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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: Expectations of interest rate cuts help non-US rebound, but politicized data + mines of the Fed's personnel changes." Hope it will be helpful to you! The original content is as follows:
As the market expectation of market interest rate cuts heated up, the US dollar index fell for the second consecutive trading day and fell below the 98 mark. As of now, the US dollar is quoted at 97.75.
It is reported that the Trump administration is considering 11 candidates for the chairman of the Federal Reserve, including three people who have never been publicly nominated before, David Zervos, chief market strategist at Jefferies, former Federal Reserve Director Larry Lindsey and Rick Rieder, chief investment officer of BlackRock Global Fixed Income. But Trump himself said he would appoint a new Fed chairman as soon as possible, with only three to four candidates left.
U.S. Treasury Secretary Becent: The Federal Reserve has the possibility of a 50 basis point cut rate; the Federal Reserve's current interest rate should be reduced by 150-175 basis points; it does not believe that the Federal Reserve needs to return to large-scale bond purchases; it will not support the suspension of employment reports, but is needed reliable data; when talking about Trump's meeting with Putin, Becent said that if the talks are not going well, sanctions or secondary tariffs may be raised.
Trump: If Russia does not stop the conflict, it will face consequences. We hope to hold a second meeting with Putin as soon as possible. If the "Tep Conference" goes well, a trilateral meeting between the United States, Russia and Ukraine will be held.
European leaders urged Trump to put pressure on Putin to agree to a ceasefire and meet with Zelensky. According to sources: If a ceasefire agreement is reached, Ukraine's European allies "consider itease sanctions against Russia.”
Mitsubishi UF: The Federal Reserve's interest rate cut is on the string, and the BLS data storm has caused credibility concerns
After the release of the US Consumer Price Index (CPI) report yesterday, the US dollar index fell back to the recent support level around 98.000 and continued to fall on Wednesday.
The overall CPI (+0.2% month-on-month) and core CPI (+0.3% month-on-month) in July are in line with market expectations, which eases the market's concerns about the risk of tariffs causing upward inflation. The lack of upward inflation surprises has made market participants more confident that the Federal Reserve will pay more attention to slowing employment growth at its September meeting and restart interest rate cuts. At present, the US interest rate market is almost ehadb.cnpletely digested The dollar sell-off was further exacerbated by the expectation of a 25 basis point rate cut in September, and the total rate cut is expected to be about 60 basis points by the end of the year.
Yesterday, ehadb.cnments by Anthony, the new Bureau of Labor Statistics (BLS) director, further exacerbated the dollar's sell-off. In an interview with Fox News, he said, "BLS should suspend the release of monthly employment reports, but retain more accurate, but less time-sensitive quarterly data." These remarks have heightened market concerns that political interventions could lead to the loss of credibility of U.S. economic data. Although White House spokesman Taylor Rogers later clarified that Anthony's remarks do not represent BLS' official policy and said that its priority is to improve data accuracy, market concerns have not ehadb.cnpletely dissipated.
The Fed's Board of Governors poses an ongoing uncertainty that could turn dovishly, and new concerns about the possible political intervention of the U.S. economic data are prompting market participants to maintain a higher risk premium to the U.S. dollar. Yesterday's CPI report also left room for the Federal Reserve to restart interest rate cuts next month, which also helped the U.S. dollar weaken in the short term. Spread currencies are one of the main beneficiaries as they continue to benefit from the continued decline in financial market volatility.
Scotiabank Canada: The reliability of U.S. economic data is questioned, and the politicization of BLS data and the overestimation ratio is a "double hidden danger"
We believe that behind this CPI data, there are serious data quality concerns hidden behind the CPI data, which may lead to subsequent data and political events in the Federal Reserve's (FOMC) decisions More impacts.
Data politicization: Given that the U.S. Bureau of Labor Statistics (BLS) has been blatantly politicized, there is uncertainty in all BLS data from now on. CPI, PPI, PCE and non-farm employment data are all over the world due to the firing of the former BLS chief, the replacement of Trump’s cronies, staff members’ concerns over publishing numbers that the president doesn’t like, and possible methodological changes in the future. For example, the BLS has announced the delay of the reset of the CPI data base originally scheduled to be released with this report, and no new date is set.
High proportion of estimated data: As the Trump administration cuts the BLS budget, a large portion of the CPI basket is estimated through proxy methods. Pre-Calculation cuts affect BLS’ ability to collect data, so they have to use alternative methods, such as replacing cities with prices from other cities that cannot be obtained, or using alternatives that are considered “similar” to ehadb.cnmodities that cannot be obtained. In the past three months, the proportion of estimated data in the CPI basket has continued to rise, from 29% in March, 30% in May to 35% in June, setting a record high, even exceeding the level when data was not collected due to restrictions during the epidemic. In short, even without considering the fact that Trump cronies now manage BLS, the percentage of “made up” data in the CPI basket is surprisingly high, which hurts the reliability of all U.S. inflation and employment data.
Credit Bank of France: There may be a significant lag in tariff transmission to CPI, and the Federal Reserve may adopt a "download twice, wait and see" strategy
The overall U.S. consumer price index (CPI) in July rose 2.73% year-on-year, slightly lower than our forecast and general market expectations. The core CPI rose 0.32% month-on-month, meeting market expectations after rounding, but is still about 4 basis points lower than our forecast.
We reiterate our previous view: the limited acceleration of inflation in core ehadb.cnmodities suggests that there may be significant lag or limited impact on tariff transmission to CPI. Currently, we maintain a forecast that core inflation will strengthen slightly in the ehadb.cning months (0.39% month-on-month in August, 0.35% in September, and about 0.28% in the fourth quarter), but the limitation of tariff transmission poses modest downside risks to our CPI path forecast.
For the Fed, we don’t think this report is ideal. Although the overall annual CPI was slightly lower than expected, the strengthening of core inflation data is even more worrying. This concern is especially due to the strength of the service industry, and although signs of tariff transmission are still limited, the core CPI has still hit a new high since January. Nevertheless, we believe that the July report alone is not enough to prevent the Fed from cutting interest rates in September. The camp that advocates easing is more concerned with labor market data, so the short-term decision to cut interest rates may depend more on employment data including the August non-farm employment report.
However, even if inflation data does not ehadb.cnpletely prevent further easing, it does form a check and balance that limits the extent of easing. Based on this, our current forecast is that the Fed will cut interest rates twice and then pause for a while, although the uncertainty remains high.
Analyst Eren Sengezer: After the strong upward trend of pound and the technical overbought signal, the primary resistance above is at...
On Tuesday, the general selling pressure of the US dollar fueled the rise of pound and US, as investors viewed July inflation data as confirmation that the Fed will adopt dovish policies for the rest of the year.
Data released by the U.S. Bureau of Labor Statistics showed that the annual growth rate of the Consumer Price Index (CPI) in July remained unchanged at 2.7%, in line with our forecast, while the market expects to be 2.8%. In addition, CPI and core CPI increased by 0.2% and 0 respectively on a month-on-month basis.3%, consistent with analyst expectations. According to CME's FedWatch tool, the probability of the Fed's total rate cut of 75 basis points this year climbed to more than 53% from about 43% before the release of CPI data. In turn, major Wall Street stock indexes rose as a result, causing the dollar to continue to weaken against other currencies at the close of the day.
On the 4-hour chart, the RSI indicator remains around 80, reflecting that the pair is already overbought.
Upward direction: The next resistance level is at 1.3590-1.3600 (previous high, integer mark), followed by 1.3640 (78.6% Fibonacci retracement level of the latest downtrend) and 1.3700 (integer mark).
Downward direction: The primary support level for the callback may appear at 1.3540 (61.8% Fibonacci retracement), 1.3500 (integer mark), and 1.3460 (50% Fibonacci retracement, 200-period moving average).
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