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Trump's tax cut bill stimulates buying, US dollar rebounds slightly, pay attention to employment data performance
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: Trump's tax cut bill stimulates buying, the US dollar rebounds slightly, pay attention to employment data performance." Hope it will be helpful to you! The original content is as follows:
On Wednesday, the US dollar index fluctuated around 96.69. The US dollar's position as a global reserve currency has recently sparked widespread discussion, which also has a profound impact on the gold market. At the annual meeting of the central bank in Sintra, Portugal, ECB President Lagarde said that if the euro zone can promote structural reforms such as capital market integration, the euro may become an alternative to the dollar in the future. The US dollar currently accounts for 58% of global foreign exchange reserves, while the euro accounts for 20%. Although Lagarde stressed that this shift will not happen overnight, she noted that investors are looking for diversified options in the current uncertain environment, and the euro is benefiting from it. The market is paying attention to the ADP employment report and the number of layoffs of challenger www.xmh100.companies in the United States in June.
Analysis of major currencies
United States dollar: As of press time, the US dollar index hovered around 96.69, ended in the second quarter of 2025, and the overall performance of the US dollar continued to weaken. The Wall Street Journal pointed out that the US dollar has fallen by more than 5% since early April, and according to some analytical statistics, the cumulative decline of the US dollar index against a basket of major currencies has reached about 12% since mid-February. At the beginning of the third quarter, this trend continued, with strong market bearish sentiment and the weak pattern of the US dollar was initially established. Technically, the US dollar index (DXY) continues to trade under sustained bearish pressure, recently breaking below the lower boundary of the downward wedge pattern that guides price action since mid-May. The index currently hovers around 96.85 and retests the lower boundary of the wedge after rebounding from intraday lows of 96.38, although still well below the 21-day index moving average (EMA) currently at 98.20. This continued rejection of EMA highlights the current downward trendThe intensity of the trend. A breakout in the wedge suggests that bearish pressure may accelerate and there is no sign of an immediate reversal.
1. The Bank of Japan Governor implies that interest rates will not be raised for the time being, saying that the balance sheet reduction task may not be www.xmh100.completed before leaving office
Bank of Japan Governor Kazuo Ueda emphasized the wait-and-see position, saying that he will wait and see more data before deciding on the next monetary policy, and imply that he is not in a hurry to increase lending costs for the time being. He said at the annual meeting of the European Central Bank in Sintra, Portugal, that "we need more inflation data to judge." It mentioned that the central bank is paying attention to the strength of core inflation, the impact of US tariffs, and the food inflation expected to gradually ease. Kazuo Ueda also said he may not be able to meet his balance sheet reduction goal before the end of his term.
2. Federal Reserve Chairman PowellEr: Tariffs bring uncertainty, resulting in delays in interest rate cuts
On July 1, local time, Federal Reserve Chairman Powell said at the meeting in Sintra, Portugal that if it were not for the tariff policy of US President Trump, the Federal Reserve would have begun to cut interest rates in 2025 and would now adopt a looser monetary policy. When asked whether the uncertainty caused by the current tariff system in the U.S. government has led to the Fed's delay in rate cuts, Powell gave a positive answer, adding that almost all forecasts for U.S. inflation have risen sharply due to the impact of tariffs. Powell acknowledged that despite increasing pressure from the U.S. government, the Fed is still entering a pattern of maintaining interest rates. Powell also said that given the instability of the current economic outlook, the Federal Reserve is still waiting and watching the situation to learn more. Additionally, when asked about the possibility of a rate cut in July, Powell said he would not rule out any possibility and would not "put it directly on the table", which would depend on how the data evolved. Powell said the "overwhelming majority" of the Fed's interest rate setting www.xmh100.committee does expect another rate cut later this year.
3. "Federal Mickey Bucket": Powell maintains flexibility. The decision-making factors for interest rate cuts have changed.
"Federal Mickey Bucket" Nick Timiraos said that Powell avoided a sharp issue in July (rate cuts) and refused to rule out any possibility four weeks before the policy meeting. His overall www.xmh100.comments have little indication that he is preparing for the rate cut this month. It is inappropriate to focus on July’s “over” (at least today) and it may mask the more subtle changes in his and others’ remarks in recent weeks. After the Liberation Day tariffs, there is a speculation that price increases may be so large that a substantial weakness in the labor market is required to cut interest rates. But recently, with the suspension of tariffs and early (maybe premature?) inflation readings have not shown meaningful effects, Powell suggests that interest rate cuts could be resumed if inflation is not as bad as feared.
4. The US Department of Defense suspends providing some promised arms to Ukraine
On July 1, local time, the US Department of Defense has stopped shipping some air defense missiles and other precision-guided weapons to Ukraine due to concerns that the U.S. weapon inventory is too low. The total number of U.S. artillery shells, air defense missiles and precision-guided weapons is decreasing, people familiar with the matter said. The initial decision to suspend part of the assistance to Ukraine was made in early June but it did not take effect until now.
5. Trump: Not considering extending the deadline for tariff negotiations may raise Japan's tariffs
U.S. President Trump said on Tuesday that he did not consider extending the deadline for negotiating trade agreements between countries and the United States - July 9, and expressed doubts about whether an agreement can be reached with Japan. "We have dealt with Japan. I'm not sure if we can reach an agreement. I doubt that." Trump said he may impose "30%, 35% or any of the goods imported from Japan."The tariffs on set numbers are much higher than the 24% tax rate he announced on April 2.
Institutional View
1. Capitol Macro: The ECB maintains a "slight balance" on the next rate cut
Capitol macroeconomist Andrew Kenningham said in a report that as inflation continues to cool down, the ECB policymakers' decision to final rate cuts is falling into subtle trade-offs. Although overall inflation in June has gone from 5 1.9% rose slightly to 2.0% in the month, but core inflation stabilized at 2.3% and service industry inflation only rose slightly should give policymakers a little relief. Kenningham predicts that based on expectations of a fall in oil prices, inflation may remain below 2% for most of the next two years. "All this shows that the anti-inflation campaign has basically won," Kenningham analyzed. "But because of this, the ECB will face a difficult choice - whether to end this easing cycle. ”
2. Deutsche Bank: Eurozone inflation may fall with oil prices falling
www.xmh100.commerzbank economist Vincent Stamer pointed out that although the eurozone inflation rate reached the 2% target in June, it may decline again in the www.xmh100.coming months. Previously, inflation rebound was mainly driven by oil prices - the escalation of the Israeli-Iran conflict caused oil prices to soar by more than 10% in the short term. Stamer said that as oil prices fell at the end of the month, inflation may fall simultaneously. But he also pointed out that the ECB is expected to suspend actions later this month, given the uncertainty of US tariff policies. Stamer added that the ECB is likely to implement it in the fall as tariff measures will curb European exports and put downward pressure on www.xmh100.commodity prices.
3. Dutch International: The voting for the UK welfare reform bill is imminent. The pound faces political risks.
Analyst Chris Turner of the Netherlands International Bank pointed out that the pound faces political risks when the Labor government is about to vote on the welfare reform bill. Even if British Prime Minister Stamer has made concessions, there may still be opposition within the party. The second reading of the bill will be launched in the House of www.xmh100.commons around 19:30 Beijing time, and the final vote is expected to be held locally at night. Analysts expect that if the bill is rejected, the euro may rise above the 0.8600 mark.
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