June 26, 2025 • 15 mins
The US stock rally lost some steam Wednesday with the S&P 500 Index ending the day flat after Federal Reserve Chair Jerome Powell told lawmakers that officials are struggling to determine the toll of tariffs on inflation. The benchmark closed the session unchanged in New York after swinging between small gains and losses, while the technology heavy Nasdaq 100 Index edged up 0.2% to log another all-time closing high. The tech benchmark reached the milestone Tuesday for the first time since February as a combination of robust fundamentals and easing geopolitical tensions boosted the appeal of the growth-focused gauge. In individual stock moves, Nvidia shares closed at an all-time high, with the leader in artificial intelligence chips extending an advance that has cemented its position as one of the most valuable companies in the world. We get reaction to the day's price action from Katy Kaminski, Chief Research Strategist at AlphaSimplex.
Plus - Hong Kong's de facto central bank bought the local dollar to prop it up on Thursday, in a move to defend the city's currency peg to the greenback. The Hong Kong Monetary Authority purchased HK$9.42 billion ($1.2 billion) of local currency against the US dollar, after the exchange rate touched the weak end of the permitted 7.75-7.85 per greenback trading band. In addition to pushing the currency back into its permitted trading range, the move will also make bearish bets more costly. It does this by draining liquidity from the financial system and driving up borrowing costs. We get reaction from Garfield Reynolds, Bloomberg's MLIV Asia Team Lead. He speaks with Bloomberg's Haidi Stroud-Watts and Avril Hong.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
Big cap tech shares. We're up today, sending the Nasdaq
one hundred to a record high. A lot of optimism
still over artificial intelligence that's been a key driver shares,
and in video We're up more than four percent to
finish at a record high now in the process, and
Video cemented its position as one of the most valuable
(00:33):
companies in the world. We also heard from Micron Technology
after the bell and an upbeat forecast for the current quarter.
Micron has been benefiting from demand for those high bandwidth
memory chips used in artificial intelligence. Joining me now for
a closer look at market action is Katie Kaminski, the
chief research strategist at Alpha Simplex. Katie, thank you so
(00:54):
much for making time to chat with me. What did
you make of today's price action, particularly the AI trade.
Speaker 3 (01:00):
Well, I'd have to say that it's quite remarkable to see,
you know, even though we had some rally today, but
it was very narrow. It was really focused on those
tech companies, and you're really seeing that optimism is still
there and that people are really seeing that opportunity as
one of the few on a day like today.
Speaker 2 (01:19):
So I mentioned the fact that the Nasdaq one hundred
closed at a record. We're trading it around thirty one
times earnings for the Nasdaq one hundred. Is that a concern?
Speaker 3 (01:28):
I mean, I think it's definitely a concern that we've
been voicing for quite some time. And I think if
that's sustainable, then you know, it's pretty impressive.
Speaker 4 (01:38):
So I think there is going to be that continued.
Speaker 3 (01:40):
Concern that how long can this type of growth be possible.
So far, as of today, it seems to be still
in line, but you're right, the skepticism is likely to.
Speaker 2 (01:51):
Come back, given that we had commentary today from Fed
jer J. Powell. He was testifying to the Senate Banking Committee.
Apparently the FED is still struggling to get its arms
around the impact of tariff policy on inflation. How do
you understand the tariff story as it relates to inflation.
Speaker 3 (02:09):
Well, I think the challenge is that there's a lot
of lag in data, and I think part of the
reason you see that sentiment is things are still pretty
good in terms of unemployment and other parts of their mandate.
Speaker 4 (02:21):
We do see.
Speaker 3 (02:22):
You know, if you look at signals on the technical side,
people are still concerned about long term bonds and.
Speaker 4 (02:28):
Maybe that's part of it. So I think until you have.
Speaker 3 (02:31):
More concrete data, they're willing to wait if things are
not necessary to necessarily cut rates.
Speaker 4 (02:37):
So that's why you're kind of seeing that weight and
see policy.
Speaker 2 (02:40):
And yet we've heard from two FED governors recently about
the possibility of rate cuts or a rate cut as
soon as the July meeting. How does that sit with you?
Speaker 3 (02:50):
Well, what we've seen is there's definitely been some of
that price action that's consistent with that story. It does
make you start to scratch your head a little bit, though,
because you can start thinking, I mean, you see that
today in price movements, you saw yields up, then you
saw yields down, and I think the market is leaning
towards the hope that there's going to be a bigger
(03:11):
pivot and actually get some rate cuts at some point.
Speaker 2 (03:14):
Does that make you a little bit more inclined to
look for opportunities in the bond market Right now? We
were talking about high valuations and technologies and if we
can kind of accept the notion that rates are headed
lower we just don't know when that move happens, that
maybe there are opportunities in the bond market right now.
Speaker 3 (03:31):
Well, I definitely think that the market looks a little
bit like that, and you've started to see a pivot
this month towards more bond buying, and I think with
the skepticism earlier, you know, there's definitely that potential that
this might be a good entry point. You might just
have to wait for some period of time to see the.
Speaker 4 (03:51):
Value of that.
Speaker 2 (03:52):
What are you advising clients to do in the current
environment in terms of deploying cash right now? Are you
advising them to wait and see anticipating maybe a pullback
in the equity market, or do you want to be
fully invested right now no matter.
Speaker 3 (04:06):
What, Well, I'd say, you know, we tend to look
at more technical signals, and what we've seen is that
equity signals have strengthened some. So there is some indication
that equity equity positioning isn't as weak as it was
before there was less concern. But of course, you know,
it is a very volatile time and you have seen
(04:27):
a lot of big moves, particularly outside of the equity market,
So you know, if there were some real events, you
could actually see a much bigger move in equities, but
so far it's been relatively calm.
Speaker 2 (04:40):
Surprisingly, I'm curious as to how you're understanding geopolitical risk
as a part of the story in markets. We've heard
from President Trump saying the US will hold a meeting
with Iran next week. He is doubtful that there is
any need for a diplomatic agreement on the nuclear program
in Iran, citing the damage that some of that American
bombing has done to key sites. This is up for debate.
(05:03):
We still don't have a lot of sharp visibility into
this situation. For the moment, it seems like the risk
has diminished, the oil market has calmed down quite a bit.
But I'm curious to get your take on geopolitics as
a factor in market's behavior lately.
Speaker 4 (05:21):
Well, it's been.
Speaker 3 (05:22):
Actually quite surprising to me that you didn't see the
type of movements in the equity markets that I would
have expected, given the strength of how extreme the headlines
were and how concerned people were. I think the only
place you've seen that is in the energy markets.
Speaker 4 (05:41):
Where you've seen sort of moves that were exceptional.
Speaker 3 (05:44):
Equity markets have remained relatively strong and relatively calm if
you take those in comparison with energies. So I think
the equity market is sort of looking past this right now,
and people, instead of acting on this, are kind of
waiting to see if we have a little bit more clarity,
which I actually found somewhat surprising. But you did see
(06:07):
those moves in places like commodities, so that could be
a foreshadowing of volatility that we could have if we
had more clarity on how a potential escalation.
Speaker 4 (06:19):
In the future.
Speaker 2 (06:20):
I want to ask you next about the financials, because
we heard from the FED today policymakers unveiled a plan
to roll back an important rule on capital for the
big banks. Talk to me a little bit about how
you understand the tweak to the enhanced supplementary leverage ratio,
what it means for big institutions like Bank of America
(06:41):
or JP Morgan Chase Well in.
Speaker 3 (06:43):
Some sense having less restrictions in lending, and also could
mean that there's a little.
Speaker 4 (06:49):
More freedom in the space.
Speaker 3 (06:51):
But what's interesting in terms of the commentary that I've
seen is that the market didn't really move much on
those adjustments, which to me suggest that whatever decisions were
made with this, some of the price action is already
baked in in these banks, so I think for me
that was surprising in some sense. And I know some
(07:11):
reports were noting that despite a relatively large decision, that
you didn't see a lot of price action regarding this
particular decision.
Speaker 2 (07:21):
How are you viewing markets offshore these days?
Speaker 3 (07:24):
Well, it's interesting to ask that because honestly, the focus
has been so much on the current Middle East conflict
that there's been a little bit less focus on places
like China, Japan, Australia. And I think that you know,
you've seen Japan has definitely been in a slightly different
trend than the US, So you've seen a weaker young
(07:46):
You've seen some questioning about whether or not there's going
to be a hike at some point. So I'd say
that it's been relatively quiet outside of what's been going
on geopolitically more recently.
Speaker 2 (07:57):
So, staying with geopolitics for the moment, the president is
returning from the NATO summit a bold commitment from all
thirty two members to raise military spending to five percent
of GDP. So does this compel you to look more
closely at what's going on in the European equity market.
Speaker 3 (08:15):
It definitely does in the sense that there is sort
of a glimmer for some growth and.
Speaker 4 (08:22):
Also opportunities in that space.
Speaker 3 (08:24):
It just really indicates a change and shift in policy
which will definitely be somewhat growth oriented for European countries.
So I think people are looking more closely at European
equities and they have really outpaced this year as well.
So I think that's something that's going to be a
more common theme as we see how this unravels in
(08:45):
terms of actual spending.
Speaker 2 (08:47):
And where Katie will leave it there. Thank you so
very much. Katie Kaminski there, chief re search strategist at
Alpha Simplex, joining us here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.
Hong Kong's de facto central bank defended the local currency
(09:11):
against its peg to the US dollar. The monetary authority
bought nine point four to two billion dollars in Hong
Kong dollars. This is after the exchange rate touched the
weak side of the permitted trading ban of seven seventy
five to seven eighty five against the greenback. For more,
we heard from Garfield Reynolds in Sydney. He is our
Asia team lead for Bloomberg Markets Live. Garfield spoke with
(09:34):
Bloomberg's April Hong and Heidi Stroud Watts.
Speaker 1 (09:38):
A bit of uncertainty when it comes to where that
dollar trajectory is headed. Oh well, I mean, the broader
dollar trajectory is very much for dollar weakness, but it
is interesting to watch the Hong Kong dollar instead. Instead,
instead it's falling against the US dollar and risking you're
falling out of its out of its peg. Hence the
(10:02):
need for Hong Kong to buy its own dollar. That
is a tension that's been brewing for some time because
in particular, as the Chinese government, the main government highlights
its desire to have the yuan be playing a greater
(10:22):
role globally, it comes to look at stranger and stranger
for the Hong Kong dollar to be pegged to the
US dollar and pegged so tightly the yuan does have.
You know, there are controls on where it goes against
the US dollar, but those controls allow it to gradually
(10:43):
move one way or the other, and it's gradually, in fact,
been strengthening but part of the setup is that the
Hong Kong dollar is stuck where it is between seven
seventy five and seven eighty five, and the other things
the PBOC are doing are helping to down benchmark borrowing
costs on the short end, in particular in Hong Kong.
(11:05):
So that's setting up the arbitrage opportunity that is pushing
down the Hong Kong dollar against the US dollar, even
if in a lot of ways you might think it
should gravitate more towards the seven point under seven point
two per dollar level that the yuan is at. So
that's a long term tension that they're going to face
(11:28):
more and more often as things developed towards a weaker
US dollar and a yuan that is playing a greater
role on capital market. So might not be the first,
might not be the last time in the coming months
when Hong Kong needs to intervene in this fashion.
Speaker 5 (11:47):
Yeah, go after your point about the dollar weakness, we're
seeing a losing ground. As you spoke against the backdrop
of Wall Street Journal reporting that Trump might name the
fet chair successor to Powerell earlier. I mean, what'sn't clear
here because markets are already sort of been betting for this.
Speaker 1 (12:04):
Yeah. Well, the play here is that it's another blow
to the credibility of the US dollar because the Fed's
independence from politics has been a key part of why. Well,
it's a key dynamic for investors and for traders. You know,
(12:26):
why are you willing to go to the US dollar
before anything else. Well, it's got the deepest bond market.
That helps. It's also got the credibility of its institutions
and the idea that power will get shunted out and
replaced by somebody more open to Trump's call for lower
(12:48):
interest rates just in order to save the US government
money on its borrowing costs. That's the kind of thing
that's going to have traders saying, well, we might want
to avoid the US dollar, or if we're going to
buy US dollars, we're not willing to pay extra to
do so. So you get at the very least movement
down in the price of the dollar against other currencies.
(13:12):
You're notable that this Wall Street Journal report comes after
a US Republican senator was you're very pointed in his
criticism of Powell at the testimony, or a US representative
saying Trump was voted in by millions. You were voted
(13:33):
in by one person, Donald Trump, and you don't want
and he doesn't want you to go on doing what
you've been doing. So what's your justification.
Speaker 3 (13:44):
The other visit News's course of relaxation of capital rules.
Speaker 2 (13:47):
Did you expect that to have more of an impact?
Speaker 1 (13:49):
Well, the impact was mostly priced in, it looks like,
and I think it was noticeable that earlier on a
few days ago, we had some comments from the Fed,
I think after the FOMC meeting in fact, that they
were moving more strongly towards the SLR changes. That didn't
(14:10):
have a huge impact, and it highlights that just because
banks will be able to buy more treasuries doesn't necessarily
mean they will, especially when we are going into what's
going to be a very fraud couple of weeks. We
have the reciprocal tariff deadline coming at about July nine,
(14:33):
and then before that, we have the July four deadline
for whether or not the Trump's spending and taxation bill
gets past, and how much that's likely to increase the deficit.
That's another uncertainty. We also have the uncertainty of we
get payrolls July three. This time around on Thursday, ahead
(14:56):
of the July for US holiday, So it's going to
be a very choppy week next week. Not too much
of a surprise that banks and others aren't going to
rush into treasuries absent a clear signal that, for example,
right cuts the coming.
Speaker 2 (15:14):
Garfield Reynolds in Sydney. He is our Asia team lead
for Bloomberg Markets Live. Thanks for listening to today's episode
of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we
look at the story shaping markets, finance, and geopolitics in
the Asia Pacific. You can find us on Apple, Spotify,
(15:35):
the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm Doug Prisner,
and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
Big cap tech shares. We're up today, sending the Nasdaq
one hundred to a record high. A lot of optimism
still over artificial intelligence that's been a key driver shares,
and in video We're up more than four percent to
finish at a record high now in the process, and
Video cemented its position as one of the most valuable
(00:33):
companies in the world. We also heard from Micron Technology
after the bell and an upbeat forecast for the current quarter.
Micron has been benefiting from demand for those high bandwidth
memory chips used in artificial intelligence. Joining me now for
a closer look at market action is Katie Kaminski, the
chief research strategist at Alpha Simplex. Katie, thank you so
(00:54):
much for making time to chat with me. What did
you make of today's price action, particularly the AI trade.
Speaker 3 (01:00):
Well, I'd have to say that it's quite remarkable to see,
you know, even though we had some rally today, but
it was very narrow. It was really focused on those
tech companies, and you're really seeing that optimism is still
there and that people are really seeing that opportunity as
one of the few on a day like today.
Speaker 2 (01:19):
So I mentioned the fact that the Nasdaq one hundred
closed at a record. We're trading it around thirty one
times earnings for the Nasdaq one hundred. Is that a concern?
Speaker 3 (01:28):
I mean, I think it's definitely a concern that we've
been voicing for quite some time. And I think if
that's sustainable, then you know, it's pretty impressive.
Speaker 4 (01:38):
So I think there is going to be that continued.
Speaker 3 (01:40):
Concern that how long can this type of growth be possible.
So far, as of today, it seems to be still
in line, but you're right, the skepticism is likely to.
Speaker 2 (01:51):
Come back, given that we had commentary today from Fed
jer J. Powell. He was testifying to the Senate Banking Committee.
Apparently the FED is still struggling to get its arms
around the impact of tariff policy on inflation. How do
you understand the tariff story as it relates to inflation.
Speaker 3 (02:09):
Well, I think the challenge is that there's a lot
of lag in data, and I think part of the
reason you see that sentiment is things are still pretty
good in terms of unemployment and other parts of their mandate.
Speaker 4 (02:21):
We do see.
Speaker 3 (02:22):
You know, if you look at signals on the technical side,
people are still concerned about long term bonds and.
Speaker 4 (02:28):
Maybe that's part of it. So I think until you have.
Speaker 3 (02:31):
More concrete data, they're willing to wait if things are
not necessary to necessarily cut rates.
Speaker 4 (02:37):
So that's why you're kind of seeing that weight and
see policy.
Speaker 2 (02:40):
And yet we've heard from two FED governors recently about
the possibility of rate cuts or a rate cut as
soon as the July meeting. How does that sit with you?
Speaker 3 (02:50):
Well, what we've seen is there's definitely been some of
that price action that's consistent with that story. It does
make you start to scratch your head a little bit, though,
because you can start thinking, I mean, you see that
today in price movements, you saw yields up, then you
saw yields down, and I think the market is leaning
towards the hope that there's going to be a bigger
(03:11):
pivot and actually get some rate cuts at some point.
Speaker 2 (03:14):
Does that make you a little bit more inclined to
look for opportunities in the bond market Right now? We
were talking about high valuations and technologies and if we
can kind of accept the notion that rates are headed
lower we just don't know when that move happens, that
maybe there are opportunities in the bond market right now.
Speaker 3 (03:31):
Well, I definitely think that the market looks a little
bit like that, and you've started to see a pivot
this month towards more bond buying, and I think with
the skepticism earlier, you know, there's definitely that potential that
this might be a good entry point. You might just
have to wait for some period of time to see the.
Speaker 4 (03:51):
Value of that.
Speaker 2 (03:52):
What are you advising clients to do in the current
environment in terms of deploying cash right now? Are you
advising them to wait and see anticipating maybe a pullback
in the equity market, or do you want to be
fully invested right now no matter.
Speaker 3 (04:06):
What, Well, I'd say, you know, we tend to look
at more technical signals, and what we've seen is that
equity signals have strengthened some. So there is some indication
that equity equity positioning isn't as weak as it was
before there was less concern. But of course, you know,
it is a very volatile time and you have seen
(04:27):
a lot of big moves, particularly outside of the equity market,
So you know, if there were some real events, you
could actually see a much bigger move in equities, but
so far it's been relatively calm.
Speaker 2 (04:40):
Surprisingly, I'm curious as to how you're understanding geopolitical risk
as a part of the story in markets. We've heard
from President Trump saying the US will hold a meeting
with Iran next week. He is doubtful that there is
any need for a diplomatic agreement on the nuclear program
in Iran, citing the damage that some of that American
bombing has done to key sites. This is up for debate.
(05:03):
We still don't have a lot of sharp visibility into
this situation. For the moment, it seems like the risk
has diminished, the oil market has calmed down quite a bit.
But I'm curious to get your take on geopolitics as
a factor in market's behavior lately.
Speaker 4 (05:21):
Well, it's been.
Speaker 3 (05:22):
Actually quite surprising to me that you didn't see the
type of movements in the equity markets that I would
have expected, given the strength of how extreme the headlines
were and how concerned people were. I think the only
place you've seen that is in the energy markets.
Speaker 4 (05:41):
Where you've seen sort of moves that were exceptional.
Speaker 3 (05:44):
Equity markets have remained relatively strong and relatively calm if
you take those in comparison with energies. So I think
the equity market is sort of looking past this right now,
and people, instead of acting on this, are kind of
waiting to see if we have a little bit more clarity,
which I actually found somewhat surprising. But you did see
(06:07):
those moves in places like commodities, so that could be
a foreshadowing of volatility that we could have if we
had more clarity on how a potential escalation.
Speaker 4 (06:19):
In the future.
Speaker 2 (06:20):
I want to ask you next about the financials, because
we heard from the FED today policymakers unveiled a plan
to roll back an important rule on capital for the
big banks. Talk to me a little bit about how
you understand the tweak to the enhanced supplementary leverage ratio,
what it means for big institutions like Bank of America
(06:41):
or JP Morgan Chase Well in.
Speaker 3 (06:43):
Some sense having less restrictions in lending, and also could
mean that there's a little.
Speaker 4 (06:49):
More freedom in the space.
Speaker 3 (06:51):
But what's interesting in terms of the commentary that I've
seen is that the market didn't really move much on
those adjustments, which to me suggest that whatever decisions were
made with this, some of the price action is already
baked in in these banks, so I think for me
that was surprising in some sense. And I know some
(07:11):
reports were noting that despite a relatively large decision, that
you didn't see a lot of price action regarding this
particular decision.
Speaker 2 (07:21):
How are you viewing markets offshore these days?
Speaker 3 (07:24):
Well, it's interesting to ask that because honestly, the focus
has been so much on the current Middle East conflict
that there's been a little bit less focus on places
like China, Japan, Australia. And I think that you know,
you've seen Japan has definitely been in a slightly different
trend than the US, So you've seen a weaker young
(07:46):
You've seen some questioning about whether or not there's going
to be a hike at some point. So I'd say
that it's been relatively quiet outside of what's been going
on geopolitically more recently.
Speaker 2 (07:57):
So, staying with geopolitics for the moment, the president is
returning from the NATO summit a bold commitment from all
thirty two members to raise military spending to five percent
of GDP. So does this compel you to look more
closely at what's going on in the European equity market.
Speaker 3 (08:15):
It definitely does in the sense that there is sort
of a glimmer for some growth and.
Speaker 4 (08:22):
Also opportunities in that space.
Speaker 3 (08:24):
It just really indicates a change and shift in policy
which will definitely be somewhat growth oriented for European countries.
So I think people are looking more closely at European
equities and they have really outpaced this year as well.
So I think that's something that's going to be a
more common theme as we see how this unravels in
(08:45):
terms of actual spending.
Speaker 2 (08:47):
And where Katie will leave it there. Thank you so
very much. Katie Kaminski there, chief re search strategist at
Alpha Simplex, joining us here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.
Hong Kong's de facto central bank defended the local currency
(09:11):
against its peg to the US dollar. The monetary authority
bought nine point four to two billion dollars in Hong
Kong dollars. This is after the exchange rate touched the
weak side of the permitted trading ban of seven seventy
five to seven eighty five against the greenback. For more,
we heard from Garfield Reynolds in Sydney. He is our
Asia team lead for Bloomberg Markets Live. Garfield spoke with
(09:34):
Bloomberg's April Hong and Heidi Stroud Watts.
Speaker 1 (09:38):
A bit of uncertainty when it comes to where that
dollar trajectory is headed. Oh well, I mean, the broader
dollar trajectory is very much for dollar weakness, but it
is interesting to watch the Hong Kong dollar instead. Instead,
instead it's falling against the US dollar and risking you're
falling out of its out of its peg. Hence the
(10:02):
need for Hong Kong to buy its own dollar. That
is a tension that's been brewing for some time because
in particular, as the Chinese government, the main government highlights
its desire to have the yuan be playing a greater
(10:22):
role globally, it comes to look at stranger and stranger
for the Hong Kong dollar to be pegged to the
US dollar and pegged so tightly the yuan does have.
You know, there are controls on where it goes against
the US dollar, but those controls allow it to gradually
(10:43):
move one way or the other, and it's gradually, in fact,
been strengthening but part of the setup is that the
Hong Kong dollar is stuck where it is between seven
seventy five and seven eighty five, and the other things
the PBOC are doing are helping to down benchmark borrowing
costs on the short end, in particular in Hong Kong.
(11:05):
So that's setting up the arbitrage opportunity that is pushing
down the Hong Kong dollar against the US dollar, even
if in a lot of ways you might think it
should gravitate more towards the seven point under seven point
two per dollar level that the yuan is at. So
that's a long term tension that they're going to face
(11:28):
more and more often as things developed towards a weaker
US dollar and a yuan that is playing a greater
role on capital market. So might not be the first,
might not be the last time in the coming months
when Hong Kong needs to intervene in this fashion.
Speaker 5 (11:47):
Yeah, go after your point about the dollar weakness, we're
seeing a losing ground. As you spoke against the backdrop
of Wall Street Journal reporting that Trump might name the
fet chair successor to Powerell earlier. I mean, what'sn't clear
here because markets are already sort of been betting for this.
Speaker 1 (12:04):
Yeah. Well, the play here is that it's another blow
to the credibility of the US dollar because the Fed's
independence from politics has been a key part of why. Well,
it's a key dynamic for investors and for traders. You know,
(12:26):
why are you willing to go to the US dollar
before anything else. Well, it's got the deepest bond market.
That helps. It's also got the credibility of its institutions
and the idea that power will get shunted out and
replaced by somebody more open to Trump's call for lower
(12:48):
interest rates just in order to save the US government
money on its borrowing costs. That's the kind of thing
that's going to have traders saying, well, we might want
to avoid the US dollar, or if we're going to
buy US dollars, we're not willing to pay extra to
do so. So you get at the very least movement
down in the price of the dollar against other currencies.
(13:12):
You're notable that this Wall Street Journal report comes after
a US Republican senator was you're very pointed in his
criticism of Powell at the testimony, or a US representative
saying Trump was voted in by millions. You were voted
(13:33):
in by one person, Donald Trump, and you don't want
and he doesn't want you to go on doing what
you've been doing. So what's your justification.
Speaker 3 (13:44):
The other visit News's course of relaxation of capital rules.
Speaker 2 (13:47):
Did you expect that to have more of an impact?
Speaker 1 (13:49):
Well, the impact was mostly priced in, it looks like,
and I think it was noticeable that earlier on a
few days ago, we had some comments from the Fed,
I think after the FOMC meeting in fact, that they
were moving more strongly towards the SLR changes. That didn't
(14:10):
have a huge impact, and it highlights that just because
banks will be able to buy more treasuries doesn't necessarily
mean they will, especially when we are going into what's
going to be a very fraud couple of weeks. We
have the reciprocal tariff deadline coming at about July nine,
(14:33):
and then before that, we have the July four deadline
for whether or not the Trump's spending and taxation bill
gets past, and how much that's likely to increase the deficit.
That's another uncertainty. We also have the uncertainty of we
get payrolls July three. This time around on Thursday, ahead
(14:56):
of the July for US holiday, So it's going to
be a very choppy week next week. Not too much
of a surprise that banks and others aren't going to
rush into treasuries absent a clear signal that, for example,
right cuts the coming.
Speaker 2 (15:14):
Garfield Reynolds in Sydney. He is our Asia team lead
for Bloomberg Markets Live. Thanks for listening to today's episode
of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we
look at the story shaping markets, finance, and geopolitics in
the Asia Pacific. You can find us on Apple, Spotify,
(15:35):
the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm Doug Prisner,
and this is Bloomberg
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