Ahead Of Trump-Putin Summit, Zelensky Warns Any Decisions Taken Without Ukraine Are “Stillborn”

By Jane Foley, senior FX strategist

The Nasdaq ended Friday at a fresh all-time high, lifted by big tech and a very good week for Apple. The week brought the start of new tariff rates on exports from dozens of countries to the US, but sentiment found support on news of concessions, particularly the exemption on semiconductor tariffs for companies that produce in the US. Over the weekend news emerged that Nvidia and AMD have agreed to give the US government 15% of revenues received from chip sales in China in exchange for export licences. The news highlights the controversy over the sales of H20 chips to China. Some US security commentators have warned that the chips will enhance China’s military and undermine the US’ relative strength in AI. 

Looking ahead, some countries are still hoping for a reduction in their specific tariff rate, Switzerland and India amongst them. The Swiss government said on Friday that it was still in discussions with the US after the shock announcement of a 39% tariff on August 1 and last week’s warning that the country’s exports of gold bars to the US could also be impacted by the tariff. While Swiss negotiators have been keen to offer a better deal to the US, India has pushed back against pressure from Washington triggered by its purchases of Russian oil. That said, on Friday Reuters reported that India’s biggest state refiners had bought at least 22 mln barrel of non-Russian crude for delivery in September and October. Indian state refiners had been largely absent from the spot market since the start of the Russia/Ukraine war, instead sourcing supplies from Putin. Brent oil futures were on the back foot this morning on hope that this week’s meeting between Presidents Trump and Putin will increase the likelihood of an end to the war in Ukraine.

On Friday, Trump announced an August 15 summit with Putin in Alaska. At a meeting of security officials hosted by US Vice-President Vance and UK Foreign Secretary Lammy in the UK over the weekend, Ukraine President Zelensky won support from European leaders and NATO over his concerns that Russia and the US could try and dictate the terms for the end of the war. European leaders are urging Trump to increase sanction pressure on Moscow. Vance described Friday’s forthcoming meeting as a “major breakthrough for American diplomacy” but suggested that a peace deal is unlikely to satisfy either side. Fearful of a land grab by Russia, Zelensky has said that any decisions taken without Ukraine would be ‘stillborn’. The White House has indicated that Trump was open to Zelensky attending the meeting, but that preparations were being made for a bi-lateral meeting. The Kremlin last week ruled out a meeting between Putin and Zelensky. Russia currently holds around 20% of Ukrainian land. 

The Fed’s Bowman made it clear over the weekend that US labor market fragility had strengthened confidence in her call for three Fed rate cuts before the end of this year. The FOMC is due to meet in September, October and December. Bowman, along with Waller, dissented at the July Fed policy meeting, favouring an immediate rate cut. Towards the end of last week reports suggested that Waller had emerged as the favourite for the new Fed Chair. Over the weekend, former Fed governor Bullard and Sumerlin, former economic advisor to Bush, reportedly joined the list of candidates. 

Very weak Canadian labor data on Friday have strongly underpinned market expectations for another BoC rate cut. Employment plunged by 40.8K in July, the biggest fall since the pandemic. 

In France, a new development on the government’s efforts to tackle the budget deficit emerged last month with PM Bayrou’s proposal to cut two bank holidays. On Friday, he proposed that negotiations on the topic should be concluded by the end of next month