Shadow

Taiwan Insurers’ FX Losses Double in May on US Dollar Slump [Bloomberg] 

EU, US Confident They’ll Reach Tariff Deal by July Deadline [Bloomberg]

US multinationals on track for minimum tax reprieve after G7 deal [FT]

Shadow

Donald Trump continues to badmouth FED Chair Powell. It's not a good look but Trump is correct in saying rates need to be considerably lower.

And now Trump and Bessent are effectively acting as a shadow FED. They've been drawing down the Treasury General Account to buy off-the-run treasuries ostensibly to provide better liquidity to Primary Dealers. Although it's obviously not QE, it is stimulus and the cash goes directly into the banking system rather than as reserves. It's a fine line between doing the FED's job for it and running out of money. And shouldn't they be paying the government's pension obligations instead?

U.S. Treasury, General Account: Week Average 

They're really turning the heat up on Powell now;

• Federal Reserve Chair Jerome Powell now heads into his next challenge: a potential threat that President Donald Trump could undermine his authority by soon naming his pick to head the central bank.
• In the wake of the intense criticism, Wall Street has been buzzing over the potential for a “shadow chair,” or someone Trump could install as a central bank gadfly until Powell’s term expires.
• A report indicated that Trump is considering naming the successor sooner than expected in an attempt to influence interest rate policy.

And Scott Bessent put the boot in too, but in a much more appropriate way 

 Watch CNBC’s full interview with Treasury Secretary Scott Bessent [CNBC]

Trump also seemed to be threatening something else when he said he had "instructed his people to not issue any debt beyond 9 months". With 3.3 TN of coupon auctions scheduled for the next 9 months, such a move would move 10 year rates aggressively lower but would be disasterous for the USD.

Markets took this as Trump being an idiot, not knowing what he was talking about, but what if this is the only course of action available to get those rates down without the FEDs help. 

I can only think he's considering it. 

Stablecoins ‘perform poorly’ as money, central banks warn [FT]

United States

US Economic Indicators

The finances of the US came into focus this week and it wasn't good reading

The US Treasury posted a $316 billion budget deficit in May, the third-largest on record. This comes as total government outlays rose 3% from YoY, to $687 billion, per ZeroHedge. And, while tariff revenue surged 270% YoY, to a record $23 billion, it barely made a dent in the deficit. In the first 8 months of Fiscal Year 2025, the budget gap now stands at $1.37 trillion, the third-largest in history. The 12-month federal deficit now stands at $2.0 trillion, or 6.7% of GDP, up from 6.1% a year ago. The deficit spending crisis is worsening.

Analysis by The Kobeissi Letter on X

The US current account deficit jumped by $138.2 BILLION in Q1 2025, or 44.3%, to a record $450.2 billion. The current account measures the flow of goods, services, and investments into and out of the country, or how much the country earns from abroad versus how much it spends abroad. As a share of GDP, the deficit rose 1.8 percentage points to 6.0%, the highest since the all time high of 6.3% in Q3 2006. At an annual rate, the current account's deficit hit a whopping $1.8 TRILLION. This spike comes as businesses rushed to front-load imports ahead of newly imposed tariffs on foreign goods. The US trade imbalance is now at historic levels.

Analysis by The Kobeissi Letter on X

The USD is still under pressure but long term support is near. There must be flows waiting to buy USD if only as part of dedollarisation. These flows certainly haven't slowed the rate of price decline so far.

Who's selling? Breaking down the dollar's breakdown [Reuters]

DXY Monthly

And US yields which have been rangebound now for some time, are bumping into support as well.

US 10 Year Government Bond Yield Monthly

China

China Economic Indicators

No numbers economically this week as China and the US look to settle the trade dispute. The Yuan has appreciated since Liberation Day and the PBoC won't want that trend to continue past he current point.

USD/CNH Daily

China's Guangxi deluged by flood-waters from upstream province [Reuters]

Japan

Japan Economic Indicators

All eyes on Japanese CPI and all measures of it, and there are many, are elevated but in control. BoJ and MoF are obsessed with it. Luckily the markets are fully in control of the YEN and interest rates.

Europe

EU Economic Indicators

Europe continues to tread water and appears to be proactive in a trade deal with Trump. Certainly the Euro is putting in a sterling (haha) performance.

EUR/USD Daily

United Kingdom

UK Economic Indicators

Not much data here either and GBP/USD is back on a roll.

GBP/USD Daily

Canada

Canada Economic Indicators

Whereas the UK and EU seem to be set for a better relationship with US, that certainly can't be said for Canada.

Inflation looks to be sticky and above target whilst GDP is now registering negative numbers.

Australia

Australia Economic Indicators

Talk down under is all about debt and the huge amount of it.

Debt pile grows to $45k per person [The Australian]

"The net debt of federal, state and territory governments is expected to blow out to more than $1.2 trillion over the next financial year, soaring 13 per cent and sparking concerns about credit ratings – as Jim Chalmers war­ned “difficult” decisions needed to be taken on all budgets."

The Aussie Dollar's crazy ride has taken it back into the bull flag after a false break lower.

AUD/USD Daily

Interesting

What's Next?

The July 9 deadline for tariff deals comes sharply into focus now. Trump and Bessent have been talking 30 or so countries lined up with a deal, but so far we have't had any concrete evidence. It'll become evident next week.

This Week's Important Economic Indicators [London time]