Market Recap: The Federal Reserve Choice, Trump’s criticism of the Bank, EU and India Tariffs, and Russia-Ukraine Development.
A lot of things are going on here in New York pre-market and during—the higher EU tariff rate, India’s secondary sanctions, the Federal Reserve chair’s 4 options, rigged labor data, and Trump’s criticism of the bank’s stance. All are displaying rising uncertainty and pushing the gold prices higher on late Tuesday.
Inside the US economy:
Starting off with how Trump repeatedly criticized the potential of having rigged Friday’s labor data, to opting to pick one of the 4 Federal Reserve chair candidates by the end of the week, to having the higher probabilities in September rate cut. All are causing the uncertainty in the economy and are factoring in the higher gold prices.
According to the CME FEDwatch Tool, the market is pricing in a 92.9% interest rate cut in September.
Regardless, major banks such as JPMorgan and the Bank of America are showing support for having no rate cut this year due to the potential of a persistent inflation problem, while rejecting Trump’s business proposal. All have resulted in a decline in their respective stock prices before the pre-market, right after Trump claimed that both banks discriminate against him.
Russia-Ukraine Conflict development
India is likely to face secondary sanctions for purchasing Russian oil, and yet, not everything has been confirmed, as Trump mentioned having further clarification after the meeting with Russia this Wednesday. This came when Russia option an air truce with Ukraine as an offer to the US. But Trump also mentioned that, if the ceasefire is not met by Friday, then fresh sanctions will be very likely.
→ If the meeting escalates, meaning Russia did not accept any obligation, then this will favor safe haven assets such as gold and vice versa.
Ongoing Trade Tension:
- The tension between the EU and the US still goes on, with Trump only saying one thing: If the obligations are not met, then the EU will be faced with a 35% tariff rate, sparking more tension in trade negotiations.
Looking Forward:
Semiconductor, Chips, and pharmaceutical tariffs are expected to be discussed next week.
→ Positive for pharmaceutical tariffs, which would be beneficial for Switzerland, one of the leading exporters in this industry. But for now, Trump also mentioned that this tariff might reach 250% which could be negative news for them.
→ Positive developments in semiconductor and chip tariffs would give an upper hand to the tech stock markets.
