There’s by no means a boring day with Trump in cost

Say what you want about the man but he definitely loves the drama. If it’s not getting involved with geopolitics, then it is trade politics. And if not that, then there’s the whole bashing of Fed chair Powell. It is tough for markets to catch a break when Trump is in charge.

In case you missed the headlines:

That also prompted a response from big bank CEOs here:

Amid the rush of headlines above, markets were sent for a wild ride yesterday. The dollar fell sharply initially while stocks fell and bonds were strongly bid. All of that retraced eventually of course as Trump’s firing threat receded, putting broader markets back to square one.

All that theatrics just for the drama of it in order to keep the pressure on the Fed ahead of the upcoming FOMC meeting at the end of July. As the dust settles, markets are also calming down and Fed pricing did not really budge either. As things stand, traders are still pricing in ~98% odds of no change in July.

The September meeting will be a heated debate though, with traders pricing in ~62% odds of a rate cut for that meeting. There will be two more CPI reports (12 August and 11 September) in the run up to that. The former will be crucial as policymakers can still use that to guide market expectations. As for the latter, it will come during the Fed blackout period so it will be a tricky one unless policymakers have already set out clear guidance ahead of the 17 September meeting decision.

Besides inflation data, trade developments will also be one to watch going into the 1 August deadline.

Trump is pressuring the Fed to act quickly but with evidence of tariffs slowly seeping into inflation starting to come about, the clock is definitely ticking. Things might be more evident in the next two reports, so they will be key risk factors in swaying Fed odds in the month ahead.

For now at least, we just have continue to deal with all the drama. There’s never a dull day at least, not even in the summer.