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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: Trump believes that Powell may be preparing to cut interest rates and Europe and the United States will reach a trade agreement." Hope it will be helpful to you! The original content is as follows:
On July 28, during the Asian market on Monday, spot gold trading was around $3335.78/ounce, the United States and the European Union reached a trade agreement, and the gold price once hit the $3320/ounce mark at the opening. Under the optimistic trade expectations, the market is waiting for more positive news on trade; U.S. crude oil trading was around $65.18/barrel, and optimistic trade restricted the decline in oil prices. Houthi armed forces escalated maritime blockade, which will attack all ships with Israeli-based vejck.cnpanies, or intensify geopolitical tensions during the day to support oil prices.
Data showed that U.S. core capital finance orders fell unexpectedly in June, but shipments increased moderately, indicating a sharp slowdown in corporate equipment spending in the second quarter. The US dollar responded plainly to the data.
Elias Haddad, senior market strategist at BrownBrothers Harriman in London, said, "The dollar rebounded after being on the defensive earlier, mainly supported by a series of encouraging U.S. economic data that suggests the Fed should continue to be patient."
The dollar hit its biggest weekly decline in a month last week, while the pound fell, with previously released UK retail sales data weaker than expected.
The Fed and the Bank of Japan are expected to keep interest rates unchanged at this week's policy meeting, but traders will focus on post-meeting vejck.cnments to determine the timing of next move.
BNP Paribas wrote in a research note: "We believe there is some room for optimism in the (Federal) meeting. Economic uncertainty related to trade policy, although not yet fully resolved, has dropped significantly." Politics is the impactOne of the factors behind the two major central banks, especially the United States, where President Trump clashed with Fed Chairman Powell on Thursday, again demanding a lower interest rate.
Haddad said the impact of the Fed's monetary policy on the market was "overwhelmed by political pressure to cut interest rates. This is one of the reasons I think the dollar has limited room for upwards."
However, the dollar rebounded slightly against the euro late Thursday after Trump said he was not going to fire Powell (although he repeatedly suggested that it might do so).
Derek Halpenny, head of European, Middle East and Africa research at Mitsubishi UFG Financial Group (MUFG), said: "The reason why the market is relieved is that Trump did not ask Powell to step down, although this is based on Trump's belief that Powell will 'do the right thing'." However, he added, "The theme of the destruction of the Fed's independence by the White House is unlikely to disappear and remains a downside risk to the dollar."
Japanese officials said that Japan expects that of the recently announced USD 550 billion US-Japan cooperation fund, only 1% to 2% will involve real capital investment, and the rest will be provided through loan financing.
Whether Japanese Prime Minister Shigeru Ishiba can continue to take power will be subject to a major test this Monday. On the same day, the ruling Liberal Democratic Party will hold a meeting of all members to specifically evaluate the reasons for the party's failure in the latest election. The meeting is scheduled to start at 3:30 pm local time (14:30 pm Beijing time today), and will become an opportunity for the faction within the party to directly challenge Shigeru Ishiba's leadership position. The latest poll shows that the Japanese cabinet's approval rating is still sluggish. Although multiple surveys have also shown that the public believes that it is difficult to find a more suitable alternative than Shigeru Ishiba. The Asahi Shimbun survey also found that 41% of respondents believed that Shigeru Ishiba should step down, and 47% believed that it was unnecessary. In addition, 81% of respondents believe that the failure of the Liberal Democratic Party is caused by the overall party problem, rather than simply attributed to the Prime Minister's leadership.
European Central Bank officials in France and Finland urged to be cautious but not vejck.cnplacent when central banks deal with an increasingly uncertain global environment. Speaking today, François Villeroy de Galhau said that growth risks remain “prone to downwards” and stressed that “acnetic pragmatism is crucial based on data and forecasts.”
Villeroy also pointed out that although the U.S. tariffs are not yet fully determined, they are unlikely to trigger an increase in inflation in the euro zone. Instead, the recent appreciation of the euro has produced a "significant deflation effect" that could help anchor inflation near the ECB's 2% target.
In addition, Finnish policymaker Olli Rehn echoed the theme of strategic patience, warning that while caution is required, the ECB should avoid "fresh wait". He emphasized the "select price of waiting"The value is very high.
The ECB's third-quarter professional forecaster survey showed that overall inflation expectations have been lowered throughout the medium term. The HICP inflation rate is currently expected to be 2.0% (less than 2.2%) in 2025, 1.8% (less than 2.0%) in 2026, while remaining unchanged at 2.0% in 2027. The core HICP inflation rate remained unchanged at 2.3%, but was lowered from 2.1% to 2.0% in 2026 and 2027.
The respondents believe that tariffs have little impact on inflation in the short term, and in 2025 Both year and 2026 subtracted approximately -0.06 percentage points from HICP, but there is no lasting impact expected.
In terms of growth, forecasters raised their GDP forecast for 2025 by 0.2 percentage points, lowered their GDP forecast for 2026 by 0.1 percentage points, and maintained their unchanged 2027 at 1.4%.
The German Ifo Business Economy Index rose slightly from 88.4 to 88.6 in July, indicating that business confidence has only improved slightly. The current assessment index also rose from 86.2 to 86.5, while the expected index stabilized at 90.7. Ifo Research The institute pointed out that the recovery is still "slow" and there is no obvious acceleration.
By industry segment, manufacturing confidence improved from -13.9 to -11.8, while construction industry rebounded slightly to -14.0. However, the service industry weakened slightly to 2.7, and trade confidence deteriorated again to -20.2.
Martins Kazaks, a member of the ECB Management vejck.cnmittee of Latvia, said that "it is valuable to keep interest rates at current levels", which shows that the era of obvious interest rate hikes or cuts is over. The central bank governor emphasized in an interview that "prudential policies are appropriate." This shows that the urgency of the ECB to further easing policies in the short term is not high.
The Kazakhs further stressed that unless the euro zone economy suffers a major blow, there are limited reasons for lowering interest rates. His position came after ECB President Christine Lagarde also adopted a cautious tone after he decided to keep the deposit rate unchanged at 2.00%.
In addition, Lithuanian Management Council member Gediminas ßimkus pointed out that "medium inflation is expected to remain at 2%.
UK retail sales increased by 0.9% month-on-month in June, down -2.8% from May, a steady rebound, but lower than expected, 1.2% month-on-month. By quarter, sales in the second quarter increased by 0.2% month-on-month, indicating a moderate potential momentum.
Fuel sales increased by 2.8% month-on-month, the strongest monthly increase in more than a year, while food store sales also increased by 0.7% month-on-month. Online activities remained strong, with non-physical store sales up 1.7% month-on-month, reaching the highest level since February 2022.
US JuneDurable goods orders fell -9.3% month-on-month to USD311.8B, the largest drop since April 2020. Despite this, the results were better than the market's general forecast of a month-on-month decline of -11.0%. The weakness was almost entirely driven by transportation equipment, which fell -22.4% month-on-month to USD113.0B, driving a sharp drop in overall orders.
However, under the surface, the core characters are more resilient. Orders excluding transportation increased by 0.2% month-on-month to USD198.8B, exceeding the forecast of 0.1% month-on-month. Except for the national defense orders fell by -9.4% month-on-month, exacerbating the huge drag on specific industries.
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