Morning Bid: Trump punches at Powell, dollar recoils
A look at the day ahead in European and global markets from Ankur Banerjee
Just as investor sentiment was recovering from the latest geopolitical jolt, buoyed by the Israel-Iran ceasefire, President Donald Trump rattled markets again with an attack on the Fed chair that revived worries over the central bank's independence.
The result has been another bout of dollar selling, which pushed the euro to its strongest level since November 2021 and the Swiss franc to its highest in a decade.
A report from the Wall Street Journal said Trump has toyed with the idea of naming Fed Chair Jerome Powell's replacement as early as September, which could undermine Powell's authority for the remainder of his term to next May.
Trump has repeatedly chastised Powell for not cutting interest rates and said he was "terrible" in the latest attack on Wednesday, eroding investor faith in the U.S. central bank's independence in setting policy.
Earlier this month, Trump openly contemplated firing Powell and even mused about making himself the Fed chair, although he subsequently backed off.
"I know within three or four people who I'm going to pick," Trump told reporters on Wednesday, when asked if he is interviewing candidates to replace Powell.
All that uncertainty, along with Trump's chaotic trade policies and their potential threat to economic growth, have taken a toll on the U.S. dollar as investors look to move their money elsewhere.
The dollar index , which measures the currency against six other units, is down 10% this year and on course for a sixth straight month in the red. The last time it had a run like this was in 2017.
While the "sell America" theme has faded somewhat in the past few weeks, as evidenced by U.S. stocks hitting record highs, investors remain worried about the dollar and how Trump's tariff policies could affect it.
Trump's tariffs are coming back onto the markets' radar as the clock ticks down to his July 9 deadline for trade deals.
In Thursday's Asia trade, futures indicated a muted open for European stock markets. Investors will keep an eye on defence stocks after NATO leaders backed the big increase in defence spending that Trump had demanded.
The big news in the corporate world was Shell (SHEL.L), opens new tab denying it was in talks to buy British rival BP (BP.L), opens new tab, after the Wall Street Journal reported on Wednesday that the oil majors were in early discussions about a takeover.
Key developments that could influence markets on Thursday:
Economic events: Germany Gfk consumer sentiment for July
Trying to keep up with the latest tariff news?
Our new daily news digest offers a rundown of the top market-moving headlines impacting global trade. Sign up for Tariff Watch here.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
BreakingNews.ie
17 minutes ago
- BreakingNews.ie
Taoiseach says ‘nobody wins' if EU-US tariff dispute ensues
'Nobody wins' if the US-EU tariff dispute continues, the Taoiseach has said, as he said the bloc is focused on arriving at a 'negotiated settlement' with Donald Trump's administration. Micheál Martin said it is 'extremely important' to be able to provide certainty to the market and investors. Advertisement The EU is seeking a trade deal with the US before July 9th. Speaking to reporters in Brussels, Mr Martin said: 'Every effort has to be made to get a landing zone that we can live with. 'It's not ideal. It's not optimal. Europe doesn't want tariffs, but we have to deal with the situation that is before us.' He added: 'If a tariff dispute ensues, nobody wins. There is no painless tariff war.' Advertisement US President Donald Trump placed tariffs on the EU (Suzanne Plunkett/PA) Mr Martin, who stressed that the EU had to be united in its negotiations, said he detects an 'atmosphere' that is focused on getting a deal. The Taoiseach's comments come against the backdrop of the latest report from the Economic and Social Research Institute (ESRI), which said the strength of the economy will be tested by domestic challenges and a period of global uncertainty. While the Irish domestic economy appears to be in a relatively robust state, the ESRI said 'notable international and domestic risks are clouding the outlook'. It said global uncertainty has risen to 'very elevated levels' given the fallout from changing US trade policy and other geopolitical developments. Advertisement It added: 'This increase in uncertainty is likely to weigh on investment and consumer spending.' The body noted that Ireland has been somewhat insulated from tariffs so far because of the exclusion of pharmaceutical goods. It added that the relative importance of services in total Irish exports provides 'short-term protection from tariff impacts but raises concerns about non-tariff barriers to services trade being imposed in future US-EU negotiations'. The ESRI said it expects GDP to grow by 4.6 per cent in 2025 and 2.9 per cent in 2026, with exports growing by 5.4 per cent and 3.3 per cent respectively. Advertisement However, this would be revised downwards if trade wars with the US intensify. It said it expects the domestic economy to grow at a relatively slower pace than in previous reports. The baseline forecast is for Modified Domestic Demand growth of 2.3 per cent in 2025 and 2.8 per cent in 2026. Inflation is projected to average 2.0 per cent in 2025 and 2.1 per cent in 2026. The ESRI said there are two main challenges to the public finances – that they are heavily dependent on windfall corporation tax receipts and residential construction is not accelerating sufficiently quickly to meet housing need. Advertisement Mr Martin said the economic growth projects reflect the challenges of the trade and tariff dispute. 'That has caused ripples all over the world – and that's why we favour an agreement by July 9th.' He said that could change the trajectory of the economic forecasts. The ESRI has lowered its forecast for housing completions (PA) The ESRI also lowered its forecast for housing completions to 33,000 in 2025 and 37,000 in 2026, citing ongoing structural challenges, including production costs, supporting infrastructure, financing, and labour shortages, as contributing factors in its decision. These are significantly below the Government's own targets to deliver 303,000 homes by the end of 2030, scaling up from 41,000 this year to 43,000 in 2026, reaching 60,000 in 2030. Asked about the ESRI forecast, Mr Martin said Government is putting 'fundamental changes and measures' in train to deliver a sustained increase in housing over the 'next number of years'. 'That is the objective on housing. It is the number one issue facing us, and it is the big social and economic priority of government and of the country.'
Reuters
27 minutes ago
- Reuters
European defence stocks tick up on NATO spending pledge
June 26 (Reuters) - Shares in European defence firms edged up on Thursday after NATO leaders on Wednesday backed the increase in defence spending demanded by U.S. President Donald Trump. As of 0814 GMT, German contractor Rheinmetall ( opens new tab and Italy's Fincantieri ( opens new tab, which on Thursday said it received an order worth 700 million euros ($820.89 million), were the top gainers, up between 3% and 6%. A broader European defence index (.SXPARO), opens new tab, which this year has rallied 49% on the back of a changed stance towards the sector in Europe, was up 1.3%. Countries on Wednesday pledged to spend 3.5% of GDP on core defence and 1.5% on broader defence-related measures, a jump worth hundreds of billions of dollars a year from the current goal of 2% of GDP. However, J.P. Morgan analysts say that the market is lukewarm to the targets, which are to be achieved over the next 10 years. "The European defense companies we cover and the European defense investors we speak with do not believe that most European countries will be able to spend 3.5% of GDP on core defense in the next 5-10 years," they wrote in a note to clients. Tom Guinchard, equity research analyst at Pareto Securities said the focus for defence companies would be Northern Europe, Germany and the Baltics, which are most likely to reach the targets. "Already last week, we saw Spain get the exception," said Guinchard. "France will have difficulties leveraging up to 3.5% of GDP and most of the southern countries are going to be quite hesitant." ($1 = 0.8527 euros)
Reuters
31 minutes ago
- Reuters
Key issues in India, U.S. trade talks ahead of July 9 deadline
NEW DELHI, June 26 (Reuters) - Trade talks between India and U.S. have hit a roadblock over disagreements on duties for auto component, steel and farm goods, Indian government sources said, dashing hopes of reaching an interim deal ahead of President Donald Trump's July 9 deadline to impose reciprocal tariffs. Here are the key issues at play: India's dependence on agriculture - a major source of rural jobs - has made it politically difficult for New Delhi to accept U.S. demands for steep tariff cuts on corn, soybean, wheat and ethanol, amid risks from subsidised U.S. farm products. Domestic auto, pharmaceutical, and small-scale firms are lobbying for only a gradual opening of the protected sectors, fearing competition from U.S. firms. The U.S. is pushing for greater access to agricultural goods and ethanol, citing a significant trade imbalance, along with expanded market access for dairy, alcoholic beverages, automobiles, pharmaceuticals, alcoholic beverages and medical devices. Despite India offering to tariff cuts on a range of farm products, preferential treatment for U.S. firms, and increasing energy and defence purchases, Indian officials say they are still awaiting substantive proposals from Washington amid Trump's erratic trade policies. Indian exporters remain concerned about U.S. tariff hikes, including a 10% average base tariff, 50% on steel and aluminium and 25% on autos imports, as well as a proposed 26% reciprocal duty that remains on hold. Indian policymakers see the U.S. as a preferred partner over China but remain cautious about compromising policy autonomy in global affairs. The U.S. is India's largest trading partner and a major source of investment, technology, energy, and defence equipment. India remains wary of deeper strategic ties after Trump's perceived tilt toward Pakistan during a recent conflict between the neighbours, which raised doubts about U.S. reliability. GROWING INDIAN EXPORTS TO U.S. New Delhi is confident exports will continue to grow, especially in pharmaceuticals, garments, engineering goods and electronics, helped by tariff advantage over Vietnam and China. India's goods exports to the U.S. rose to over $87 billion in 2024, including pearls, gems and jewellery worth $8.5 billion, pharmaceuticals at $8 billion, and petrochemicals around $4 billion. Services exports - led by IT, professional and financial services - were valued at $33 billion in 2024. The U.S. is also India's third-largest investor, with over $68 billion in cumulative FDI between 2002 and 2024. U.S. manufacturing exports to India, valued at nearly $42 billion in 2024, face high tariffs, ranging from 7% on wood products and machinery to as much as 15% to 20% on footwear and transport equipment, and nearly 68% on food. According to a recent White House fact sheet, the U.S. average applied Most Favoured Nation (MFN) tariff on farm goods was 5% compared to India's 39%.
