July sixth, two thousand twenty-five (250630-250706)
The much-anticipated 7 9 is approaching, but there are no clear signs of a pickup in hedging activity in the market, We tend to think this date is more symbolic and that its impact will likely be muted.
1) To date, the tariff relief and trade arrangements reached by the United States with the United Kingdom and Vietnam can hardly be defined as formal, comprehensive trade agreements in the traditional sense.Take the U.S.-U.K. agreement as an example: about six weeks elapsed between its announcement and the start of U.S. implementation, and key details were deferred for later negotiation. The agreement with Vietnam will also need more time before all its terms are clear.
2) Signals about extensions remain muddled. On one hand, Trump says countries that have not reached an agreement will be sent tariff implementation notices directly; on the other, a White House spokesperson suggested that extensions may be granted to some countries where “negotiations are progressing quickly.” Bessent also said that an extension is possible as long as there is sufficient good faith in the negotiations, and revealed that he hopes to complete all negotiations before the U.S. Labor Day at the beginning of 9, This means the tariff extensions could continue at most until the beginning of 9.
3) Trump’s economic adviser Kevin also added some details. He mentioned:The government hopes to “lock in a batch of framework trade agreements” by 7 9, these agreements will lay the groundwork for reaching more comprehensive agreements in the future lay the groundwork.
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In the U.S. session, the S&P and Nasdaq set record highs for the second consecutive week. However, More notable was the internal sector rotation:
In line with the expectations in our Wrap last week, S&P MidCap 400 rose 2.85%, Russell 2000 rose 3.52%, followed by the Dow, which rose 2.30%.
Our view on this has not changed. New readers who did not see last week’s Wrap can go back and read it.
Chart: RTY, rose as expected and outperformed
Chart: DJI, rose as expected and outperformed
Another topic to discuss this week is the FX position (or, to be blunt, the short-dollar position). The dollar rebound driven by this week’s data came just after our euro-dollar position reached its target. We have been following this part in the Notes throughout the week, so I will not take up much space on it today. As before, interested readers can review the Notes themselves:
Chart: The market began to stall at our target
At present, market pricing for the second-half scenario is tilting toward Dovish Policy Shock+US Growth Up, whether nominal growth continues or settles into a stable pattern supported by liquidity and fiscal stimulus, As we enter July, the dollar’s depreciation may gradually moderate...
The monetary policy actions of the European economies are largely over, In the second half of the year, Asian currencies may take over, with the Korean won having particularly large potential room to fluctuate. However, this trade is not fully formed yet. We will continue to watch it and let you know when the time comes.
Additionally, an interesting piece of feedback:
Original text:https://www.wsj.com/economy/tom-barkin-richmond-fed-profile-b800d337
Tariff pass-through + fiscal expansion = clear inflation risk.
Additionally, one key issue is the 232-clause investigations. The current scope of the investigations covers a range of goods, including timber, copper, pharmaceuticals, and semiconductors. They are moving forward quickly, and some results may be released before the end of this summer.
232The main reason this has been fast-tracked is that the tariffs and tariff-extension policies implemented previously face legal challenges on many fronts. Therefore, for now, the government intends to rely more on the more certain executive authority under 232, in order to obtain trade-protection tools with greater legal stability...
Based on current progress, Most of the 232 investigations are already at a relatively advanced stage, and some may be finalized and implemented before the end of summer.
Keep an eye on BCI (and watch copper closely too).
Cross-asset weekly review (250706)
My computer is acting up again and won’t export the charts. The main logic has not changed. Everyone can review it for themselves using the recap from 0629, The two points to emphasize this week are the following; they are the most important for now:
1）The Brazilian stock index has successfully broken through
2) The Shanghai Composite 50 is approaching the level we are watching. If it manages to hold above it, the Chinese market will rise.
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Finally, one more chart:
Chart: PB data show a large inflow of risk-on capital into Asian markets in June
The weekend is over. Wishing everyone who made it this far a happy life and all the best in the new week!
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Note: All content in this article is for reference only and does not constitute investment advice or serve as the basis for any laws, regulations, or regulatory policies. Investors should not make decisions based on or rely on this information.