performance under Prayuth ultimately pressured his government to allow for elections.

“The decision by the court today has heightened the coup risk a bit,” said Thitinan of Chulalongkorn University. But “the last time they had a coup, they did not do well.”

Source: Bloomberg Europe

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Gerik

Economic

Market Sentiment: Fragile Risk Appetite in Asia

Asian markets opened the second half of 2025 on a weak note, with MSCI’s Asia-Pacific index ex-Japan falling 0.23%, slightly off its 2021 highs. Japan’s Nikkei shed 0.78%, dragged lower by tech stocks, as U.S. technology shares also corrected after June’s strong rally. Taiwan and South Korea followed suit with similar declines.

Investor caution reflects growing unease over Trump’s firm stance on trade negotiations. With the president stating he will not extend the July 9 deadline, and expressing skepticism over talks with Japan—while remaining optimistic about India—market participants are pricing in heightened uncertainty and potential disruptions to supply chains.

Currency Markets: Dollar Slides Further as Cuts Priced In

The dollar remains under pressure, with the dollar index lingering around 96.649—its weakest since March 2022 and marking its worst half-year performance since the 1970s, down more than 10% year-to-date. The euro was last seen near $1.1793, close to Tuesday’s 3.5-year high, while the yen held steady at 143.52.

Traders are pricing in around 64 basis points of rate cuts by the end of 2025, with only a 21% chance of easing in July. Fed Chair Jerome Powell has pushed back against political pressure from Trump for immediate cuts, repeating that the Fed will “wait and learn more” before reacting to tariff-driven inflation.

Carol Kong of the Commonwealth Bank of Australia noted that any disappointment in upcoming data—such as Thursday’s non-farm payrolls—could lead to “further dovish repricing” and spark another wave of dollar selling. The intersection of fiscal uncertainty and unclear trade outcomes has amplified downside pressure on the greenback.

Fiscal and Geopolitical Risks: The 'OBBBA' and Beyond

The so-called “One Big Beautiful Bill” Act (OBBBA), which narrowly passed the Senate and now heads to the House, is also casting a long shadow over markets. With $3.3 trillion in added national debt projected, fiscal stability concerns are growing. U.S. 10-year Treasury yields were little changed at 4.245%, but the term premium may stay elevated due to long-run debt sustainability fears.

Aninda Mitra of BNY Investment Institute described the bill as “hard-wiring” fiscal deterioration, warning that U.S. yields are unlikely to materially decline over the next 6–12 months, even with expected rate cuts.

This mix of fiscal fragility and geopolitical unpredictability, especially around Trump's tariff policies, is driving investors to shift out of U.S. assets. A weak dollar, combined with better returns and political predictability elsewhere, is reshaping capital flows globally.

Safe Havens and Commodities: Gold Shines Amid Dollar Decline

Gold prices retreated slightly to $3,332.19/oz after a strong 1% rally in the previous session, though the yellow metal remains up 27% this year. The dollar’s decline, combined with persistent geopolitical tensions and concerns about monetary and fiscal discipline, has fueled consistent demand for safe-haven assets.

The broader commodity complex is now seen as a hedge against not just inflation, but broader systemic risk—especially if political pressure continues to compromise institutional independence in the U.S.

Markets on Edge as Trump Trade Clock Ticks Down

With just days remaining before Trump’s trade deadline, investors are caught in a delicate balancing act: weighing soft Fed rhetoric and upcoming jobs data against the disruptive potential of U.S. fiscal and trade policy. Market resilience in the first half may be tested in the weeks ahead, particularly if geopolitical risks materialize or domestic political tensions over the OBBBA bill intensify.

The dollar’s weakness, coupled with Asian equity volatility, underscores a fragile global sentiment—one highly sensitive to both data releases and political developments out of Washington.