02/07/2025 Daily Reports
• Mounting concerns over U.S. national debt, with Trump’s tax-cut and spending bill expected to add $3.3 trillion to the deficit
• Erratic tariff policies under President Trump fueling global uncertainty and investor anxiety
• Expectations of Fed rate cuts intensifying after Trump’s public pressure on Fed Chair Powell
• The term premium surge has contributed to an 11% decline in the dollar against major currencies this year
• Short-dollar positions are at their highest in nearly two years, suggesting traders expect further dollar weakness
• A Reuters poll shows over 80% of FX analysts believe the bearish positioning will hold or worsen by end-July
• Main drivers for the dollar in coming months:
o 37% of analysts say tariff negotiations
o 18% point to interest rate differentials
o 13% see portfolio diversification away from dollar assets
o 7% highlight concerns over Fed independence
• The euro has surged nearly 14% year-to-date, its best run since 2017, with forecasts pointing to $1.20 within a year
What’s Next?
• The dollar’s traditional safe-haven status is clearly under pressure as structural issues like debt, tariffs, and political interference with monetary policy continue to unfold. If fiscal uncertainty grows and global confidence weakens, we could see a prolonged period of dollar softness. This could significantly influence global capital flows and investment decisions in the months ahead.
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Trump’s “Big Beautiful Bill” Passes Senate Despite Debt Concerns; Musk Increases Competition; Asian Stocks Plummet Ahead of Tariff Expiry Date; Paramount Settles Trump Lawsuit
• US stocks recorded mixed activity on Tuesday as President Trump’s “One Big Beautiful Bill” passed the Senate with a thin majority, advancing it closer to becoming law. The S&P 500 closed a tad lower from its all-time peak, and the Nasdaq Composite, which is heavy in tech stocks, also fell, partially because of a 5% drop in Tesla shares amid CEO Elon Musk’s ongoing public battle with President Trump. Musk has sharply criticized the massive tax and spending bill for its projected $4 trillion hike in national debt, its tax cuts for the wealthy off the backs of the poor and green energy, and promised to fund a new political party if the Republicans pass the bill. The Senate passed the bill on a tie vote with Vice President JD Vance casting the deciding vote and it now heads to the House for passage, where Speaker Mike Johnson is seeking passage by July 4.
• Across the globe, Asian stocks stumbled on Wednesday as investors weighed up prospects of US interest rate cuts and President Trump’s imminent deadline of July 9 to establish tariffs. Trump expressed that he is not thinking of extending the tariff deadline and is doubtful regarding a trade deal with Japan, although he is optimistic with regard to one with India. This stance, coupled with fiscal concerns prompted by the new US budget bill, is alarming investors.
• Separately, President Donald Trump was paid out a $16 million claim by Paramount Global in a suit alleging that its CBS news network influenced the election with a “60 Minutes” interview featuring Trump. The settlement, in which no apology is made and funds will be donated to a forthcoming presidential library (not to Trump personally), is widely regarded as significant in order for Paramount to gain federal regulatory approval for its planned merger with Skydance Media.
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