SINGAPORE (Reuters) – On Thursday, Asian stocks showed slight movement, while oil prices held steady and the euro found some stability as investors weighed geopolitical, economic, and fiscal uncertainties ahead of a tariff deadline set by U.S. President Donald Trump.
Markets appear to be calming, backed by a ceasefire between Israel and Iran, which has eased concerns about disruptions in the global oil trade.
With Wall Street taking a breather, the broadest index of Asia-Pacific stocks, excluding Japan, remained mostly unchanged in early trading. Meanwhile, Tokyo’s Nikkei index climbed by 0.9%, marking a four-month high.
Reports in the media have speculated that Trump may announce a replacement for Federal Reserve Chair Jerome Powell in September or October, possibly undermining his position.
This speculation has pushed the euro to its highest level since November 2021, reaching $1.6805. The Swiss franc has also strengthened against the Japanese yen, gaining 0.35% to 144.70 per dollar.
Trump has been vocal in his criticism of Powell for not lowering interest rates, hinting at possible plans to replace him, which has unnerved investors and raised questions about the independence of the central bank.
“I think Trump’s choice for Powell’s successor, whenever it comes, will lean heavily toward supporting his agenda to cut interest rates,” remarked Tony Sycamore, a market analyst at IG.
“This raises again the concerns we had at the start of the year about the Fed’s independence, which, as we’ve noted, impacts confidence in both the Fed and the dollar,” he added.
The dollar index, reflecting the U.S. currency against six others, has fallen to its lowest point since March 2022. It has dropped 10% as investors, wary of Trump’s tariffs and their potential impact on U.S. growth, begin to seek alternatives.
Financial markets are on edge, keeping an eye on Trump’s unpredictable trade policies as the July 9th trade contract deadline approaches.
Powell resumed his testimony in Congress on Wednesday, indicating that Trump’s tariff plans could initially spike prices. However, he also noted that the risk of sustained inflation is significant enough for central banks to consider further interest rate cuts.
Fed officials expect to lower interest rates again this year, although the timing remains uncertain as they analyze the upcoming trade deadlines and assess the implications of tariffs on prices and economic growth.
“It’s unclear precisely how tariffs influence inflation. Thus, central banks will likely adopt a cautious approach, particularly the Fed,” commented a strategist from Bank of America, also highlighting that global growth risks are tied not only to trade wars but also to geopolitical developments.
They further stated, “We’re monitoring fiscal policies in major countries that may impact global interest rates. Unsustainable fiscal dynamics could lead to issues in the bond market.”
In commodity news, the ongoing conflict between Israel and Iran has contributed to a rise in oil prices, which have started to rebound after a turbulent month.
Brent crude futures increased by 0.2% to $67.82 per barrel, while U.S. West Texas Intermediate crude oil (WTI) rose by 0.28% to $65.1.
