In the chess game over bending the Federal Reserve to his will and sidelining Chair Jerome Powell, a significant piece just fell into President Trump’s hands. Adriana Kugler’s early departure gives Trump a chance to nominate a Fed governor, potentially influencing rate decisions. Trump, during an interview with CNBC, ruled out choosing Treasury Secretary Scott Bessent as chairman of the Fed. And Trump, along with his critics, have described his tariffs as an earthquake that would transform the U.S. economy. So far, the impact has been mostly a series of tremors.

Fed governor Adriana Kugler said unexpectedly last week that she will leave the central bank this Friday, about six months before her term was set to end. That gives the president the chance to install his own pick on the rate-setting committee earlier than he had expected, adding pressure on Powell with a new ally who can push for interest-rate cuts.

Trump could also use that selection to position someone as the heir apparent to Powell, creating a competing voice that markets listen to for signals about the Fed’s future direction.

Trump told reporters Tuesday he would make his decision later this week, including whether to nominate to the post his choice to succeed Powell next year or whether to instead pick someone who could simply serve out the last few months of Kugler’s term.

President Trump ruled out choosing Treasury Secretary Scott Bessent as chairman of the Federal Reserve. “I love Scott, but he wants to stay where he is,” Trump said during an interview with CNBC, adding that he would take him off the shortlist of candidates to succeed Fed Chair Jerome Powell when his term ends next year. The president said he is considering four Fed chair candidates, including Kevin Hassett, one of Trump’s closest economic advisers, and former Fed governor Kevin Warsh. He declined to name the other two candidates.

In recent months, the president pledged that a new tariff regime would slash the trade deficit and force manufacturers to move production back to the U.S. His detractors warned that the tariffs would spark sharp inflation and even shortages in stores as soon as this summer. Six months into the experiment, with more tariff announcements likely in the coming days, the economy hasn’t crashed. Inflation has ticked up but not soared. Consumers aren’t finding empty shelves. 

The trade deficit in goods and services shrank to $60.2 billion in June, the lowest level since September 2023. Total imports fell by $12.8 billion, or 3.7%, from May, according to the Commerce Department. Exports were roughly flat, dropping 0.5%.

2 p.m.: Fed’s Cook discusses the U.S. and global economies

7 a.m.: U.K. interest rate decision
8:30 a.m.: Unemployment Insurance Weekly Claims Report - Initial Claims
10 a.m.: Federal Reserve Bank of Atlanta President Raphael Bostic speaks at Florida Institute of CFOs virtual event

Investors are increasingly turning to bitcoin as a way to diversify their portfolios, eToro analyst Lale Akoner says. The S&P 500 is skewed toward big tech stocks, particularly Nvidia, with few defensive stocks. Long-dated Treasurys used to be in demand as a diversifier but have recently come under pressure. That means investors are looking for other assets to protect against potential losses in their portfolios, she says. "I think that's the reason why we're seeing more exposure to gold, more exposure to bitcoin." Bitcoin remains a high risk asset but it serves well as a diversifier, she says. — Renae Dyer

• Canada’s merchandise-trade deficit inched up in June as tariffs and uncertainty continued to drag on exports, widening the shortfall for the second quarter to a record.
• Canada’s government unveiled a roughly C$1.25 billion package of measures to help the country’s lumber industry face up to increased U.S. trade duties and support a drive to build homes and infrastructure.
• The Swiss president is heading to the U.S. in a last-ditch effort to head off punishing tariffs that threaten to cripple key sectors of the country’s export-reliant economy.
• The U.K. government is set to break its fiscal rules unless it raises taxes or cuts spending when it unveils its new budget plans later this year, the U.K.’s National Institute of Economic and Social Research said Wednesday.
• Eurozone shoppers spent a little more in June after a downtick in spending a month earlier, a fresh sign of an economy proving resilient to tariff-related travails and other challenges. Total retail volumes increased by 0.3% in the last month of the second quarter, European Union figures showed Wednesday. (Dow Jones Newswires)
• German manufacturing orders unexpectedly declined in June, but were up overall in the second quarter of this year, a sign of resilience in the economy despite international demand being hit by U.S. tariffs.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to vicky.huang@wsj.com.