Stock futures are mixed this morning ahead of the Fed’s first interest rate decision under new Chair Kevin Warsh and following the release of details surrounding the memorandum of understanding between the U.S. and Iran (more on that below). When Warsh was nominated earlier this year, the path for monetary policy appeared straightforward. Inflation was easing, growth was slowing, and markets anticipated a series of rate cuts. Since then, the narrative has shifted. Inflation has reaccelerated, hiring has remained resilient, and the much-discussed AI productivity boom has proven inflationary in some areas through rising demand for power, labour, and construction tied to data centres. Add higher gas prices stemming from the Iran war, and the case for lower rates has become less compelling. The Fed is expected to keep its benchmark rate unchanged at 3.5%-3.75%, leaving investors focused on Warsh’s first press conference for clues about the path ahead. They may be left waiting. Warsh has long criticized the Fed’s tendency to overcommunicate, believing in “more thinking, less talking.” While he will face questions about future rate cuts, observers may find that his words are fewer, and his guidance less explicit, than what markets have grown accustomed to from recent Fed chairs. Perhaps the updated Fed dot plot will say more.
Peace pending. Details of the proposed 14-point memorandum of understanding between the U.S. and Iran, as viewed by Bloomberg, outline a framework that would formally end hostilities, reopen shipping through the Strait of Hormuz, ease sanctions, and launch a 60-day negotiating period aimed at reaching a final agreement on Iran’s nuclear program. The draft, which is reportedly expected to be signed Friday in Switzerland, also includes provisions for the release of frozen Iranian assets and broad economic support measures. A copy of the proposed memorandum can be found here. However, despite the market’s positive reaction, Trump has already cautioned that the agreement is not final, dismissed reports of a $300 billion development fund for Iran as false, stated the U.S. will not invest “10 cents” in the country. He warned that military action remains an option if negotiations fail to produce an acceptable outcome, saying “If I don’t like it, we’ll go back to shooting at them.” In short, while the MOU represents a framework for de-escalation, investors should view it as the beginning of a negotiation process rather than the end of one.
Shop till you drop. Retail sales in the U.S. rose a stronger-than-expected 0.9% in May, signaling resilient consumer spending despite higher gasoline prices driven by the Iran war. Sales excluding autos and gasoline increased 0.5%, while the closely watched control group which feeds into GDP calculations climbed 0.7%, both beating forecasts. Higher spending at gas stations contributed to the headline gain, but the broad-based strength suggests consumer demand remained solid even as inflationary pressures continued.
As the G7 summit continues, leaders have agreed on a plan to reduce their dependence on China for critical minerals by ensuring no single country supplies more than 60% of imports by 2030. The strategy includes binding sourcing quotas for some industries, particularly defense, and a coordinated effort to expand supplies through recycling and new mining projects. The all revolves around growing concerns over China’s dominance in rare earth processing and export controls, which have highlighted the vulnerability of global supply chains and the need to diversify sources despite the significant cost and time required to build alternative supply networks.
Canada’s housing market showed some signs of recovery in May, with home sales rising 5.5% from April, marking a second consecutive monthly increase as lower prices helped buyers back into the market. The national benchmark home price slipped just 0.1% to $657,700, continuing a period of relative price softness that has improved affordability. Supply also tightened, with new listings falling 1% from the previous month and the total number of homes for sale remaining below the long-term average. The data suggest housing activity is gaining momentum during the peak spring selling season as lower borrowing costs and some improving economic conditions help restore confidence among buyers.
Inflation in the UK held steady at 2.8% in May, below both economists’ and the Bank of England’s forecasts, easing expectations for a rate hike ahead of the BoE’s policy meeting tomorrow. Lower food and heating oil prices offset increases in airfares and gas, while core inflation rose slightly less than expected to 2.6%. Although services inflation accelerated to 3.7%, the easing of energy price risks following signs of a U.S.-Iran agreement, have reinforced expectations that the BOE will keep interest rates unchanged, with many economists now seeing no rate hikes this year.
The human edge. The world’s attention has been focused on artificial intelligence lately. Every week seems to bring a new breakthrough, a new valuation milestone, or a new prediction about how AI will reshape our future. Yet for a moment this week, that attention shifted to something far more human. Cape Verde goalkeeper Vozinha woke up Monday as a largely unknown 40-year-old playing out the final chapters of a modest professional career, with roughly 50,000 Instagram followers. By Tuesday, after helping Cape Verde hold World Cup favourite Spain to a draw and becoming the oldest goalkeeper ever to keep a clean sheet in his World Cup debut, that number surged to +8 million. What captivated people was not just the result itself, which was pretty cool itself as long as you weren’t rooting for Spain. It was the story of decades of perseverance, countless setbacks, and a dream that refused to go away. The virality of Vozinha’s moment is a reminder that while technology may change how we live and work, we still gravitate toward something algos can’t give us, that is the underdog story, and the resilience of the human spirit. The next chapter comes Sunday against Uruguay, when Cape Verde will attempt to turn a tournament’s memorable moment into one of its most improbable runs.
Diversion: Walking on, walking on broken glass
