"I'm Just Here For The Cotton Candy"

The market reacted to weaker US data, including ADP employment and ISM services, by expecting rate cuts from the Fed. Rabobank has updated its US forecasts, predicting the next and final Fed cut in September, but notes that this is dependent on trade, fiscal, and Fed independence binaries. Geopolitical tensions are rising, with President Trump discussing Russia's potential retaliation to a Ukrainian drone attack and Moldova warning of Russian troop deployment in Transnistria. The EU is under pressure from the US on trade, Ukraine, and NATO, and is considering increasing defense spending. The US is also exerting pressure on the EU, with Defense Secretary Hegseth skipping a meeting with European counterparts to emphasize the importance of US support. Israel is unveiling new laser-based air defense systems, while Iran is refusing to give up its nuclear program. China is considering buying hundreds of Airbus jets from Europe, playing it against the US in trade negotiations. The EU is trying to cooperate with the US on trade, particularly on steel, but the US has pushed Europe to take a harder stance on China. The article concludes that markets are ignoring the complexity of geopolitical and economic issues, focusing instead on "cotton candy" monetary policy.