No cuts for now

Daily update

In the US yesterday, Federal Reserve Chair Powell delivered a speech to members of the House of Representatives (most of whom are not economists). The main messages were: no rush to cut rates, and trade taxes create uncertainty. This will not surprise markets. There was a further softening of the data dependency mantra, as Powell focused on future inflation as a reason to keep rates unchanged for now. Powell testifies again today.
Financial markets have priced in an Iran-Israel ceasefire holding. That skews the risks if there is any further military activity. Intelligence reports suggesting the US failed to destroy Iran’s nuclear program are unlikely to impact markets directly (investors do not price extreme tail risks), but that failure probably keeps tensions high in the region (which markets do care about).
European defense spending is a focus as the NATO summit continues. In terms of economic effects what matter is not only the scale of European spending, but also the extent to which dependence on US procurement is reduced.
The Democratic primary election for the New York mayor’s race is not a market event directly. It does remind investors of the unreliability of survey/polling evidence.