As you likely know already, the rating agency Moody’s downgraded the U.S. sovereign credit rating on Friday from Aaa to Aa1, citing the nation’s soaring $36 trillion debt and persistent fiscal deficits. The move, which comes after similar downgrades by other agencies a year of so ago, signals growing concern over America’s long-term fiscal outlook and rising interest costs. While Moody’s shifted its outlook from “negative” to “stable,” the downgrade sparked backlash from Trump allies, who criticized the decision as politically motivated. The change could complicate President Trump’s efforts to cut taxes and balance the budget, especially as investors remain unconvinced by revenue-raising tariffs and cost-cutting measures. The announcement sent Treasury yields higher after the market close, raising the risk of bond market instability when trading resumes.
From the Fed, Atlanta Fed President Raphael Bostic this morning on CNBC warned that Moody’s downgrade could have wide-reaching effects across the economy and financial markets, particularly by raising the cost of capital and introducing greater uncertainty. He emphasized that it may take several months to fully understand the impact on U.S. debt demand and inflation from tariffs. Bostic noted the Fed is cautious on rate cuts, leaning toward just one this year due to the complex interplay of inflation, tariffs, and economic sentiment. While markets are functioning well, inflation remains above target and expectations are moving in a troubling way, although firms aren’t planning large layoffs. He highlighted a disconnect between economic sentiment and data and pointed to potential ripple effects from even reduced tariffs on China.
Last week, Ukraine stated that Kyiv prioritizes a ceasefire in its ongoing discussions with the Russian delegation and is open to exploring a potential meeting between President Zelensky and President Putin. This aligns with earlier remarks from U.S. President Trump, who expressed willingness to meet with both leaders once arrangements are made. Attention now turns to determining the specific timing of any such meetings.
Dow Industrial average futures implying a decline of -258 pointS&P index futures are implying a decline of -63 pointsNasdaq futures are implying a decline of -311 points
In the European markets, the major indices are mixed:
German Dax, unchangeFrance's CAC, -0.68%UK FTSE 100, -0.36%Spain's Ibex, -0.24% Italy's FTSE MIB, -1.80%2-year yield 4.025%, +4.2 basis points5-year yield 4.131%, +6.9 basis points10-year yield 4.536%, +9.7 basis points30-year yield 5.007%, +11.0 basis points
In other markets:
Crude oil down $0.57 or -0.90% at $61.41Silver up $0.32 or 1.01% at $32.60Gold is up $40.62 or 1.27% at $3242.41Bitcoin is trading down $3790 at $102,719 This article was written by Greg Michalowski at www.forexlive.com. Read More Details
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