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market analysis
Trump bombards Powell again, inflation data boosts Fed's bets cut
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: Trump once again bombarded Powell, inflation data boosted the Federal Reserve's bet on interest rate cuts." Hope it will be helpful to you! The original content is as follows:
On Wednesday, intraday, spot gold trading around $3,350/ounce, gold prices rose slightly on Tuesday. After U.S. inflation data maintained Fed rate cut expectations, people's attention turned to other key economic data to be released this week; U.S. crude oil trading around $63.12/barrel, oil prices fell on Tuesday, traders awaited the U.S. Energy Information Administration's inventory report and began to pay attention to signs of possible decline in demand at the end of the summer driving season in early September.
The U.S. Department of Labor Bureau of Labor Statistics said Tuesday that the consumer price index rose by 0.2% last month after rising 0.3% in June.
CPI rose 2.7% in the 12 months to July, www.xmh100.compared with a 2.7% increase in June. Economists surveyed by Reuters expect CPI to rise 0.2% year-on-year in June and 2.8% month-on-month.
Corpay chief market strategist Karl Schamotta said, "Basic inflation remains sluggish, giving policymakers room to cope with initial signs of weakness in the labor market. The possibility of a September rate cut should be on the agenda when Chairman Powell spoke at Jackson Hall on the 21st."
The money market had been on the stand-by-side state as the market increasingly expected a moderate reading of U.S. price pressure could consolidate bets on the Fed's next month's rate cut, which increased after last week's weak employment data were released. "If the Fed cuts interest rates continuously, the policy interest rate spread with peers may shrink rapidly, putting pressure on the dollar against high-yield currencies," analyst Fawad Razaqzada said in a note.
Asian Market
The RBA lowered the cash rate by 25 basis points to 3.60%, as generally expected, and the decision was passed by a unanimous vote. New forecasts show that there is still room for interest rate cuts this year, with two interest rate cuts in 2026 and room for interest rate hikes in 2027.
The updated economic forecast shows that inflation forecasts remain unchanged, with CPI at the end of 2025, 3.1% in 2026, and 2.5% in 2027. The average inflation rate in 2025 and 2026 also stabilized at 2.6%, and fell to 2.5% in 2027.
However, the growth outlook has been significantly lowered. In 2025, the average annual GDP growth rate was lowered from 1.9% to 1.6%, from 2.2% to 2.1% in 2026, and is expected to be 2.0% in 2027.
These forecasts are based on the interest rate assumptions of 3.4% in 2025, 2.9% in 2026 and 3.1% in 2027 - which means that after the interest rate hike in 2027, there is still room for a rate cut this year, and there is room for two rate cuts in 2026.
The RBA pointed out in its statement that uncertainty in the global economy remains high. While recent developments have made the scope of U.S. tariffs and policy responses in other countries “clearer”, the Bank expects “may avoid more extreme results.”
Even so, uncertainty in trade policy is expected to put pressure on global economic activity and inflation, and households and businesses may delay spending until the situation becomes clearer. The RBA said the impact could continue to drag down the Australian economy “for some time”.
European market
UK labor market data in July showed that employment deteriorated slightly and wage growth slowed slightly. The number of employed people fell by -8 on a month-on-month basis, or the monthly rate fell by -0.0%, and a year-on-year decrease of -0.5% www.xmh100.compared with the same period last year. Since reaching its peak in 2024, the number of salaried employees has been on a downward trend, highlighting the gradual cooling of recruitment momentum. The median monthly salary growth slowed slightly from 5.7% year-on-year to 5.8%, while the number of applicants fell by -6.2k, significantly better than expected 20.8k growth.
In the three months to June, the unemployment rate stabilized at 4.7%, in line with expectations. Wage growth indicators are mixed. Average revenue, including bonuses, slowed from 5.0% to 4.6% year-on-year, down from 4.7% expectation. The income excluding bonuses remained unchanged year-on-year, at 5.0%, in line with expectations.
In August, investor sentiment in Germany weakened sharply, with the ZEW economic prosperity index falling from 52.7 to 34.7, far below the expected 40.0. The status quo index further deteriorated from -59.5 to -68.6, which was also lower than the expected -63.0.
Overall, the ZEW economic prosperity index fell from 36.1 to 25.1, lower than the expected 28.4. The status quo index fell -7 points to -31.2.
ZEW President AchimWAmbach said the decline was partly due to disappointment with the recently announced EU-U.S. trade deal and Germany's poor performance in the second quarter. He noted that the chemical, pharmaceutical, mechanical engineering, metals and automotive industries are facing special pressures to worsen the forward-looking outlook.
U.S. market
CPI data for July showed that the overall inflation rate remained unchanged at 2.7% year-on-year, lower than the expectation of rising to 2.8% year-on-year. Core CPI accelerated from 2.9% year-on-year to 3.1%, higher than the year-on-year expectation of 3.0%. The annual energy index fell -1.6% year-on-year, offsetting the impact of a 2.9% year-on-year increase in food prices.
Moon-month, CPI rose 0.2% and core CPI rose 0.3%, both in line with market expectations. Housing prices rose 0.2%, the biggest contributor to the monthly gains, while the food index remained flat, with energy prices falling -1.1%.
The rebound in core pressure may keep the Fed cautious. Although the market is still expected to cut interest rates in September, the rise in core CPI may limit the pace of policy easing after the meeting.
Richmond Fed Chairman Thomas Balkin said in a speech today that recent policy developments — including a major tax bill, immigration changes and the www.xmh100.completion of key tariffs and trade negotiations — have lifted most of the “fog” surrounding the economic outlook. What will happen next will depend on how households deal with the price increase that tariffs may bring.
Balkin pointed out that there is evidence that consumers are buying goods in advance while cutting services, a model that, if continued, could limit tariff-driven inflation. “If we see this demand disruption more broadly, the impact of tariffs on inflation will be smaller than many people expect,” Barkin said.
However, he said, if this spending change happens more widely, “businesses will see sales drops and profit margins squeezed. They will look for cost cuts. Employment may be hit by that.”
"We are likely to see inflationary pressures, and we may also see unemployment pressures, but the balance between the two is still unclear," he said. "As visibility continues to improve, we are fully capable of adjusting our policy position as needed."
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