• US President Donald Trump’s “erratic” tariff policies are causing a sharp shift in investment globally, with investors and businesses increasingly choosing Europe over the US. European ventures, particularly hydrogen, are in focus on the back of a perceived steady framework and a large infrastructure and defense expenditure push on the continent. This as US stock futures rose, signaling a turbulent first half for markets, with the July 9 deadline for the possible resumption of unilateral tariffs approaching. Trump has indicated he may not extend the tariff reprieve, but the terms of many trade deals, including with China and India, remain unclear, even as gains are trumpeted.
• The tariff impact on the US economy is a top concern for Fed policymakers, with Thomas Barkin foreseeing “pressure on prices” in the coming months, though not as severe as pandemic-era inflation. He reiterated the Fed’s wait-and-see approach to interest rate cuts, given the economic uncertainty. In the foreign exchange markets, there’s less need for the US dollar, even during periods of volatility, with analysts pointing to shifts in cross-currency basis swaps.
• In market performance, European equities have outperformed their US peers by a mile in the first half of the year, marking a stunning comeback for the region’s markets after more than a decade. The euro has also appreciated versus the dollar, and German bunds have outperformed US Treasuries as investors globally rotated capital into Europe on concerns Trump’s tariff and tax policies will dent earnings and inflate the US deficit. Gold prices, despite being down for the month as Middle East conflict risk recedes and US consumer confidence returns, are still supported by residual geopolitical and trade tensions, trading around $220 below their April record high.

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