China’s Ministry of Commerce has announced that a new framework agreement has been established with the United States, aimed at reducing tensions surrounding rare earth exports and technology restrictions.
This development will enable both nations to roll back previously imposed limitations.
On the other hand, the trade relationship with Canada has soured following Donald Trump’s announcement that he is “terminating all discussions on trade effective immediately” and that he will inform Canada of his tariff intentions within the week.
This decision carries significant consequences, as both countries have been strong neighbours and the second largest trading partners, and it threatens to strain businesses in both industries along the border, potentially leading to higher inflation and decreased demand for goods.
In contrast, the trade deadline between the United States and the European Union (EU) is set for July 9, with both sides hoping for a resolution. If not, US tariffs on nearly all EU products could rise by 50 percent. After a cordial G7 gathering, it is expected that both the sides will soon reach an agreement.
Additionally, last week, the Wall Street Journal (WSJ) reported that President Trump is contemplating replacing Federal Reserve Chairman Jerome Powell this summer. Despite various criticisms and pressures, Powell has remained steadfast in the face of political influence. It is globally acknowledged that political meddling in Central Banks is inappropriate, as these institutions have specific mandates to stimulate the economy, generate jobs, and maintain price stability.
Central bankers are appointed for fixed terms, and the Federal Reserve is a respected US institution, so it will be interesting to see how this situation develops.
Meanwhile, during his testimony before Congress, the Federal Reserve Chairman consistently emphasised that he is not rushing to reduce interest rates due to the uncertainty surrounding inflation.
In my view, in present times Central Banks worldwide are increasingly less engaged in direct economic activities, concentrating on stabilising banks, offering liquidity, and protecting the financial system from failure caused by mismanagement and insufficient risk management, which can result in a decrease in asset value and a rise in liabilities that eventually surpass the assets.
Although some may argue differently, I am convinced that major surges in the national debt ceiling are caused by the breaching of limits and the adoption of unusual monetary strategies like quantitative easing support my perspective.
With the reduction of geopolitical tensions, the market is anticipated to shift its focus toward economic fundamentals and tariff-related matters.
On Friday, while personal income and spending saw a drop, which could support a decrease in US interest rates, the US Core Personal Consumption Expenditure index (PCE) unexpectedly rose to 2.7 percent, reinforcing the Fed’s stance against making any cuts.
Additionally, concerns regarding the Fed’s independence put pressure on the US Dollar, and gold did not gain from the Wall Street Journal report about President Trump contemplating a replacement for the Fed Chairman this summer.
Oil prices fell sharply, nearly 11%, following news of a ceasefire between Iran and Israel, alleviating supply concerns.
However, the US equity market emerged as the week’s best performer, rebounding significantly after a few volatile weeks.
As geopolitical tensions ease, gold may be losing its appeal as a safe haven asset, with Central Bank purchases of gold also decreasing. An additional factor that may influence gold demand is the upcoming end of June and expectations for US Dollar strength.
Moreover, the market is preparing for a shorter trading week in the US due to the Independence Day holiday on July 4.
On Tuesday, the ISM Manufacturing PMI and JOLTS Job Openings will be released. On Wednesday, the ADP Non-Farm Employment Change report is expected, while Thursday will bring the US nonfarm payrolls report, alongside weekly jobless claims and the ISM Services PMI.
WEEKLY OUTLOOK - June 30- July 4
GOLD @ $ 3274— Unless gold can exceed the $ 3350-55 range, it is anticipated to stay under pressure. However, if it drops below $ 3220-25, this could lead to a test of the $ 3170-80 levels. Otherwise, it will continue to trade within its current range.
EURO @ 1.1720— Euro remains strong, approaching a nearly three-year peak. It is expected to find support at the 1.1630-40 range for further gains. The next resistance level is at 1.1798. A breakthrough here could lead to a test of the 1.1835-40 levels. Conversely, if the support fails, it will likely drop to the 1.1570-80 range.
GBP @ 1.3716— Pound Sterling needs to surpass 1.3820 for further gains. There is a risk that if it drops below 1.3620-30, it could drive Cable down to 1.3570.
JPY @ 144.67— The USD must rise above 145.50 to reach 146.25. A drop below 143.65 poses a risk of dropping to 143.10.
Copyright Business Recorder, 2025
The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper
He tweets @asadcmka
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