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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: Trump increases pressure on the Federal Reserve and focuses on the annual meeting of global central banks." Hope it will be helpful to you! The original content is as follows:
On Thursday, during the Asian market, spot gold trading around $3,348/ounce, gold prices rose on Wednesday, the dollar weakened, and market participants are preparing for the upcoming Jackson Hall seminar. Meanwhile, the minutes of the Federal Reserve meeting showed that only two policymakers seemed to support the rate cut at the July meeting; U.S. crude oil traded around $62.90 per barrel, and oil prices rose on Wednesday as U.S. crude oil inventories fell more than expected last week, and investors were waiting for the next progress in Ukraine's conflict talks, and Russian crude oil is still under sanctions.
The dollar fell on Wednesday after U.S. President Trump called on Fed Director Cook to resign, but the dollar shranked its decline after records of a recent Fed meeting showed only two policymakers supported a rate cut last month.
Trump further stepped up his efforts to influence the Fed by accusation of one of his political allies of Cook of holding mortgages in Michigan and Georgia. Trump also told aides that he was considering trying to fire Cook, the Wall Street Journal reported on Wednesday. "The market has voted with its wallet, showing it doesn't like the president's interference in the Fed," said Marc Chandler, chief market strategist at Bannockburn GlobalForex. "Trump has been criticizing Fed Chairman Powell for being slow to cut interest rates, and traders expect him to appoint a more dovish successor after Powell's term ends in May.
But Powell may remain on the Fed's board, which will limit the number of directors appointed by Trump and may hinder his plans to form a more dovish policy-making team.
Chandler said this was just a disguise attempt to control the Fed, because if Powell did not resign from his post as director after the end of his term as president, the only thing Trump could appoint is his temporary seat to replace Coogler.
Earlier this month, Trump said he would nominate Milan, chairman of the Economic Advisory Board, to fill the vacant seat left by Fed Director Coogler after his unexpected resignation, with a term of only a few months left.
The Federal Reserve meeting minutes from July 29 to 30 show that in the Fed's decision to keep interest rates unchanged last month, although two policymakers expressed opposition, no other officials seemed to support the rate cut at the meeting. The US dollar has since left the daily low.
The latest data released by Standard & Poor's Global Global Manufacturing Purchasing Managers Index (PMI) in Australia in August was 52.9, and the previous value was 51.3.
Australia's S&P Global Services Purchasing Managers Index rose from its previous value of 54.1 to 55.1 in August, while the qxkkl.cnprehensive Purchasing Managers Index rose from its previous value of 53.8 to 54.9 in August.
The inflation dynamics in the euro zone in July did not change much, with the overall CPI 2.0% year-on-year and the core CPI 2.3% year-on-year. Both remain stable qxkkl.cnpared to June's readings.
The service industry remains the main driver, with a contribution of +1.46 percentage points to annual inflation, followed by food, alcohol and tobacco, at +0.63 percentage points. Non-energy industrial products rose slightly by +0.18 percentage points, while energy fell by -0.23 percentage points, highlighting that weak energy costs still offset the sustainability of some domestic prices.
In contrast, the broader EU recorded a slight acceleration from 2.3% to 2.4% year-on-year. The differences at the national level are still very large, with inflation in Cyprus close to zero, inflation in France below 1%, but inflation in Romania still above 6%.
ECB President Christina Lagarde said that with the lifting of earlier tariff-related upfront hikes, eurozone growth is expected to weaken in the third quarter.
A key factor is the new EU-US trade agreement, which means an effective tariff of 12-16% on EU goods entering the United States. Lagarde stressed that it is "still close to" the baseline scenario for June and is still below the grim scenario of more than 20% of tariffs that staff have also considered.
Nevertheless, “the uncertainty remains as industry-specific tariffs on pharmaceuticals and semiconductors remain unclear,” she added.
Lagarde confirmed that the ECB will include the updated tariff framework in its September forecast, which will help formulate policy decisions in the qxkkl.cning months.
UK inflation accelerated more than expected in July, with the overall CPI rising from 3.6% to 3.8% year-on-year, exceeding the expected 3.7%, setting a record 2024The highest level since the beginning of the year. The biggest driver is transportation costs, especially the rising airfare prices, which contributes the most to the monthly increase in annual rates.
Segmented data show widespread strength. CPI qxkkl.cnmodity inflation rate climbed from 2.4% year-on-year to 2.7%, while CPI in the service industry soared from 4.7% year-on-year to 5.0%. Meanwhile, the core CPI rose slightly from 3.7% year-on-year to 3.8%, exceeding expectations and being on par with the overall speed, highlighting the continued potential pressure.
For the Bank of England, data poses a challenge. Rising overall and core inflation may slow down the recent easing cycle as policymakers balance the continued high inflation and weak momentum of economic growth. If stickiness persists, the market may reduce expectations of recent rate cuts.
Minutes of the Federal Open Market qxkkl.cnmittee meeting from July 29 to 30 showed that although two members, President Christopher Waller and Michelle Bowman, were opposed to supporting the rate cut, they remained isolated on the qxkkl.cnmittee. "Almost all participants" believe that it is appropriate to maintain the federal funds rate between 4.25% and 4.50%, highlighting the broad consensus on maintaining stability amid uncertainty.
The discussion reveals the differences of focus: Most officials still view the upward risk of inflation as “the larger of both”, especially given the risk of tariffs and expected deans. But several members warned that weak employment should not be underestimated, reflecting the growing tension between the Fed's dual mission.
The minutes of the meeting pointed out that there is "conspicuous uncertainty" in the timing and scale of the tariff impact, and that if inflation proves to be sticky and the labor market is weak, policy makers will be prepared for potential trade-offs. Therefore, interest rate decisions will depend on “the distance between each variable and the qxkkl.cnmittee’s objectives and the potentially different time frames in which these respective gaps are expected to narrow”.
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