Ankur Banerjee’s outlook on the European and worldwide markets for the coming day
As investors focused on the direction of U.S. interest rates and trade agreements ahead of the re-imposition of U.S. tariffs on July 9, markets dismissed the passage of President Donald Trump’s “big, beautiful bill” by the U.S. Senate.
Investor concerns about the independence and credibility of the central bank have been heightened by Trump’s diatribe against the Federal Reserve and its Chair Jerome Powell for lowering interest rates. Additionally, it has caused traders to factor in the potential for early rate reduction.
Powell, meanwhile, reaffirmed that the Fed will “wait and learn more” about how tariffs affect inflation before cutting interest rates during a central bank meeting in Portugal.
Due to this and Tuesday’s comparatively positive labor statistics, investors are unaware of when the Fed would lower interest rates and are instead waiting for clues from Thursday’s nonfarm payroll data.
Following a mixed Asian session in which Hong Kong’s Hang Seng Index (.HSI) opened the day up 0.75% and Japan’s Nikkei fell 0.75%, European equities are expected to open marginally higher.
DAY OF TARIFF
Trump’s tax package is now on its way to the House of Representatives for potential final approval. It will increase military and immigration enforcement expenditures, cut taxes, eliminate social safety net programs, and add to the already massive U.S. debt pile.
Meanwhile, nations are rushing to reach trade agreements with the United States as the tariff day on July 9 draws nearer. According to Trump, India is more likely to sign a deal than Japan.
As the second half of the year approaches, all of that has left markets in a state of turmoil. As investors struggled with Trump’s confusing trade policies and sought out other locations to store their money, the first half was dominated by unrelenting selling of the US dollar.
Although the euro has risen 14% so far in 2025 and is already at its highest level since September 2021, it is unclear if it will eventually overtake the dollar as the preferred reserve currency of the globe.
A significant challenge to the dollar’s standing is not anticipated anytime soon, according to central bankers who convened for an annual meeting in the Portuguese town of Sintra.
“It will not occur in that manner overnight. “Historically, it never did,” stated Christine Lagarde, president of the European Central Bank.
After President Donald Trump’s tax and spending plan was approved by the Senate, investors were assessing the bill’s potential for stimulus against its multi-trillion dollar price tag.
However, it’s obvious that something has broken. Whether it can be fixed or will continue to be broken is up in the air, in my opinion.
