The week began with leaders from the G7 gathering for their summit in Kananaskis, Canada. However, geopolitical tensions quickly overshadowed the event. The summit was dominated by the escalating conflict in the Middle East, prompting President Trump to leave early to address the situation. Ukrainian President Volodymyr Zelensky also departed the summit, though he secured new aid from Canada rather than the United States, as the G7 struggled to present a united front in efforts to resolve the ongoing conflict with Russia.
As expected, the US Federal Reserve left interest rates unchanged at 4.5% on Wednesday. There has yet to be a rate cut this year, and Fed Chair Jerome Powell has continued to voice concerns about a potential reacceleration in inflation over the coming months, as President Trump’s tariffs begin to impact prices. It is clear that the Fed will want to see signs of softening in the labour market, which has remained resilient throughout the first half of the year. Markets remain optimistic about the likelihood of two rate cuts in 2025, although expectations have shifted towards a more gradual pace, with just a single 25 bps (0.25%) cut anticipated in both 2026 and 2027.
President Trump has repeatedly made it clear that he wants Fed Chair Jerome Powell to cut interest rates since returning to office in January. While the threat of Trump dismissing Powell has diminished, he has indicated that he will soon nominate Powell’s successor—despite nearly a year remaining in Powell’s term. Such a move would likely cause significant unease in financial markets, particularly if the nominee is perceived as a Trump loyalist.
The UK and US have finalised their trade agreement, initially outlined in May. President Trump, who remains unpredictable, expressed clear admiration for Sir Keir Starmer and the UK, which he described as the country’s “ultimate protection”. Under the agreement, all tariffs in the aerospace sector will be removed, while tariffs on the automotive industry will be reduced from 25% to 10%. Both sides also pledged to continue working towards a zero-tariff arrangement on core steel products.
Italian car manufacturer Ferrari has delayed plans to launch its electric vehicle (EV) range from 2026 to 2028, due to a lack of consumer demand. Known for its loyal and passionate customer base, built on exclusivity and racing heritage, Ferrari is using the additional time to further develop its EV offering, particularly to address the challenge of battery technology, which currently lacks the sustained power required for high-performance vehicles. This trend is not unique to Ferrari, other luxury automakers are also adjusting their EV strategies; Lamborghini has postponed its EV launch until 2029, while Maserati has cancelled plans for an electric version of the MC20.
Turning to Europe, and in contrast to the United States, three interest rate cuts were announced within 24 hours. The Swiss National Bank, Sweden’s Riksbank, and Norway’s Norges Bank each trimmed rates by 25 bps (0.25%). Despite the coordinated timing, each central bank is responding to different economic conditions. Switzerland has entered a period of deflation, with inflation falling to -0.1%, largely due to the strength of the Swiss franc. In Sweden, the krona has also appreciated significantly against the US dollar this year, and with inflation nearly flat, Riksbank Governor Erik Thedéen saw room for monetary easing. For Norway, this marks the first interest rate cut since 2020.
The Bank of England (BoE) met on Thursday and, as markets anticipated, held interest rates steady at 4.25%. Notably, three of the nine policymakers voted in favour of a 25bps (0.25%) rate cut, more than initially expected. Following the meeting, BoE Governor Andrew Bailey stated that interest rates remain on a gradual downward path and acknowledged early signs of softening in the labour market. He emphasised that the Bank would continue to adopt a “gradual and careful” approach, citing elevated global uncertainty and ongoing geopolitical tensions as factors that could influence future decisions. Similar to the US, investors have priced in two 25 bps (0.25%) cuts by the end of the year.
The ongoing conflict in the Middle East has put upward pressure on oil prices, with Brent crude oil rising above $77 a barrel this week. If we were to see the Strait of Hormuz shut, then it’s likely oil prices would spike further. Approximately 20 million barrels of oil and petroleum products pass through the Strait of Hormuz daily therefore any closure will lead to severe disruption in the delivery of oil.
For gaming enthusiasts, the Nintendo Switch 2 has officially become the most successful console launch in history, surpassing Sony’s PlayStation 5 release in 2020. The console sold over 1.1 million units in the US and 3.5 million units globally within just four days, setting a new sales record. Nintendo’s shares have surged 40% year-to-date.
Nathan Amaning, Investment Analyst
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