Core Viewpoint - The ongoing conflict between the Federal Reserve and President Trump over interest rates is creating significant instability in the global economy, with no clear winners in sight [1][3]. Group 1: Federal Reserve and Interest Rate Dynamics - The probability of a rate cut by the Federal Reserve in September stands at 75%, reflecting intense political pressure from Trump, who has publicly criticized Fed Chair Powell and demanded a reduction of 2 to 3 percentage points [1][3]. - Internal divisions within the Federal Reserve are at a ten-year high, with 7 out of 19 decision-makers opposing any rate cuts this year, while 8 support two cuts [3]. - Key economic indicators show a mixed picture: the core PCE price index rose by 2.7% year-on-year, while personal consumption expenditures fell by 0.1% month-on-month, and income dropped by 0.4%, marking the largest decline since the beginning of the year [3]. Group 2: Trade Wars and Market Reactions - Trump's trade policies have escalated tensions, with threats of new tariffs on Canada and other countries, leading to significant market volatility [4]. - The S&P 500 index experienced a decline, while tech stocks like Nvidia reached new highs, indicating a narrowing market breadth with only a few stocks driving gains [4]. - The market's reaction to trade negotiations breaking down has been complex, with the Dow Jones falling by 249 points on July 11, while the S&P 500 dropped by 0.19% [4]. Group 3: Political Pressure and Economic Implications - Political pressure on the Federal Reserve is mounting, with Trump's trade advisor publicly calling for intervention in Fed policy, and Treasury Secretary Mnuchin indicating alignment with Trump's wishes [5]. - The new tax legislation is projected to increase the U.S. deficit by $3 trillion over the next decade, which could lead to a dangerous combination of inflation, crisis, and economic stagnation [5]. - Powell has asserted the independence of the Federal Reserve in the face of political pressure, but potential candidates for the next Fed chair show signs of political influence [7]. Group 4: Global Market Impact - The U.S. dollar index has fallen to 97.18, marking the largest half-year decline since the early 1970s, while gold prices have risen to $3,337 per ounce [9]. - China's capital markets are seeing positive inflows, with the first batch of floating rate funds raising 21.8 billion yuan to invest in A-share core assets [9]. - Goldman Sachs has revised its forecast for Fed rate cuts, now expecting three cuts within the year, citing weaker-than-expected impacts from tariffs and signs of a softening job market [9].