Following US President Donald Trump’s unexpected strikes at Iran’s three nuclear sites, investors are expected to seek safety. Bitcoin fell 3.5% to 99,255, below 100k for the first time since May 7. Global equities will likely retreat as investors price in the risk of a broader conflict and economic uncertainty, especially if fears of oil supply disruption propel the VIX Volatility Index like in April. The Iranian Parliament has voted to potentially close the Strait of Hormuz – a major global oil chokepoint.
Given how the USD has been reacting to Trump’s policies, it is too early to conclude that higher oil prices would lead the greenback to reprise its haven role in a meaningful way. Following the Liberation Day tariffs in April, Trump’s protectionist policies, attack on the Fed’s independence, and the debt-driven “One Big Beautiful Bill” have been undermining the USD’s global status.
Trump will attend a NATO Summit in the Hague on June 24-25. NATO members have approved a draft summit statement aiming for a 5% of GDP defence spending pledge by 2035, overcoming Spain’s reservations. The pact will become legally binding after the leaders, including Trump, endorse it at the summit. However, the NATO Summit has also transformed into a crisis summit where the geographic focus could expand beyond Europe to include the Middle East as a NATO frontier. Hence, Iran, Russia, China, and the broader Middle East will view this NATO Summit as a barometer of whether Iran could turn into a multi-theatre confrontation.
On June 24, Fed Chair Jerome Powell will present his semi-annual testimony on monetary policy before the House Committee on Financial Services on monetary policy. Powell will emphasize that the dot plot is not a forecast or a policy promise but an outlook of each FOMC committee member that will change with data. The range of uncertainty is wide, given the tariff uncertainty and the Middle East tensions. The Fed will react to how these factors affect actual inflation and labour market data. Until more clarity emerges, Powell will affirm that the Fed’s stance is a pause and not a pivot.
According to the last week’s Summary of Economic Projections, among the 17 FOMC participants, there was a clear division – eight held out for two rate cuts by the end of 2025, with two favouring one cut. The remaining seven did not see a need to lower rates this year. Last Friday, the interest rate futures priced in a 65% chance of a Fed cut in September.
Quote of the Day
“There is no gambling like politics.”
Benjamin Disraeli
June 23 in history
In 2010, the Marina Bay Sands casino resort owned by Las Vegas Sands officially opened in Singapore, with an infinity pool on the world's largest cantilevered platform.
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