Frank Kelly’s Geopolitical Week Ahead | July 28, 2024

Much of the world is focused on the Olympic Games in Paris this week, while summer holidays are beginning for many in the Northern Hemisphere.  But there are still plenty of important meetings and events happening this week around the world.

U.S. focuses on Asia

Asia will be a massive focus for the U.S. this coming week as U.S. Secretary of State Antony Blinken and U.S. Defense Secretary Lloyd Austin conduct two separate “2+2” meetings – the first with their counterparts in Japan and the second with their counterparts in the Philippines. The two sets of meetings aim to bolster U.S. military alliances with the two countries significantly. Before the US-Japan meetings, the U.S. Defense Department announced the very significant establishment of a new U.S. military command in Japan, one of the most important restructurings in the U.S. command structure in Asia in decades. And then the week after next, Blinken and Austin will then host a 2+2 meeting with their Australian counterparts (August 6), further cementing the U.S.’ new enhanced security structure in the region. 

European Union to transfer interest income from frozen Russian bank accounts

Also this week, the European Union begins transferring the interest income from frozen Russian bank accounts to Ukraine.  Russian President Vladimir Putin has vowed to retaliate and is likely to confiscate Western financial assets and securities held in special accounts in Moscow. 

G7 central banks

However, the most significant events this week came from several of the G7 central banks. The U.S. Federal Reserve’s Open Market Committee meets to discuss the economy and interest rate adjustments — a likely 25-basis point cut. The Bank of England and the Bank of Japan are also meeting this week to decide interest rates.  There is a good chance the Bank of Japan will raise rates while the Bank of England moves to cut rates.

Global economic radar screen

Elsewhere on the global economic radar screen this week, markets will look at the U.S. jobs report on Friday, and JOLTS and ADP figures will also be released earlier in the week.   In Europe, the Eurozone, Germany, and France release GDP figures and CPI reports this week. 

Finally, returning to Asia, China releases PMIs and the Caixin manufacturing PMI this week and will give some further clarity to the struggling Chinese economy. 

U.S. Financial Regulatory Week Ahead

Last week we said Washington’s financial regulatory world was entering the dog days of summer. That might have been a bit premature.  First, we saw former President Donald Trump address the Bitcoin 2024 Conference in Nashville, Tennessee where he promised to fire SEC Chair Gary Gensler and create a “strategic national bitcoin stockpile.” Financial regulation has now officially entered the 2024 presidential election debate! 

Then, we saw the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a request for information from the industry on bank’s partnerships with fintech firms. Specifically, the regulators want to hear about how banks are maintaining “effective risk management practices.” They also separately issues a joint-statement reminding banks’ of the potential risks of working with third-party companies that provide bank despot products and services. 

The same trio of bank regulators also issued a notice requesting comment on interagency efforts to reduce regulatory burdens, focusing on consumer protection, the role of directors, officers and employees, and money laundering. 

Also this past week, FDIC Vice Chair Travis Hill stepped up and made a public call for scrapping the pending bank capital rules and starting over from scratch and not simply making modifications to the draft. He went on to argue the Basel-mandated rules, as currently drafted, may not be legal.  Hill then presented a vision for a number of important bank regulatory issues.  If former President Trump is elected, Hill is seen as his choice as FDIC Chair. 

The Federal Courts were also active this past week as a federal judge in Texas stayed the long-suffering Department of Labor’s fiduciary rule. 

Looking at the week ahead, the FDIC is holding an Open Meeting to consider new rules on industrial loan companies and brokered deposits. And the SEC is holding a Small Business Capital Formation Advisory Committee.  

Up on Capitol Hill, the Senate Agriculture Committee is tentatively planning to mark-up a crypto regulatory bill while the Senate Banking Committee might vote on the nomination of Christy Goldsmith Romero’s to be FDIC Chair (much depends on whether recently convicted Senator Bob Menendez (D-NJ), a member of the committee, will show up to vote.  Following his recent federal bribery conviction, Menendez said he will resign. 

But what will likely be the best event this week will be Capitol Account’s event being held in the Capitol Visitors Center.  SEC Commissioner Mark Uyeda will participate in a fireside chat giving great insights into the SEC’s agenda for the rest of the year and what to expect in the wake of the Chevron decision.