A look at the day ahead in European and global markets from

Ankur Banerjee

Markets shrugged off the U.S. Senate passing President

Donald Trump's "big, beautiful bill", with investor attention

fixed to the path for U.S. interest rates and trade deals ahead

of the United States' re-imposition of tariffs on July 9.

Trump's tirade against the Federal Reserve and its Chair

Jerome Powell to lower rates has stoked investor worries of the

central bank's independence and credibility. It has also led to

traders pricing in the possibility of early rate cuts.

But Powell, at a central bank gathering in Portugal,

reiterated that the Fed plans to "wait and learn more" about the

impact of tariffs on inflation before lowering interest rates.

That, along with relatively upbeat labour data on Tuesday,

has left investors none the wiser about when the Fed would cut

rates and watching out for Thursday's nonfarm payrolls data for

cues.

European stocks are set for a slightly higher open after a

mixed Asian session, where Japan's Nikkei dropped 0.75% whereas

Hong Kong's Hang Seng Index gained 0.75%.

TARIFF DAY

Trump's tax bill, which will add to the already enormous

U.S. debt pile, slash taxes, reduce social safety net programs

and boost military and immigration enforcement spending, now

heads to the House of Representatives for possible final

approval.

Meanwhile, with the July 9 tariff day creeping closer,

countries are scrambling to agree trade deals with the U.S.

India is likely ink a deal whereas Japan is not, Trump said.

All that has left markets in flux as we head into the second

half of the year. The first half was dominated by relentless

U.S. dollar selling as investors grappled with Trump's chaotic

trade policies and looked for alternative places to park their

money.

The euro has had a blistering 2025 so far gaining

14% and perched at its highest level since September 2021, but

whether it could replace the dollar as the world's reserve

currency of choice is an open question.

Central bankers gathered for an annual conference in the

Portuguese resort of Sintra do not expect a major challenge to

the dollar's status any time soon.

"It's not going to happen just like that overnight. It never

did historically," said European Central Bank President

Christine Lagarde.

"But there is clearly something that has been broken.

Whether it is fixable, or whether it is going to continue to be

broken - I think the jury's out."

Key developments that could influence markets on Wednesday:

Economic events: Euro zone unemployment rate for May, trade

deal updates

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