Trading Day: Wall Street's twin peaks

ORLANDO, Florida (Reuters) -- TRADING DAY

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist

I'd love to hear from you, so please reach out to me with comments at . You can also follow me at @ReutersJamie and @reutersjamie.bsky.social.

Just a heads up, Trading Day will be in the capable hands of Lewis Krauskopf next week and Alden Bentley the following week, while I take some time off to recharge the batteries. Back on July 13.

Another extraordinary week ended on Friday with the S&P 500 and Nasdaq hitting all-time highs as investors ramped up bets that U.S. interest rates will soon fall, a stunning turnaround from the post-'Liberation Day' tariff gloom of early April.

Several developments this week fed into the rate cut narrative - the Iran-Israel ceasefire, tumbling oil prices, soft U.S. economic data, dovish comments from some Fed officials, and renewed pressure from President Donald Trump on the Fed to ease.

Fed Chair Jerome Powell pushed back against suggestions rates could be cut as soon as July, arguing that the impact of tariffs should be assessed first, and the consensus among the Fed's 19 rate-setters is to hold the line too. But traders are now leaning towards three quarter-point rate cuts this year.

Progress on trade is also boosting investor sentiment. Trump said a deal between the US and China had been signed, but did not provide details, and Treasury Secretary Scott Bessent said the two countries have resolved issues surrounding shipments of rare earth minerals and magnets to the US.

That said, trade optimism was dented on Friday after Trump abruptly cut off trade talks with Canada over its new tax on U.S. technology firms, calling it a "blatant attack" and saying he will set a new tariff rate on Canadian goods next week.

The most significant market move of the week, however, was not in equities but in currencies. The dollar continued its decline, and is now down more than 10% this year. That's its worst first-half performance of any year in more than 50 years.

It should be remembered, however, that the dollar started the year at extremely expensive levels, so some adjustment was always likely. This is proving to be a pretty severe adjustment, one which markets and policymakers appear to be relaxed about. For now.

This Week's Key Market Moves

* World stocks at record highs. The MSCI ALl Country indexrises 3% above 900 points, boosted by a resurgent Wall Street,Asia and EM, which offset sluggish Europe. The S&P 500 andNasdaq rise 3% and 4%, respectively, to new highs. * The dollar sinks to multi-year lows vs major currencies,especially European one. Dollar index down 1.5%, greenback fallsmore vs euro, sterling, Swissie. * Oil plunges after Israel-Iran ceasefire. Brent crudetumbles 12%, its biggest weekly fall since 2022. * U.S. Treasury yields slide to their lowest in nearly twomonths, curve bull steepens on growing (but still unlikely) viewthe Fed could cut rates in July. * Platinum soars above $1,400/oz for the first time since2014, and is well on track for its best month since 1986.

Chart of the Week

Self-explanatory really.

When the world's reserve currency has its steepest January-June decline since the era of free-floating exchange rates began over half a century ago, something major is underway. How big remains to be seen. But if the Trump administration wanted a weaker currency, it can't complain.

Here are some of the best things I read this week: 

1. Who Needs the G7? 2. Can Asia and Europe Rescue the Global Economy? 3. War and Tariffs Are a Double Shock to the World Economy 4. Downgrading Uncle Sam, not America 5. The great trade rearrangement

What could move markets on Monday?

* China official PMIs (July) * Japan industrial production (May, prelim) * India current account (Q1) * India industrial production (May) * Germany retail sales (May) * Germany CPI inflation (June, prelim) * UK current account (Q1) * US Chicago PMI (June) * Chicago Fed President Austan Goolsbee and Atlanta FedPresident Raphael Bostic speak (at different events)

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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(Writing by Jamie McGeever; Editing by)