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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: Federal Reserve officials refute expectations of a sharp interest rate cut in September, and the countdown to the "Tepco" is on." Hope it will be helpful to you! The original content is as follows:
On August 15, during the Asian market on Friday, spot gold trading was around $3333.50 per barrel, and gold prices fell on Thursday, as U.S. inflation data was hotter than expected and the number of unemployment benefits fell, boosting the yields of the US dollar and U.S. Treasury bonds, reducing the possibility of a super-large interest rate cut in September; U.S. crude oil trading was around $63.90 per barrel, and oil prices rose about 2% on Thursday, hitting a weekly high.
The dollar rose across the board on Thursday, with data showing that U.S. producer prices rose more than expected in July as prices of services and ehadb.cnmodities surged, suggesting that inflation will generally rise in the ehadb.cning months.
The July Consumer Price Index (CPI) released on Tuesday was better than expected, pushing traders to step up bets on the Fed's interest rate cut in the ehadb.cning months.
While Thursday's data did not shake the reason for the September rate cut, it did raise concerns that tariffs could still stimulate inflation in the ehadb.cning months and change the rate cuts for the rest of the year.
The data also hit the possibility of the Fed's 50 basis points cut in September, with Treasury Secretary Becent hinting in an interview Wednesday that such action could be taken. "I don't think this is likely to happen, but this PPI report is expected to dispel this idea." Mousalem, chairman of the St. Louis Federal Reserve Bank, said Thursday that given the current economic situation, it is unnecessary to cut interest rates by half a percentage point at the Federal Reserve meeting in September, the United States is close to full employment and inflation is above the 2% target, and ehadb.cnpanies are still in the early stages of adapting to the tariff increase.
StoneX's WeLer said inflation data did raise questions about whether the Fed can cut interest rates significantly for the rest of the year. "Some say we may see three consecutive rate cuts, 25 basis points each, but if we approach this level of inflation, we may see up to two rate cuts, and even that may be doubtful," Weller said. "The London Stock Exchange Group (LSEG) data shows that traders still believe that the Fed cuts on September 17 are almost certain.
The latest data released by the National Bureau of Statistics on Friday showed that China's retail sales in July rose 3.7% year-on-year, higher than expected 4.6% and 4.8% in June.
China's industrial production grew by 5.7% year-on-year during the same period, ehadb.cnpared with previous forecasts of 5.9% and 6.8%.
At the same time, fixed asset investment rose 1.6% year-on-year in July, down from the expected 2.7%. The reading for June was 2.8%.
The Australian labor market strengthened again in July, with employment increasing by 245,000, slightly lower than expected growth of 253,000 and significantly improved from the tepid 10,000 in June. Full-time positions increased significantly by 60.5, which was enough to offset the decline of part-time jobs -35.9, boosting headlines.
The unemployment rate dropped from 4.3% to 4.2%, in line with expectations, while the participation rate stabilized at 67.0%. Signs of potential elasticity are also reflected in total working hours up 0.3% month-on-month.
Strong full-time recruitment shows that momentum to create higher quality jobs continues, which could ease the RBA’s move toward further easing as policymakers weigh domestic strength against global uncertainty.
European industrial production in the euro zone fell sharply by -1.3% month-on-month in June, and lower than expected, down by -0.8% month-on-month. The segment showed mixed situations, with energy production increasing by 2.9% month-on-month, but other categories decreased: intermediate products -0.2% month-on-month, capital goods -2.2% month-on-month, durable consumer goods -0.6% month-on-month, and non-durable consumer goods sharply declined by -4.7% month-on-month.
The output of the entire EU fell by -1.0% month-on-month. The largest monthly declines were Ireland (-11.3%), Portugal (-3.6%) and Lithuania (-2.8%). On the upside, Belgium (+5.1%), France (+3.8%), Sweden (+3.8%) and Greece (+3.3%) recorded significant growth.
UK GDP grew by 0.3% month-on-month in the second quarter, exceeding expectations of 0.1%, but slowed significantly from the strong 0.7% in the first quarter. In terms of output, the service industry grew by 0.4% month-on-month and the construction industry grew by 1.2% month-on-month, while the production sector shrank by -0.3% month-on-month. The per capita GDP grew by 0.2% month-on-month in the quarter, highlighting that despite the adverse factors,But it still maintains a moderate but wide expansion.
Second slowdown in the second quarter may be due to early loading in the first quarter, with activity ahead of April’s stamp duty changes and U.S. tariffs.
The June rebounded strongly on a month-on-month basis by 0.4%, which is the dual consensus of continuous declines in April and May. Monthly data shows that the service industry's output increased by 0.3% month-on-month, production increased by 0.7% month-on-month, and the construction industry increased by 0.3% month-on-month.
As of the week ended August 9, the number of initial unemployment claims in the United States fell -3 to 224, slightly lower than the expected 227. The four-week moving average of initial jobless claims rose 750 to 222.
The number of people who continue to apply for unemployment benefits fell by -15k to 1953k in the week ending August 2. The four-week moving average of the number of people who continue to apply for unemployment benefits rose by 500 to 1951k.
U.S. producer prices soared in July, and ultimately demand PPI rose by 0.9% month-on-month, far exceeding the expected 0.2% increase, setting the largest monthly increase since mid-2022.
This growth is widespread, with more than three-quarters driven by ultimate demand services, which rose 1.1% month-on-month, while ehadb.cnmodity prices rose 0.7% month-on-month. The core indicators, excluding food, energy and trade services, rose 0.6% month-on-month, the largest increase since March 2022.
On the year-on-year, the overall PPI accelerated from 2.4% to 3.3%, far higher than the year-on-year forecast of 2.5%, the highest level since February. The PPI, which excludes food, energy and trade services, rose to 2.8% year-on-year.
Despite political pressure and Treasury Secretary Becent Becent demanded a 50 basis point rate hike, the data could undermine market enthusiasm for the Fed's aggressive rate cut in September.
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