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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The expectation of the Federal Reserve's interest rate cut has increased, and Trump has foreseen a series of major tariff moves." Hope it will be helpful to you! The original content is as follows:
On August 6, during the trading session in Asia on Wednesday, spot gold trading was around $3,380.80 per ounce, and gold prices climbed to a nearly two-week high on Tuesday, supported by rising expectations of a US interest rate cut, while investors were waiting for President Trump to make a decision on the appointment of the Federal Reserve; U.S. crude oil trading was around $65.30 per bbl, oil prices fell nearly 2% on Tuesday, and the increase in OPEC+ supply and concerns about weak global demand overshadowed the impact of US President Trump's threat to India's purchase of Russian oil.
The dollar rose on Tuesday but remained hovering near the lows hit last Friday, with markets still consolidating, and a weak jobs report strengthened expectations for the Fed's interest rate cut next month. Investors are also paying attention to President Trump’s nomination for the Fed’s director and his choice for the Bureau of Labor Statistics.
Moneycorp's head of trading and structural products, Eugene Epstein, said, "We are basically adjusting now after the employment data is released. The Fed is not in a hurry to cut interest rates, nor is it really seeing any signs of inflation, or maybe it is just a little inflation. So from now until the release of the Consumer Price Index (CPI) next week, we are basically in a purgatory state. The dollar is consolidating and waiting for this data."
Wall Street economists surveyed by Reuters expect core CPI to rise 0.3% and 3.0% month-on-month and year-on-year respectively in July. In addition to economic data, the market is also paying attention to the Fed's personnel changes, which may turn it to a more dovish and in line with Trump's aspirations.
Trump said on Tuesday that he will announce the Fed's remedial soonKugler's short-term successor and the next chairman. Kugler resigned last Friday. Current Federal Reserve Chairman Powell's term will end in May 2026, and Trump ruled out the option of U.S. Treasury Secretary Becente to take over him.
Trump said Becente hopes to continue in his current position, adding that the White House is considering four candidates to replace Powell.
Moneycorp's Epstein pointed out: "You can say that Kugler's successor will be dovish about interest rates, which in turn means the dollar will soften in the future." Trump also fired Erika McEntarfer last Friday, after data showed that employment growth was weaker than expected in July and that job growth in the first two months was significantly revised down. He said on Sunday that he would announce the new Director of Labor Statistics within three to four days.
The data released on Tuesday had little impact on the foreign exchange market. U.S. service industry activity was unexpectedly flat in July, with orders almost unchanged, and employment further weakened, but input costs hit the biggest increase in the past three years.
New Zealand's unemployment rate rose from 5.1% in the first quarter to 5.2% in the second quarter, official data released by the New Zealand Bureau of Statistics on Wednesday. This figure is lower than the market's general expectations of 5.3%.
In addition, employment changes in New Zealand grew from 0.1% in the first quarter to -0.1% in the second quarter, while the market generally forecast was -0.1%. New Zealand's participation rate fell to 70.5% in the second quarter, vifu.netpared with the previous value of 70.8%.
Jason Attewell, a labour market spokesman for Statistics, said the main highlights are as follows: The labor market conditions have changed a lot in the past few years. The unemployment rate has risen by 1.9 percentage points since the June 2022 quarter. During the same period, the underutilization ratio rose by 3.5 percentage points.
In the euro zone, PPI rose 0.8% month-on-month and 0.6% year-on-year, slightly lower than monthly expectations but higher than annual rate. Energy prices soared 3.2% this month, offsetting a slight increase elsewhere. Intermediate products prices fell -0.2%, reflecting the continued deflation of the manufacturing industry's input costs.
What is even more encouraging is that the final value of the service purchasing managers index in the euro zone in July was 51.0, higher than the 50.5 in June. The vifu.netprehensive purchasing managers index rose from 50.9 to 50.6. Germany and Italy rose, while Spain led the EU with a five-month high of 54.7. However, France fell to a three-month low of 48.6. The HCOB pointed out that service industry inflation is easing, with input costs growing at the slowest rate in nine months. Coupled with slowing wage growth, the ECB's reason for another rate cut in the second half of the year has been strengthened.
In the UK, the tone is more cautious. The service industry PMI ended up being 51.8 in July, lower thanIn June, the vifu.netprehensive PMI fell from 52.0 to 51.5. Despite weak data, Standard & Poor Global noted business confidence improved, supported by a waning U.S. tariff concerns and hopes of domestic interest rate cuts later this year.
The US ISM Service Industry Purchasing Managers Index fell from 50.8 to 50.1, lower than the market expectations of 51.5. Business activity fell from 54.2 to 52.6, while new orders fell from 54.2 to 50.3. It is worth noting that new export orders have dropped sharply from 51.1 to 47.9, the fourth contraction so far this year. The employment index also weakened further, falling from 47.2 to 46.4.
The only upward surprise came from the Payment Price Index, which jumped from 67.5 to 69.9—the highest reading since October 2022. The inflation indicator has now remained above 60 for eight consecutive months, indicating that the pricing pressure of the entire service industry economy continues to exist.
Fast price expansion and continued weak employment are a "worrying development" according to ISM, although the overall index has barely remained in the expansion zone. The July reading corresponds to an annualized GDP growth rate of only 0.5%.
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