This’ll be a pretty light week on the data front in the US, which is to say any surprises will have to emanate from unscheduled events.
The adrenaline junkies among you needn’t worry, though: Donald Trump’s president. There will be unscheduled drama. If it’s spectacle — absurdist theatre — you crave, he never disappoints.
Apparently, Scott Bessent prevailed upon Trump to hold off on firing Jerome Powell. That’s according to sources who spoke to The Wall Street Journal. As Trump pondered the move, Bessent explained that if Powell were to sue, there’s no guarantee the case would be resolved before his term ends next year, nor was the Senate guaranteed to confirm a replacement immediately, potentially leaving the chairmanship to Philip Jefferson who, one has to assume, would hold a grudge.
Bessent also reminded Trump that the Fed’s likely to cut twice before year-end anyway, and as the Journal put it, describing discussions between Trump and his advisers, the risk-reward’s poor given that the administration would “own the cost of adverse market reactions” to Powell’s ouster “without the benefit of gaining immediate influence over monetary policy.”
Suffice to say Trump’s not a real dictator yet, nor even a full-on autocrat. If you’re the genuine article, staff changes at the central bank do in fact result in “immediate influence” over policy.
None of that rules out Trump moving against Powell eventually, nor does it preclude daily social media harangues. I suspect Trump’s allies on Capitol Hill might still open some manner of investigation into the renovation cost overruns at the center of Trump’s scheme to fabricate an excuse to rid himself of a disloyal technocrat.
Simply put: The Trump-Powell drama isn’t over. Not by a long shot. And the damage is anyway done. That Trump resorted to such a flagrantly ridiculous excuse while dreaming up “cause” to remove Powell speaks volumes about what’s coming for the Fed under Powell’s successor. The institution’s under siege, and will remain so for the foreseeable future.
Speaking of monetary policy, the ECB meets this week. After eight cuts (and seven in a row), they’re likely to take a break. A long one, actually: There’s seven weeks between the July meeting and the September GC gathering.
As the figure reminds you, eurozone inflation’s more or less back to target. Between currency strength and Europe’s famously moribund growth profile, inflation’s not a top concern for the bloc going forward.
In fact, the GC’s more worried about disinflation now, particularly given that Trump’s most recent tariff threats are actually more onerous than the staff’s worst-case scenario as gamed out in June. The ECB could (easily) justify another cut this week, but most economists expect a pause pending resolution of bilateral trade talks with The White House. A rate cut could conceivably complicate those discussions.
Like everybody else, Brussels is trying to figure out what Trump wants to hear before the August 1 “deadline” when Europe would be hit with a 30% tariff. Already, nearly three quarters of Europe’s exports to the US are subject to some sort of levy. Trump’s targeted cars and metals, and he has designs on taxing pharmaceuticals and chips too.
Reading accounts of Europe’s efforts to placate Trump is painful. Almost physically. He’s subjecting Brussels to a form of torture in these negotiations. In short: Nothing’s ever good enough for him. They’ve already agreed, in principle, to an arrangement that favors the US — which is to say a framework Trump could genuinely call a “win” — but he’s still turning the screws and holding out.
Anyway, the US data docket’s empty until Wednesday, when the NAR will tell us how weak existing home sales were in June. On Thursday, preliminary reads on S&P Global’s PMIs will probably suggest activity in both the services and manufacturing sectors expanded at a moderate pace early this month. The government’s tally of new homes sales, due later that day, is expected to show a gain. Alphabet reports on Wednesday.
