Market Rundown: Trump's Tariffs Fuel Inflation, Fed Rate Cut Bets Decline

US Inflation and Interest Rate Outlook

• 📈 US factory inflation is expected to rise, following a rapid increase in consumer prices in June, particularly in goods subject to President Trump's tariffs.
• 💡 Categories like toys and appliances saw their sharpest price hikes in years, indicating the arrival of tariff inflation.
• 📉 Traders have reduced expectations for US interest rate cuts by the Federal Reserve this year due to the inflationary pressures.

Trump's Stance on the Federal Reserve

• 🏛️ President Trump continues to criticize the Federal Reserve and suggested a renovation plan for the central bank could be sufficient to remove Chair Jerome Powell.
• 🗣️ Trump's administration is considering imposing tariffs on pharmaceuticals and semiconductors as early as the end of the month.

UK Inflation and Monetary Policy

• 🇬🇧 UK inflation unexpectedly jumped to 3.6%, its highest level since January 2024, driven by rising costs for petrol, airfares, and rail tickets.
• Sterling saw a slight increase against the dollar following the inflation data.
• 🏦 This data may influence the Bank of England's decision on interest rates in August, with policymakers focusing on the UK's labor market.

Crypto Legislation and Market Impact

• 💻 Long-awaited crypto legislation in Washington faced delays due to opposition from a faction of Republican hardliners and Democrats.
• 🤝 President Trump intervened to broker an agreement, convincing holdouts to advance the legislation.
• 🚀 Bitcoin prices rose on the news, with industry backers anticipating the bills will encourage wider adoption of digital tokens.

ASML's Growth Concerns and AI Demand

• ⚠️ ASML has warned that tariffs on new systems and parts could negatively impact its gross margins and potentially affect its 2026 growth targets.
• ⚡ Despite these concerns, the company's second-quarter bookings exceeded expectations, largely driven by strong orders fueled by AI demand.