Joyful June Joever: Summertime Blues

As widely anticipated, the US Federal Reserve held benchmark rates steady. However, the Committee maintained its hawkish stance, noting that near-term inflation expectations remain elevated, with tariffs cited as a key upside risk. Officials reiterated their preference for a “wait and see” approach, pending greater clarity on inflation’s trajectory.

Within macro circles, there is growing debate over the resilience of the labor market. Some expect that a continued softening in employment and economic activity will eventually lead the Fed to pivot dovish. Yet so far, the data tells a different story, as the US economy remains robust, underpinned by steady job creation and resilient consumption.

Geopolitics Take a Backseat as Crude Consolidates

Meanwhile, markets are increasingly desensitised to geopolitical headlines, including ongoing tensions between Israel and Iran. Despite US President Trump’s repeated assertions that a new Iranian nuclear deal is in progress, crude benchmarks have traded firmly within a narrow consolidation band. Implied volatility in oil has faded, retreating from recent highs. Importantly, surging oil prices and any resultant inflation would undercut President Trump’s ambitions for lower interest rates and bond yields ahead of the election. The incentive is clear: striking a deal with Iran would be politically expedient.

Global Trade Tensions Build Ahead of Key Tariff Deadlines

On trade, the clock is ticking. With the 9 July tariff deadline (marking the end of the EU’s tariff pause) looming, the US has concluded just one trade agreement out of nearly 195 potential partners. Negotiations remain stagnant, and leaks have become repetitive. Markets may now be less reactive to incremental tariff headlines.

However, the timeline remains key:

14 July: The EU is expected to impose retaliatory tariffs on US goods

12 August: The 90-day pause on retaliatory tariffs with China ends

31 August: Expiry of longstanding tariff exclusions on Chinese imports

These upcoming dates could inject episodic downside volatility into risk assets. That said, our base case remains constructive. With aligned incentives on both sides, we see a stable outcome to US-China trade talks as the more probable path, a backdrop that would support the ongoing rally across risk markets.

Crypto Markets Reflect Seasonal Sluggishness

Seasonality is also starting to play its part. Historically, summer months are marked by muted activity and lower volatility, and crypto markets are following suit. BTC front-end implied vols have dipped below 40%, erasing the spike from recent geopolitical jitters. Risk reversals remain negative, with BTC puts trading at a premium to calls, pointing to cautious positioning and expectations for near-term pullbacks.

With US markets closed today, month-end OPEX, rebalancing flows, and systematic deleveraging continue to dominate price action, contributing to the sluggish tone across crypto markets.