Asian stocks saw slight gains on Wednesday amidst ongoing uncertainty caused by President Trump’s tariffs and ambiguities surrounding Federal Reserve policies. The dollar remains close to its multi-year lows, which has investors and traders on edge about future market conditions. Federal Reserve Chairman Jerome Powell has maintained a wait-and-see approach regarding potential rate cuts, significantly influencing market sentiment.
Traders eagerly anticipate the forthcoming U.S. payrolls report, hoping it will offer clearer insight into the Federal Reserve’s next moves. In political news, President Trump’s tax bill successfully passed the Senate and is now set to be reviewed by the House of Representatives. Markets shrugged off the U.S. Senate passing President Trump’s tax bill, as investor attention remained fixed on the path for U.S. interest rates and upcoming trade deals ahead of the United States’ re-imposition of tariffs on July 9.
President Trump’s calls for the Federal Reserve and its Chair Jerome Powell to lower rates have stoked investor concerns over the central bank’s independence and credibility, leading to speculation about early rate cuts. However, Powell reiterated at a central bank gathering in Portugal that the Fed plans to “wait and learn more” about the tariffs’ impact on inflation before making any rate decisions.
Asian market momentum amidst tariffs
Recent upbeat labor data has added to the uncertainty, with investors awaiting Thursday’s non-farm payrolls data for further clues on possible rate cuts. European stocks are set for a slightly higher open following a mixed session in Asia, where Japan’s Nikkei dropped 0.75% and Hong Kong’s Hang Seng Index rose by 0.75%. Trump’s tax bill, which is set to add to the already substantial U.S. debt, reduce social safety net programs, and boost military and immigration enforcement spending, now heads to the House of Representatives for possible final approval.
Meanwhile, with the July 9 tariff date approaching, various countries are working to finalize trade deals with the U.S. India is likely to sign a deal, while Japan is not, according to Trump. The first half of the year saw relentless U.S. dollar selling as investors reacted to Trump’s unpredictable trade policies and looked for alternative investments. The focus has been on whether any other currency could challenge the dollar’s status as the world’s reserve currency.
Christine Lagarde, President of the European Central Bank, stated at the Sintra conference that while the dollar’s dominance is under scrutiny, any major changes are unlikely to happen swiftly. Key developments that could influence markets on Wednesday include the Euro zone unemployment rate for May and updates on trade deals.