Senate Passes Trump’s Tax Bill; Powell Cautious, Tariff Threats Loom, Markets Mixed

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3520-1.3760

Euro                 1.5930-1.6280

Sterling            1.8580-1.8820

WTI Oil (opening level) $66.34

The CAD/USD is opening at 1.3637 ( 0.7333 )

Headlines

·    The Senate approved their version of President Trump’s tax-and-spending bill, sending it back to the House, where it may not have the votes to pass in its current form, as both fiscal hawks are against the large deficits it will entail and moderates are against cuts to health care coverage for low income constituents. Currently, the House has 220 Republican and 212 Democratic members (three Democratic seats are vacant after the deaths of Representative since the November election).

·    Federal Reserve Chair Powell was cautious on rate cuts, citing inflation risks this summer from Trump tariffs and the need for more data, but didn’t explicitly rule out a July rate cut, which the market currently prices at only slightly more than 20% likely.

·    Trump cast doubt on whether a trade deal with Japan will be reached before the July 9th negotiation deadline and said he would not extend the negotiation deadline. He suggested Japan could face 30% or 35% tariffs as a result. The US will prioritise India in tariff talks, addressing Japan later, per Nikkei.

·    The US June ISM Manufacturing PMI was out at 49 in June 2025 from 48.5 in May, slightly stronger than 48.8 consensus expectations. Manufacturing contracted for the fourth month, but the pace of contraction slowed, with production rebounding to 50.3 and inventories improving to 49.2.

·    US job openings rose by 374,000 to 7.769 million in May 2025, exceeding expectations and reaching the highest level since November 2024. Accommodation and food services added 314,000 openings, finance and insurance increased by 91,000, while federal government openings fell by 39,000.

·    Eurozone inflation rose to 2.0% in June 2025, meeting expectations and the ECB's target, up from 1.9% in May. Germany's inflation fell unexpectedly, France and Spain saw modest increases, and Italy's rate stayed steady.

Key Points

·    Equities: Tech under pressure; tariff risks; Europe weak; UK defensive

·    Volatility: VIX calm; mild jitters; sector rotation

·    Digital assets: BTC, ETH steady; ETF flows strong; regulatory focus

·    Fixed Income: US yields rebound at front end of curve on Powell comments, job openings data

·    Currencies: USD hit a new cycle low yesterday before rebounding, especially versus a suddenly weak JPY

·    Commodities: US fiscal debt concerns underpin gold. Crude remains stuck near lows