Trump’s assaults on Fed immediate greenback swings and inflation fears | Invesloan.com

Today’s agenda: EU stalls X probe; China’s BRI expands; Europe’s rural areas shrink; Zelenskyy accused of authoritarian slide; and Robert Armstrong on the perfect hat

Good morning. We start with Donald Trump’s attacks on the Federal Reserve for declining to cut interest rates, which have unsettled financial markets.

What happened: On Tuesday, the US president reportedly asked Republican lawmakers if he should remove Fed chair Jay Powell, before later insisting it was “highly unlikely” he would imminently sack the central bank’s chief. An index tracking the dollar against its peers slid as much as 0.9 per cent, before trimming its losses.

Why it matters: On top of volatility in the dollar, a proxy for the health of the US economy, the repeated attacks on the Fed’s independence have also stoked concerns about inflation. Some analysts say pressure from Trump could force the Fed to become more dovish, or he could replace Powell early with a successor more amenable to lowering interest rates. These fears helped push up market-based measures of expected inflation — known as break-even rates — to multi-month highs yesterday.

Here’s more on investors’ reactions, and we have more on Trump below.

• Jeffrey Epstein: Trump has attacked his “past supporters” as his administration’s handling of files relating to the late convicted paedophile continues to divide his Maga base.

• Trump vs Maga: From Epstein to the Middle East, a summer of splits shows the president and his movement are no longer the same thing, writes Janan Ganesh.

• Coca-Cola: Trump said the beverage giant had agreed to swap high fructose corn syrup, which it has used for decades to sweeten its signature beverage in the US, for cane sugar.

Here’s what else we’re keeping tabs on today:

• UK-German ties: The two countries will sign a pact today to work more closely on selling jointly made weapons such as Typhoon jets.

• G20: The grouping’s finance ministers and top central bankers meet in South Africa.

• Results: TSMC, Volvo, PepsiCo, Marsh McLennan, easyJet, Novartis and GE Aerospace report earnings.

Five more top stories

1. Exclusive: The EU has stalled a probe into Elon Musk’s X as the bloc seeks to conclude trade talks with the US. According to officials familiar with the matter, Brussels was expected to finalise an investigation into the social media site for breaking the bloc’s digital transparency rules before the EU’s summer recess, but it will now miss that deadline.

• More EU: President Ursula von der Leyen’s plan for the bloc’s €2tn budget has sparked uproar over her ultra-centralised management style.

• US-EU trade: Brussels should not be shocked by Trump being Trump, writes Alan Beattie.

2. Exclusive: Germany is no longer the EU’s top destination for asylum seekers after the end of the Assad regime led to a drop in Syrians applying for protection in the bloc, according to an unpublished report by the EU Agency for Asylum. Spain is now the country with the highest number of applications. Here’s why.

3. Investment and construction activity in China’s Belt and Road Initiative has hit a record this year, a study has found, totalling $124bn over 176 deals in the first half of the year. The expansion in overseas markets and Beijing’s increased engagement with countries in the programme has contrasted with the US approach.

4. There is “confusion” over the costs of the UK’s secret resettlement scheme for thousands of Afghans following a data leak, the head of parliament’s spending watchdog has said. Sir Geoffrey Clifton-Brown called on ministers to clarify the amount, with estimates ranging from £850mn to upwards of £7bn.

• UK wealth tax: A new levy would compound the exodus of rich people from Britain caused by abolishing the non-dom regime, the head of the Royal Bank of Canada has warned.

5. Alimentation Couche-Tard has dropped its record-breaking $46bn takeover bid for Seven & i Holdings, bringing an end to its year-long campaign to bring the 7-Eleven owner to the negotiating table on friendly terms. The Canadian group, which owns Circle K, blamed its decision on a lack of “constructive engagement” from Seven & i.

The Big Read

Rural depopulation is spreading across Europe, leaving no country unaffected. In the decade to 2024, the estimated number of people living in predominantly rural EU regions fell by nearly 8mn, an 8.3 per cent drop. While there are attempts to reverse the trend, the underlying issues in remote rural areas — ageing populations, falling birth rates and a paucity of employment opportunities — will be harder to address.

​​We’re also reading . . . 

• Zelenskyy: Ukraine’s president has been accused of an authoritarian slide after anti-corruption raids on prominent figures and moves to favour loyalists.

• French politics: François Bayrou has staked his premiership on striking a deal with the Socialist party to pass a belt-tightening budget.

• Japanese economy: A weak yen has spurred support for a hard-right populist party in the country, writes Leo Lewis.

• Bobby Jain: A year on from the start of trading, the industry veteran’s hedge fund is at the bottom of the pack of so-called multi-managers it sought to challenge.

Chart of the day

A record number of Americans have applied to undergraduate courses at UK universities, according to admissions data published today, as Trump’s attack on higher education shows signs of putting people off studying in the US.

Take a break from the news

Does the perfect hat exist? The FT’s Robert Armstrong writes that his bald head — a “heat-leaking, solar-radiation-collecting roof panel” — requires coverage. Style-wise, this creates challenges.