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Waiting for Powell Jackson Hall to speak, the United States and Europe finalize trade agreement
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: Waiting for Powell Jackson Hall to speak, the United States and Europe finalize the trade agreement." Hope it will be helpful to you! The original content is as follows:
On Friday, Asian market, spot gold trading around $3337.37/ounce, gold prices fell slightly on Thursday, the dollar strengthened, investors awaited Fed Chairman Powell's speech at Jackson Hall seminar to understand the letter of the direction of the U.S. policy; U.S. crude oil trading around $63.48/barrel, oil prices rose Thursday, as Russia and Ukraine accused each other of causing the peace process to stagnate, and earlier U.S. data showed signs of strong demand from the largest oil consumer.
The dollar strengthened on Thursday, with markets paying attention to the highly anticipated speech that Fed Chairman Powell will make on Friday, with investors looking for new clues about whether the Fed may cut interest rates next month.
Early, U.S. employment report unexpectedly weakened in July, and traders increased their bets on the Fed's interest rate cut at its Sept. 16-17 meeting. But the risk of upward inflation remains an uncertainty as President Trump’s administration imposes new trade tariffs, leaving some policymakers cautious about easing policies.
The theme of this year's Jackson Hall Annual Meeting is "The Transformational Labor Market." "It may depend on how much Powell wants to use the rift in the labor market (to support his position). "Whether it is the employment data and its corrections, or the rising initial jobless claims data, constitute a narrative that he can focus on. ”
On Thursday, the dollar briefly gave up some of its gains after data showed the U.S. initial jobless claims hit its biggest increase in nearly three months last week. Another report later showed that U.S. businesses were active in AugustThe momentum accelerated, the manufacturing industry recovered, order growth hit a 18-month high, and the US dollar's rise expanded again.
Asian market
Japan inflation slowed again in July, with the core CPI (excluding fresh food) falling from 3.3% to 3.1% year-on-year, slightly higher than expected 3.0%. Overall CPI also fell to 3.1% year-on-year. This slowdown is partly due to the cooling of rice prices, which rose 90.7% year-on-year after soaring 100.2% year-on-year in June, while reintroducing energy subsidies. Together, these helped core inflation fall from its peak of 3.7% in May.
However, price pressures remain deeply rooted. Food inflation, excluding fresh goods, actually accelerated from 8.2% year-on-year to 8.3%. The core core CPI (excluding food and energy) remained unchanged, rising to 3.4%. Energy prices fell -0.3% year-on-year, the first decline since March 2024, which has eased the pressure to some extent, but it is not enough to offset the stubborn potential strength.
For the Bank of Japan policymakers, the data paints a mixed picture: rice and energy have finally relaxed control over consumer prices, but the continued high core inflation highlights why rate hikes are still on the table. While inflation is clearly out of its May peak, the road to returning to the 2% target looks slow and unbalanced.
European market
UK's economy performed strongly in August, with the www.xm-links.comprehensive PMI climbing from 51.5 to 53.0, the highest in a year. The service industry provided most of the support, rising from 51.8 to 53.6, which was also a 12-month high, while the manufacturing industry further declined from 47.3 to 48.0.
S&P Global's Chris Williamson noted that the UK economy is enjoying its best expansion rate since last summer, with the service sector driving economic activity. Although the manufacturing industry is still weak, it shows initial signs of stabilization. However, the demand environment remains “unbalanced and fragile” and under the pressure of rising costs, www.xm-links.companies continue to lay off employees at a “radical pace”.
The improvement in growth background, coupled with stronger-than-expected inflation data in July, has reduced the likelihood of a further rate cut this year. With the Monetary Policy www.xm-links.committee diverging on policy outlook, upcoming growth and inflation data are crucial to determine whether central banks tend to be patient or to resume easing.
Eurozone private sector activity gained a moderate momentum in August, with the integrated PCP index rising from 50.9 to 51.1, the highest level in 15 months. Manufacturing led the gains, climbing from 49.8 to 50.5, a 38-month high. The service industry weakened slightly from 51.0 to 50.7. Growth remains fragile, but data show that under the current trade and policy context, businesses are coping better than expected.
Cyrus de La Rubia of Hamburg www.xm-links.commercial Bank pointed out that despite the resistance and lingering uncertainty in the United States, the EU's single marketIt has helped alleviate the crackdown, and domestic demand and tourism have played a stable role.
Using Germany's push, manufacturing industry has seen growth for six consecutive months. France, which has previously dragged down, has shown signs of stabilization in both manufacturing and services. However, U.S. trade policy continues to be affected. Foreign orders for manufacturing in the euro zone fell for the second consecutive month, and Germany has also seen a decline after it remained stable earlier this year.
While cost pressure in the service industry remains a concern for the ECB, the stability of selling price inflation provides a "slight relief."
U.S. market
As of the week ended August 16, the number of initial unemployment benefits in the United States increased by 11 to 235, higher than expected 227. The four-week moving average for the first-time unemployment benefits application rose 4.5k to 226k.
The number of people who continue to apply for unemployment benefits increased by 300,000 to 19.72 million in the week ended August 9, the highest level since November 6, 2021. The four-week moving average of the number of people who continue to apply for unemployment benefits rose 70 to 19.55 million.
Chicago Fed Chairman Ostan Goulsby spoke cautiously, telling Bloomberg that while next month’s FAP meeting is “live,” the recent rebound in service sector inflation has left him hesitant to support a rate cut.
He pointed to the latest CPI report where service costs accelerated in a “probably not driven by tariffs” and called it a “dangerous data point” for the Fed to fight inflation.
By www.xm-links.comparison, Boston Fed Chairman Susan Collins said she would rather cut interest rates soon, telling the Wall Street Journal that she could support easing as early as September. Collins stressed that higher tariffs could suppress consumer purchasing power and ultimately weaken spending, while also warning that labor market risks are becoming increasingly obvious.
Collins acknowledged that she expects inflation to continue to rise by the end of 2025 and then slows again in 2026, but still sees growth and employment risks as important factors that justify the option to cut interest rates on the table.
The initial value of the U.S. Purchasing Managers Index shows that the manufacturing industry has rebounded the most in more than three years, with the index jumping from 49.8 to 53.3. The service industry remained steady at 55.4, slightly below 55.7, pushing the www.xm-links.comprehensive purchasing managers index to an eight-month high of 55.4. Data shows that the annualized economic growth rate is 2.5%, far higher than the average of 1.3% in the first half of 2025.
S&P Global's Chris Williamson pointed out that demand for www.xm-links.companies in both industries is strengthening, and the increase in backlog of orders indicates capacity restrictions are reminiscent of supply bottlenecks in early 2022. This surge also supported a rebound in recruitment.
However, the survey also shows that inflationary pressures are increasing. www.xm-links.companies are increasingly passing on tariff-related costs to consumers, PMIThe price index is currently at its highest level in three years. The higher sales prices of goods and services suggest consumer inflation will "further than the Fed's 2% target in the www.xm-links.coming months."
For the Fed, the PMI results raise more questions than answers. Instead of strengthening the reason for an impending rate cut, these data bring the economy closer to a historical situation consistent with policy tightening.
Williamson noted: "Combining business activity and hiring improvements, the price increase in surveys has made PMI data more use for rate hikes than cuts.
Cleveland Fed Chairman Beth Hammack said there was little interest in recent easing, telling Yahoo Finance that she "don't see reasons for rate cuts if the FAP meets tomorrow." She stressed that inflation "has too high in the past four years" and is currently "moving in the wrong direction", which justifies the position that remains "moderately restricted".
Hammark noted that the economy has shown resilience to date, with no obvious signs of recession indicating the need for policy easing. Instead, she stressed that the Fed has a duty to ensure inflation expectations remain stable, warning that premature cuts
About tariffs, Hamak said its impact has just begun to appear. Usually, the first sign takes three to four months to appear, which means that most of the impact will not be seen until 2026. She expects the cost increase to be further transferred next year, which adds another reason to cautiously implement a loose policy.
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