Global markets entered the day in a state of cautious anticipation, as investors shifted their focus away from political developments toward monetary policy cues and looming trade uncertainties.
Despite the U.S. Senate passing President Donald Trump’s sweeping tax-and-spending bill—dubbed his “big, beautiful bill”—markets appeared largely unfazed. Instead, attention has zeroed in on the Federal Reserve’s next move on interest rates and the impact of upcoming tariff decisions, particularly with U.S. import duties set to be re-imposed on July 9.
Trump’s recent criticism of the Federal Reserve and Chair Jerome Powell has unsettled investors, raising concerns about the central bank’s independence. This rhetoric has fueled speculation of early rate cuts, despite the Fed’s current wait-and-see stance. Speaking at a central bank summit in Portugal, Powell reaffirmed that the Fed would assess the inflationary effects of tariffs before adjusting interest rates. His comments, combined with stronger-than-expected labor market data released Tuesday, have left markets uncertain about the timing of any policy shift.
As the week progresses, all eyes are now on Thursday’s nonfarm payrolls data for clearer guidance on the Fed’s rate path.
European stocks are poised for a slightly positive start following a mixed performance in Asia. Japan’s Nikkei slipped 0.75%, while Hong Kong’s Hang Seng Index gained 0.75%, reflecting the global market’s divided outlook.
Meanwhile, with “tariff day” fast approaching, nations are rushing to finalize trade agreements with the U.S. President Trump indicated India may soon reach a deal, while Japan appears unlikely to secure an agreement in time. These developments have added to the market’s volatility as the second half of the year begins.
Currency markets have also seen notable shifts. The euro has rallied impressively in 2025, climbing 14% year-to-date to its strongest level since September 2021. However, despite this surge, central bankers gathered at the Sintra conference remain skeptical that the euro could soon challenge the dollar’s dominance as the global reserve currency. European Central Bank President Christine Lagarde remarked that such a transformation would not happen overnight, despite cracks beginning to show in the dollar’s global standing.
The long-term consequences of Trump’s tax-and-spending bill also remain in focus. While it promises economic stimulus through tax cuts, increased defense spending, and stricter immigration enforcement, it is expected to significantly add to the national debt and reduce funding for social programs. Investors continue to weigh these trade-offs, acknowledging the bill’s short-term impact while questioning its long-term sustainability.
As global markets navigate a complex mix of policy uncertainty, geopolitical tensions, and shifting economic fundamentals, the path ahead remains anything but clear.
