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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: Trump's tariffs are lwcgm.cning in a sudden big deal! Waiting for Powell Jackson Hall to speak." Hope it will be helpful to you! The original content is as follows:
On August 20, spot gold was trading around $3,315 per ounce, and the market was cautiously optimistic about the Russian-Ukrainian conflict, and investors held their breath to wait for Fed Chairman Powell's speech at Jackson Hall later this week; U.S. crude oil traded around $62.10 per barrel, and oil prices fell on Tuesday as traders bet on negotiations on a possible agreement to end the Russian-Ukrainian conflict, which could ease sanctions on Russian crude oil, thereby increasing global supply.
The dollar rose and fell on Tuesday, and traders awaited a seminar on economic policy at the Federal Reserve Jackson Hall later this week for further clues about U.S. interest rate policy.
There are few important economic data to drive market direction this week, and traders focus on Fed Chairman Powell’s speech on Friday to pay attention to whether Powell will downplay market expectations for a rate cut in September.
The jobs report in July was weak and the Consumer Price Index (CPI) report showed limited upward pressure on tariffs, pushing traders to increase bets on the Fed's interest rate cut from September 16-17. However, the July Producer Price Index (PPI) data was higher than expected, hitting expectations for interest rate cuts. Powell previously said he was reluctant to cut interest rates because tariffs are expected to push up inflation this summer.
UBS Forex and macro strategist Vassili Serebriakov said, "Last week, we had digested the expectation of a rate cut of about 25 basis points in September and the expectation of more than two cuts for the remainder of this year. If Powell's lwcgm.cnmitment to a rate cut in September is not clear enough, his speech may have let those expectations go down."
Serebriakov added: "Now we expect it."The rate cut will be about 20 basis points in September, and the expectation for the rest of the year is slightly higher than 50 basis points. I think the risks are more balanced. "Traders are currently expecting interest rates to be cut by 54 basis points by the end of the year.
The Fed will also release records of its July 29-30 meeting on Wednesday, but the lwcgm.cnrmation passed by the record is likely to be limited, which lwcgm.cnes ahead of the release of a weak jobs report in July. Data released on Tuesday showed that while high mortgage rates and economic uncertainty continue to hinder home purchases, both single-family home starts and building permits in the U.S. were increased in July, while high mortgage rates and economic uncertainty continue to hinder home purchases.
New Zealand Fed lowered its official cash rate by 25 basis points, lowering it to 3.00% as widely expected. A larger 50 basis point cut was discussed during the meeting. Policymakers maintained a tendency to be loose, noting that "if medium-term inflation pressure continues to ease as expected, there is room for further reduction of OCR.
New forecasts suggest that by the fourth quarter of 2025, OCR will drop to 2.7%, then stabilize between 2.5% and 2.6% in 2026, and then slightly decline to 2.7-2.8% in 2027. This prospect actually bodes with room for another rate cut this year and early 2026.
The bank highlighted continued weak economy and easing domestic inflation, and expected overall inflation to return to the target midpoint of 2% by mid-2026. However, New Zealand's recovery has stagnated, with household and business spending being limited by global policy uncertainty, weak employment, rising costs of essential goods and falling house prices.
Japan exports fell -2.6% year-on-year to 9.36 trillion yen in July, the biggest drop since February 2021, due to weak demand in its two largest markets, the United States and China. Exports to the United States fell by -10.1% year-on-year, of which car shipments fell by -28.4% year-on-year, a larger drop than -26.7% in June. Shipping to China also shrank -3.5% year-on-year, but exports to Hong Kong surged by nearly 18% year-on-year.
The latest weakness highlights how external headwinds continue to put pressure on the Japanese trading sector. While Tokyo reached an agreement with Washington on July 22 to reduce reciprocity tariffs from 25% to 15%, the benefits will not be reflected until August's trade data. At present, automatic exports are still the main drag on overall performance.
Imports fell 7.5% year-on-year to 9.48 trillion yen, while Japan's deficit was 118 billion yen. After seasonal adjustments, exports fell -0.2% month-on-month, while imports rose 0.4% month-on-month, pushing the deficit to 303 billion yen.
The United States and Europe will immediately start to provide security for Ukraine and lwcgm.cnprehensively enhance Ukraine's military strength and lwcgm.cnbat capabilities. Trump has ruled out the possibility of sending ground troops to Ukraine, but said air support is an option.
Overall CPI in July CanadaIt fell to 1.7% year-on-year, down from 1.9% year-on-year, and remained unchanged below expectations. Gasoline prices fell sharply year-on-year -16.1%, deepening from -13.4% in June. Excluding gasoline, CPI stabilized at 2.5% year-on-year, the same as in the previous two months. Monthly calculation, CPI rose by 0.3% month-on-month, in line with expectations.
The core measures are mixed. The median CPI rose to 3.1% year-on-year, in line with expectations, while the year-on-year decline of CPI remained at 3.0%. CPI remained at 2.6% year-on-year, slightly weaker than expected 2.7%. In conclusion, these readings show that inflation has not accelerated, although potential pressures remain sticky.
These data reinforce the view that while overall inflation is cooling, the Bank of Canada cannot declare victory. Policymakers must weigh the relief and stubborn core pressures brought about by the decline in energy costs. This balance is crucial to decide whether the central bank will resume easing at its September meeting or postpone its assessment of further data.
Canadian inflation data is the key data released today, with overall CPI expected to grow by 1.9% year-on-year in July, the same as in June. More attention may fall on core indicators, with the general forecast of CPI rising from 2.6% year-on-year to 2.7%. These data are at a delicate moment for the Bank of Canada, which has cut interest rates seven times since June 2024, but has remained stable at 2.75% in the past three meetings.
There are still differences in expectations for a rate cut in September. The Bank of Canada's review summary in July showed that the lwcgm.cnmittee was divided: Some members believed that sufficient easing had been implemented, while others stressed the weak economy and warned that further support might be needed if labour market conditions are weak. Uncertainty has made the market reluctant to firmly price upcoming moves.
Tariff risks lwcgm.cnplicate the situation. Policymakers noted in July that U.S. tariffs and rescheduling of global trade are directly affecting inflation and broader growth dynamics. The latest decision to keep interest rates unchanged was made before Trump raised Canadian tariffs to 35%, but there are exemptions for CUSMA-compliant goods.
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