U.S. Now Imports More from EU Than China: Is Tariff Hike a Self-Inflicted Wound?

Economic

Summary:

A new German study reveals that the U.S. is now more dependent on imports from the EU than from China, suggesting that raising tariffs on European goods could hurt American interests more than expected....

U.S.-EU Trade Ties Strengthen While Reliance on China Wanes

A study by the German Economic Institute (IW) has found that the United States is increasingly dependent on imported goods from the European Union (EU), more so than on those from China. This marks a significant shift in global trade dynamics over the past 15 years.

In 2010, the U.S. had about 2,600 product categories where over 50% of imports came from the EU. By last year, that number had risen to over 3,100. In terms of value, imports from the EU mainly chemicals, machinery, and electrical equipment reached $287 billion in 2024, which is about 2.5 times higher than in 2010.

Meanwhile, Chinese goods accounted for 2,925 categories, with a total import value of $247 billion. This suggests a strategic diversification effort by the U.S., reducing its dependence on China a move widely seen as part of its broader "de-risking" strategy.

A Stronger Negotiating Position for the EU

The findings suggest that European Commission President Ursula von der Leyen could wield a stronger hand in future trade negotiations with Washington. The U.S. has imposed a baseline 15% tariff on most EU goods under former President Donald Trump’s administration tariffs that remain a point of contention.

Given the high dependency on EU goods, the IW study implies that raising tariffs further could be counterproductive for the U.S. economy. Many of the EU-origin products with consistently high import shares are hard to substitute in the short term, making them strategically important.

Strategic Leverage and the Risk of Retaliation

The study also points out that the EU holds potential leverage. If trade tensions escalate, Brussels could restrict exports of goods critical to the U.S. economy as a countermeasure. Although trade data alone may not capture how essential these products are to U.S. buyers, the message is clear: increasing tariffs could backfire.

As co-author Samina Sultan puts it, the research serves as a warning: “If [the U.S.] continues to raise tariffs, they will be shooting themselves in the foot.”

Implications Going Forward

With a shifting geopolitical landscape and upcoming elections in both the U.S. and EU, trade relations are likely to be reevaluated. As the U.S. continues to pivot away from China, Europe’s role as a primary trading partner becomes more prominent suggesting that any future trade strategy must balance economic necessity with political posturing.

In this context, aggressive tariff policies risk disrupting critical supply chains and inflaming tensions with a key ally. The data signals the need for more nuanced trade diplomacy, especially as economic interdependence between the U.S. and EU deepens.

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Government Capital Injection and Liquidity Reinforcement

In a significant policy maneuver, the Indonesian government has deployed 200 trillion rupiah approximately 319.132 trillion Vietnamese dong from its fiscal surplus to bolster liquidity in five state-owned banks under the Himbara group. This capital injection, formalized under Finance Ministry Decree No. 276/2025 and effective since September 12, is being routed through the central bank, Bank Indonesia.

The allocations are as follows: Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI), and Bank Mandiri each receive 55 trillion rupiah; Bank Tabungan Negara (BTN) receives 25 trillion; and Bank Syariah Indonesia (BSI) receives 10 trillion. The goal is to ease interbank liquidity stress, empower lending capacity, and maintain a healthy equilibrium between credit supply and demand in Southeast Asia’s largest economy.

Measurable Impact: Liquidity Ratios Improve Sharply

Post-injection, liquidity indicators have improved across the system. According to the Financial Services Authority (OJK), the liquidity asset to third-party deposit ratio (AL/DPK) rose from 24.01% on September 4 to 25.57% by September 12. Meanwhile, the liquidity asset to non-core deposit ratio (AL/NCD) jumped from 106.92% to 113.73% during the same period.

Dian Ediana Rae, Executive Director of OJK's Banking Supervision Division, confirmed during a parliamentary session on September 17 that the injection has significantly strengthened the banking sector’s liquidity buffers. These ratios remain well above regulatory thresholds, reinforcing confidence in the system’s readiness for credit expansion.

Banking System Outlook: Credit and Deposits on the Rise

The macro-banking landscape is also showing positive signals. Year-over-year growth for credit and third-party deposits stood at 7.56% and 8.63%, respectively, as of August 2025. This steady growth has pushed the system’s loan-to-deposit ratio (LDR) to 86.03% a healthy level that suggests banks are actively lending but still have room to expand.

According to OJK, the liquidity injected into the system is not just serving as a buffer, but as a catalyst for additional credit disbursement. Strong liquidity ratios give banks the space to lower lending standards modestly and take on more risk, thus accelerating capital formation and domestic demand.

Strategic Use of Fiscal Surplus: Lowering Interest Rates in Focus

Finance Minister Purbaya Yudhi Sadewa stated that the liquidity provision stems from surplus budget funds (SAL) and is part of a broader macro-financial strategy. By increasing available capital within the banking system, the policy is expected to lower interbank lending rates and, in turn, pull down market interest rates more broadly.

He emphasized two expected outcomes: first, a rise in liquidity; second, a gradual decrease in market interest rates, thereby facilitating cheaper borrowing for businesses and households. In essence, the move acts as a quasi-monetary easing measure that doesn’t rely on central bank rate cuts but achieves similar effects through direct liquidity enhancement.

Broader Implications: Pre-emptive Stabilization in a Volatile Environment

This capital injection comes at a time when many emerging markets are navigating tight global liquidity, rising geopolitical risk, and uncertain U.S. monetary policy. Indonesia’s strategy appears to be pre-emptive ensuring domestic banks remain robust and credit channels unblocked, even as external volatility persists.

It also reflects confidence in the ability of state-owned banks to channel liquidity efficiently into priority sectors such as infrastructure, housing, agriculture, and MSMEs. With Bank Indonesia maintaining a cautiously neutral policy stance, fiscal tools like this liquidity deployment become critical for maintaining growth momentum.

Liquidity Now, Lending Later

Indonesia’s injection of nearly 320 trillion VND into state-owned banks is more than a short-term liquidity buffer it is a calculated strategy to unlock credit flow, stabilize interest rates, and reinforce systemic financial health. By utilizing surplus reserves, Jakarta is signaling that it will proactively manage liquidity risks and preserve its status as Southeast Asia’s economic engine.

Whether the move will lead to lower borrowing costs and sustained credit expansion in the quarters ahead depends on complementary policy alignment, especially from the central bank and regulatory agencies. But for now, the liquidity foundation has been laid and the market has taken notice.

To stay updated on all economic events of today, please check out our Economic calendar

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Fed’s Policy Shift Offers Breathing Room for Asia but China Treads Carefully

On September 18, the U.S. Federal Reserve cut its benchmark interest rate by 25 basis points to 4.00–4.25%, marking its first reduction since December 2024. In response, central banks across Asia, including China’s People’s Bank of China (PBoC), have been reassessing their policy stance. While the move theoretically offers China more flexibility to ease, analysts believe Beijing will act with continued caution.

The PBoC set the daily midpoint rate of the yuan (CNY/USD) at 7.1085, slightly weaker than the previous fix at 7.1013. The offshore yuan initially appreciated to 7.086 before settling back to 7.107 reflecting the market’s confidence in the yuan’s near-term stability amid global monetary shifts.

Why PBoC Isn’t Rushing to Follow the Fed

While many emerging-market central banks may consider easing policy following the Fed’s move, PBoC is expected to maintain a more measured pace. Ding Shuang, Chief Economist for Greater China at Standard Chartered, anticipates only one additional 10-basis-point cut from PBoC in Q4 2025. He argues that the narrowing rate differential with the U.S. reduces capital outflow pressure, thus supporting the yuan. This alignment, rather than a direct mimicry of the Fed, is shaping PBoC’s cautious approach.

The yuan has already appreciated nearly 3% against the dollar since mid-August, supported by stronger midpoint fixes and market speculation around the Fed’s dovish pivot. These developments have created a favorable external backdrop, but domestic factors remain the PBoC’s key consideration.

Domestic Constraints: Banking Margins and Financial Stability

Robin Xing of Morgan Stanley cautions that China’s monetary easing is constrained by the shrinking net interest margins of banks. A more aggressive rate cut could reduce profitability in the banking sector, potentially weakening credit provision and threatening financial stability. Consequently, the PBoC is more likely to introduce a moderate 10–15 basis-point cut before the end of 2025 only if growth and inflation deteriorate further.

This perspective is shared by analysts at Macquarie, who view another cut as likely, but not imminent. They emphasize that PBoC may hesitate to ease too forcefully out of concern that it could reignite speculation in the stock market, reminiscent of the 2015 equity bubble.

Learning from 2024: Tactical, Not Reactive, Policy Moves

Historically, the PBoC has moved with strategic timing relative to Fed actions. In September 2024, just days after the Fed’s 50-basis-point cut, PBoC responded with several support measures including mortgage rate cuts and a reduction in the required reserve ratio (RRR). But this time, the central bank appears more focused on preserving macroprudential stability.

Larry Hu and Zhang Yuxiao of Macquarie point out that China’s leadership is wary of overstimulating markets, particularly when valuations and investor sentiment are fragile. Thus, rather than mirroring the Fed’s easing cycle, PBoC is pursuing targeted, incremental actions to avoid overheating sectors already vulnerable to speculation.

Economic Outlook: Growth Holding, But Headwinds Remain

China’s GDP expanded by 5.3% in the first half of 2025, on track to meet the official growth target of approximately 5% for the full year. However, recent August data have shown signs of weakness retail sales and industrial production both came in below forecasts, renewing concerns about the durability of the recovery.

The yuan’s strength also introduces a delicate balancing act. Tianchen Xu of the Economist Intelligence Unit notes that the PBoC now appears more focused on preventing excessive appreciation of the currency rather than shielding it from depreciation. This suggests confidence in near-term capital stability, but also highlights the fragility of export competitiveness if the yuan continues to strengthen.

Global Positioning: A Strategic Opportunity Amid Dollar Weakness

As the U.S. dollar continues to lose momentum, Morgan Stanley’s Xing believes China may be facing a strategic window to reassert economic leadership in emerging markets provided it can escape deflationary pressures and reignite entrepreneurship in its industrial sectors. The fading advantage of U.S. growth and rates opens the door for capital to reconsider China, but this will depend on Beijing’s ability to manage policy carefully without triggering instability.

JPMorgan Private Bank’s recent shift prioritizing emerging market equities excluding China indicates that investor caution remains high. For China to regain market favor, monetary policy must be supportive but also credible and measured.

Strategic Caution Over Aggressive Easing

The PBoC’s approach to monetary policy in 2025 reflects a calibrated balance between external alignment and domestic risk management. While the Fed’s easing offers room to maneuver, China is prioritizing currency stability, bank health, and long-term growth quality over short-term stimulus.

As such, any further rate cuts are likely to be limited in size and frequency. The broader message from Beijing is clear: easing, yes but on China’s terms, not Wall Street’s timeline.

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Fed’s Rate Cut Reshapes Global Monetary Landscape

On September 18, the U.S. Federal Reserve lowered its benchmark interest rate by 0.25 percentage points to a range of 4.00–4.25%, its first rate cut since December 2024. Fed Chair Jerome Powell hinted at the possibility of two more cuts before year-end, citing risk management and slower economic momentum.

This dovish shift has rippled across Asia, where central banks now find greater policy space to ease monetary conditions. Peiqian Liu of Fidelity International emphasized that the narrowing gap between U.S. and Asian bond yields could reduce currency depreciation risks and provide “additional breathing room” for regional policymakers to cut rates.

Early Movers: Korea, Australia, India Take the Lead

Some central banks in Asia had already initiated pre-emptive easing earlier this year, in part to buffer against tariff uncertainty and slowing external demand. The Bank of Korea slashed rates to a three-year low in May. The Reserve Bank of Australia cut to a two-year low in August, and the Reserve Bank of India reduced its policy rate by a substantial 50 basis points in June.

These decisions reflected domestic challenges but were also a response to shifting global dynamics, especially U.S. protectionist policy under the Trump administration. Despite these moves, analysts note that conditions vary sharply across countries. Domestic inflation trajectories and the delayed impact of front-loaded exports in anticipation of U.S. tariffs remain key constraints.

Stronger Currencies, Softer Inflation Provide More Room

According to Betty Wang of Oxford Economics, the prospect of further easing remains particularly relevant for the Bank of Korea and the Reserve Bank of India. Fears of currency depreciation have proven less severe than expected, and the U.S. dollar’s recent weakness has actually allowed regional currencies to appreciate modestly, easing inflationary concerns.

Chi Lo of BNP Paribas Asset Management supported this view, adding that real interest rates across Asia remain elevated compared to historical norms, creating additional scope for downward adjustments. The overall macro context low inflation, stable financial systems, and a dovish Fed positions Asia for a longer easing cycle in the coming quarters.

India and China: Contrasting Priorities

India presents a unique case. Despite robust GDP growth in the past two quarters, much of it is domestically driven. With global trade facing headwinds, India may prioritize sustaining internal demand through accommodative policy. Peiqian Liu believes further easing is likely as India shifts focus from export resilience to domestic consumption support.

China, however, remains an outlier. The People’s Bank of China kept its short-term policy rate unchanged at 1.4% on the same day as the Fed’s cut. While the Chinese economy has shown signs of weakness retail sales and industrial output missed forecasts in August Beijing is treading cautiously. Authorities are wary of repeating the market excesses of 2015 and are focused on managing asset bubbles, especially in equities and real estate.

Tianchen Xu of The Economist Intelligence Unit pointed out that Beijing's current concern may not be defending the yuan from depreciation but rather preventing excessive appreciation. The offshore renminbi has already risen around 3% against the U.S. dollar in 2025, and further strengthening could undermine export competitiveness.

Japan: A Rare Tightening Candidate in Asia

Japan is also defying the regional easing trend. With inflation exceeding the Bank of Japan’s 2% target for over three years, the BoJ is preparing for rate hikes potentially beginning by the end of this year. This would mark a stark divergence from most Asian peers and indicate Japan’s transition out of its long-held ultra-loose monetary framework.

Despite global headwinds, Japan’s resilient GDP growth and stable job market provide the BoJ with a unique opportunity to normalize policy. Analysts now expect gradual but consistent tightening, in contrast to the expected easing cycle across much of the region.

A Widening Policy Split in Asia

The post-Fed landscape suggests that a majority of Asian economies will lean into monetary easing, driven by soft inflation, slowing global demand, and favorable currency dynamics. However, national differences are increasingly shaping policy outcomes. While South Korea, India, and Australia appear poised for further cuts, China and Japan are charting more cautious or even hawkish paths.

This divergence reflects both macroeconomic fundamentals and political considerations. The pace and scope of monetary easing across Asia will thus remain uneven, shaped by each country’s growth outlook, inflation trend, and exchange rate management strategy.

The Federal Reserve’s policy pivot has opened the door for Asian central banks to reassess their monetary stances. While many are expected to ease further, the region is unlikely to move in unison. For investors and policymakers alike, the next phase of monetary policy in Asia will be defined less by synchronization with the U.S. and more by country-specific trade-offs between growth, inflation, and financial stability.

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Bipartisan Gridlock: Both Funding Bills Collapse in the Senate

On September 19, the U.S. Senate rejected two competing short-term funding bills, one from Republicans and one from Democrats, in a dramatic display of congressional deadlock. The Republican proposal, which had narrowly passed the House earlier that day with a 217–212 vote, fell short in the Senate with 44 votes in favor and 48 against failing to reach the 60-vote threshold required to bypass a filibuster. The Democratic alternative also failed, receiving just 47 votes in support and 45 against.

These back-to-back defeats underscore the intensifying divide between the two major parties and leave Congress with no clear path to avert a government shutdown by October 1 the start of the new fiscal year.

Procedural Deadlock and Political Strategy

Under current Senate rules, any stopgap funding measure to keep the government operating must attract at least 60 votes to overcome a filibuster and proceed to final passage. With the Senate nearly evenly split and both parties refusing to yield, neither side has been able to generate the bipartisan support required to push through legislation.

The shutdown threat stems from an impasse not only over short-term spending but also long-term budget priorities. While negotiations are ongoing, partisan tensions are rising. The House Appropriations Committee and its Senate counterpart are still discussing security funding allocations for the fiscal year 2026, but these talks have yet to yield actionable consensus.

The Republican-controlled House had planned to reconvene on September 29–30. However, House GOP leadership abruptly canceled the session in a bid to increase pressure on Senate Democrats by withholding legislative momentum until closer to the shutdown deadline.

Consequences of a Government Shutdown

If no agreement is reached by midnight on September 30, nonessential federal government operations will be suspended. Essential services such as border patrol, postal services, and Social Security disbursements will continue, but hundreds of thousands of federal workers including military personnel will be forced to work without pay or be furloughed.

A shutdown would affect wide-ranging sectors, from national parks and research programs to food assistance services and federal loan processing, damaging public trust and economic stability. The longer it persists, the more severe the economic and social consequences could become.

Political Implications and the Road Ahead

The rejection of both funding bills illustrates the fragility of U.S. fiscal governance in a polarized era. With Jewish New Year (Rosh Hashanah) recess scheduled for the following week, time for legislative action is vanishing. Any resolution will now depend on rapid bipartisan negotiations and a willingness to compromise two factors currently in short supply.

While public blame may fall on both parties, the GOP’s strategic cancellation of House proceedings signals a high-stakes game of brinkmanship. The hope is that Democrats will concede to more conservative spending provisions, but the strategy risks backfiring if the public perceives Republicans as obstructionist.

Countdown to Fiscal Disruption

As the October 1 deadline approaches, the United States stands on the brink of another disruptive government shutdown. With no viable funding path in place and bipartisan cooperation elusive, federal agencies are already preparing for contingency operations.

Unless a compromise emerges quickly, Americans may once again witness the tangible consequences of legislative stalemate unpaid workers, suspended services, and weakened confidence in Washington’s ability to govern responsibly.

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Diverging Expectations: Market Bets vs. Fed Caution

The Federal Reserve’s recent 25 basis-point rate cut, combined with its projection of two additional cuts by year-end, has injected a fresh wave of optimism into financial markets. However, investor expectations have quickly outpaced the Fed’s own guidance. According to LSEG data from futures contracts, Wall Street now expects the Fed’s benchmark rate to dip below 3 percent by the end of 2026 significantly more dovish than the Fed’s own dot plot projection of 3.4 percent.

This divergence suggests that investors are increasingly convinced of a more aggressive policy easing cycle, possibly driven by slowing growth, easing inflation, and political pressure. Yet it also sets the stage for potential volatility should the Fed maintain its conservative posture.

What’s Fueling the Easing Expectations?

Markets are interpreting recent data and political developments as signals that the Fed may have room and motivation to cut faster and deeper than previously indicated. A combination of slowing job creation, weaker growth forecasts, and decelerating service-sector inflation is fueling expectations for a lower trough in interest rates.

The short end of the yield curve reflects this sentiment. Treasury yields, which typically price in future policy moves, have retreated since earlier in the year. Although the 10-year yield recently rebounded to 4.14 percent from an early-September low of 4.01 percent, it remains below its January peak of 4.8 percent. This adjustment shows markets are still processing the balance between economic slowdown and Fed policy flexibility.

Meanwhile, inflation expectations remain stable, reinforcing the notion that rate cuts are being driven by economic fundamentals rather than political motivations.

Political Influence or Policy Realignment?

One unique factor in this cycle is the political backdrop. President Donald Trump has publicly advocated for faster rate cuts and recently appointed Stephen Miran, an economic advisor aligned with his policy views, to the Fed’s Board of Governors on a temporary basis. Trump has also expressed a desire to replace Fed Governor Lisa Cook, a Biden-era appointee.

These moves have sparked speculation that political pressure could distort monetary policy, but current market-based inflation indicators suggest that investors still trust the Fed’s data-driven approach. The fact that inflation expectations have not surged indicates continued confidence in the central bank’s independence at least for now.

Still, the context cannot be ignored. Political dynamics may not dictate rate decisions directly, but they could influence the pace or communication of those decisions, especially in an election cycle.

A Cautionary Tale from 2023

This is not the first time market exuberance has outpaced the Fed’s pace. Late in 2023, a sharp drop in Treasury yields pre-empted actual rate cuts, as markets priced in a steep recession. However, stronger-than-expected labor data and fiscal optimism following Trump’s election win led to a sharp reversal. Yields on the 10-year Treasury surged from 3.6 percent in September 2023 to 4.8 percent by January 2024, despite Fed cuts totaling 100 basis points.

The lesson: when investor expectations and economic realities diverge too far, corrections can be sudden and painful. A similar dynamic may re-emerge if the Fed remains cautious in the face of overly bullish market positioning.

Will Rates Drop Below 3 Percent by 2026?

The answer hinges on three critical factors: labor market trajectory, inflation persistence, and the Fed’s tolerance for political and market pressure.

Current economic trends lean in favor of further easing. Monthly job creation has slowed, raising fears that unemployment could soon rise. Service-sector inflation is moderating, and tariffs introduced by the Trump administration have not yet produced inflationary shocks. This lends support to the view expressed by Brian Quigley of Vanguard, who sees growing risks to the labor market and believes the eventual trough in rates could fall below current Fed estimates.

If these trends continue and barring any inflationary rebound the Fed may indeed be forced to revise its projections lower. However, the Fed’s credibility rests on its consistency and caution, and a pivot to more aggressive cuts would require clear evidence of economic deterioration, not just market anticipation.

Optimism with a Risk Premium

Investors may be right to anticipate more rate cuts, but their current pricing suggests a level of confidence that borders on complacency. The expectation that interest rates will fall below 3 percent by the end of 2026 is not implausible, but it is not yet aligned with the Fed’s policy signals.

As history has shown, when markets and central banks diverge too sharply, volatility tends to follow. For now, the path of monetary easing remains supportive of risk assets but it is paved with conditions that must be met, not merely hoped for. Investors should prepare for both continued upside and abrupt recalibration if the Fed’s caution once again proves resilient.

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Wall Street’s Best Week of 2025: Optimism Ignited by the Fed

The past week marked one of the most bullish phases for Wall Street this year, as all three major stock indexes surged to historic highs. The rally was driven by renewed confidence in monetary policy after the Federal Reserve delivered its first rate cut of 2025. Investors viewed this move as a pivotal turning point for U.S. markets, which had previously been navigating a cautious monetary environment.

By the close of trading on September 19, the Dow Jones Industrial Average climbed 0.4 percent to 46,315.27 points, the S&P 500 gained 0.5 percent to close at 6,664.36, and the Nasdaq Composite surged 0.7 percent to 22,631.48. For the week, the Dow added 1.1 percent, the S&P 500 rose 1.2 percent, and the Nasdaq soared by 2.2 percent, indicating a broad-based rally.

Fed’s Rate Cut Anchors the Momentum

The catalyst came on September 17 when the Fed lowered the federal funds rate by 25 basis points, bringing it to a range of 4.0 to 4.25 percent. While the decision was anticipated, the accompanying statement by Fed Chair Jerome Powell drew considerable attention. Powell described the move as a “risk management measure” and signaled that future policy actions would remain data-dependent.

Markets initially responded with a surge, though reactions later diverged as traders parsed Powell’s cautious tone. Still, the rate cut removed one of the most anticipated risk events of September, giving investors clarity on the central bank's stance and boosting confidence.

Chris Low of FHN Financial noted that the Fed’s hint at two additional cuts this year offered relief to markets and helped anchor expectations for a smoother monetary path ahead.

Key Drivers Behind the Rally

Momentum in the latter part of the week was further fueled by two critical developments. First, Nvidia’s announcement of a $5 billion investment in rival Intel caused Intel shares to spike nearly 23 percent, triggering a tech-led rally. Second, a high-level phone call between President Donald Trump and Chinese President Xi Jinping, during which both sides discussed trade and the ongoing TikTok framework agreement, added to the market’s optimistic outlook on global cooperation.

The broader psychological backdrop also shifted. Despite historically weak performance in September, the S&P 500 has risen more than 3 percent and the Nasdaq has gained nearly 5.5 percent so far this month. Analysts like Adam Turnquist from LPL Financial believe the start of a rate-cutting cycle could help offset lingering headwinds, such as valuations and macro uncertainty.

Investor Sentiment: Buoyant but Measured

Despite the euphoric gains, sentiment remains cautiously optimistic rather than euphorically overheated. According to a recent AAII survey, investor outlook is balanced, with 41.7 percent expressing bullish views and 42.4 percent bearish. Mark Hackett of Nationwide highlighted that this “healthy skepticism” is often favorable for sustained upward trends, as it suggests the absence of extreme complacency.

While record-setting levels often come with increased risk of market pullbacks, the current rally appears supported by improving macro fundamentals, responsive monetary policy, and renewed corporate dynamism in sectors such as technology.

Looking Ahead: Data-Driven Decisions

In the coming week, a dense calendar of economic releases will test investor confidence. Key indicators include the Personal Consumption Expenditures (PCE) price index, University of Michigan’s consumer sentiment survey, housing market data, and the final estimate of Q2 U.S. GDP.

These data points will be scrutinized for insights into inflation trajectories, consumer strength, and economic momentum. Although the Fed's recent action has already lifted sentiment, the sustainability of the rally may hinge on how upcoming numbers align with market expectations.

Conclusion: Momentum with a Margin for Caution

Wall Street has entered a phase of renewed enthusiasm, underpinned by policy shifts and strategic corporate activity. The Fed’s rate cut served as a confidence booster, easing one of the major macroeconomic uncertainties of 2025.

However, while upside potential remains, the market’s elevated valuations and sensitivity to data suggest a path ahead that, while promising, may be accompanied by bouts of volatility. For now, investors appear willing to ride the momentum, but the next phase will depend on whether economic fundamentals justify continued optimism.

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U.S. Now Imports More from EU Than China: Is Tariff Hike a Self-Inflicted Wound?

U.S.-EU Trade Ties Strengthen While Reliance on China Wanes

A Stronger Negotiating Position for the EU

Strategic Leverage and the Risk of Retaliation

Implications Going Forward

Indonesia Injects 320 Trillion VND into State Banks: A Strategic Liquidity Move for Credit Expansion

Government Capital Injection and Liquidity Reinforcement

Measurable Impact: Liquidity Ratios Improve Sharply

Banking System Outlook: Credit and Deposits on the Rise

Strategic Use of Fiscal Surplus: Lowering Interest Rates in Focus

Broader Implications: Pre-emptive Stabilization in a Volatile Environment

Liquidity Now, Lending Later

PBoC Maintains Cautious Easing Stance Despite Fed Rate Cut, Prioritizing Yuan Stability and Financial Health

Fed’s Policy Shift Offers Breathing Room for Asia but China Treads Carefully

Why PBoC Isn’t Rushing to Follow the Fed

Domestic Constraints: Banking Margins and Financial Stability

Learning from 2024: Tactical, Not Reactive, Policy Moves

Economic Outlook: Growth Holding, But Headwinds Remain

Global Positioning: A Strategic Opportunity Amid Dollar Weakness

Strategic Caution Over Aggressive Easing

Asia Eyes Monetary Easing as Fed Opens the Door: Diverging Paths Ahead

Fed’s Rate Cut Reshapes Global Monetary Landscape

Early Movers: Korea, Australia, India Take the Lead

Stronger Currencies, Softer Inflation Provide More Room

India and China: Contrasting Priorities

Japan: A Rare Tightening Candidate in Asia

A Widening Policy Split in Asia

U.S. Senate Rejects Both Budget Bills, Government Shutdown Looms

Bipartisan Gridlock: Both Funding Bills Collapse in the Senate

Procedural Deadlock and Political Strategy

Consequences of a Government Shutdown

Political Implications and the Road Ahead

Countdown to Fiscal Disruption

Fed Signals Two More Cuts, but Markets Eye Sub-3% Rates by 2026: Cautious Easing or Investor Overconfidence?

Diverging Expectations: Market Bets vs. Fed Caution

What’s Fueling the Easing Expectations?

Political Influence or Policy Realignment?

A Cautionary Tale from 2023

Will Rates Drop Below 3 Percent by 2026?

Optimism with a Risk Premium

Wall Street Surges to New Highs as Fed Begins Rate-Cut Cycle

Wall Street’s Best Week of 2025: Optimism Ignited by the Fed

Fed’s Rate Cut Anchors the Momentum

Key Drivers Behind the Rally

Investor Sentiment: Buoyant but Measured

Looking Ahead: Data-Driven Decisions

Conclusion: Momentum with a Margin for Caution

Risk Disclosure