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market analysis
The yields of US dollar and US bonds have risen together, and the US CPI data is coming!
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: The yields of the US dollar and US bonds have risen together, and the US CPI data is xm-links.coming!" Hope it will be helpful to you! The original content is as follows:
On the Asian session on Tuesday, the US dollar index hovered around 98.03, and the June CPI data to be released on Tuesday became another major focus of the market. The market generally expects inflation data to provide important clues to the Federal Reserve's September interest rate decision. If the CPI shows that inflationary pressure exceeds expectations, it may enhance the market's expectations of the Federal Reserve maintaining high interest rates, thereby providing support for the US dollar; conversely, if the inflation data is soft, it may further weaken the short-term momentum of the US dollar. Well-known institutions pointed out that the current market expectations for the Fed's interest rate cut have cooled down, partly because of the stable performance of recent economic data and Trump's tariff remarks that may push up import prices and indirectly amplify inflationary pressure.
Analysis of major currencies
United States dollar: As of press time, the US dollar index hovered around 98.03. On Monday, the US dollar index (DXY) showed a steady trend in the global foreign exchange market. Although it fell slightly during the day, the overall consolidation pattern near its highs in the past two weeks was still maintained. As of the evening of Beijing time, the DXY quotation was around 97.80, and it failed to effectively break through the key resistance range of 97.80-98.00. Market sentiment is significantly affected by Trump's latest tariff remarks. Coupled with the upcoming June U.S. Consumer Price Index (CPI) data, traders remain cautious and wait and see further guidance from subsequent fundamentals and technical aspects. From a technical perspective, the US dollar index (DXY) has gradually stabilized and rebounded since hitting a three-year low of 96.38 on June 1. Currently, trading is around 97.80, and has fallen slightly during the day by about 0.2%. The daily chart shows that DXY is currently located at the 50-day moving average (97.65), 100-day moving average (97.50) and 200-day moving average (97.30) Above, it indicates that short-term trends have improved, but are still subject to the key resistance range of 97.80-98.00. This range is not only the high point of recent consolidation, but also coincides with the upper rail of the descending wedge, forming a convergence point of multiple technical pressures.
1. Tariff remarks aggravate market uncertainty
Trump's recent tariff remarks against many countries around the world have become the focus of market attention. After issuing tariff warnings to more than 20 countries including Canada, Japan, South Korea, Brazil, Thailand last week, Trump further pointed his finger at the EU and Mexico, and planned to impose 30% tariffs on goods from the two countries from August 1. In response to the EU, Trump criticized its "long-term, huge trade deficit" and demanded that the market be fully opened or faced higher retaliatory tariffs. Although Trump said tariff levels “can be adjusted for bilateral relations,” his tough wording undoubtedly exacerbated market concerns about global supply chain disruptions and retaliatory measures. The EU responded quickly, with European xm-links.commission President Ursula von der Leyen saying it would postpone the original retaliatory tariff plan and seek a solution by August 1 through negotiations. She also warned Trump's tariffsThe strategy may have a serious impact on the transatlantic supply chain. EU Trade xm-links.commissioner Maroche Sevchovich further revealed that the EU is coordinating response strategies with G7 partners in an attempt to form a united front. This multilateral coordinated effort reflects the high degree of uncertainty facing the global trading system. Mexican President Claudia Sheinbaum expressed strong opposition to the tariff proposal, emphasizing Mexico's efforts to xm-links.combat fentanyl and strengthen US-Mexico security cooperation, and clearly stated that it would give priority to diplomatic channels to avoid immediate retaliatory tariffs.
2. Sources: The ECB is still expected to keep interest rates unchanged at its July 24 meeting
Sources said that after Trump's latest trade tax threat, the ECB will discuss a more negative situation next week than expected in June. The ECB is still expected to keep interest rates unchanged at its July 24 meeting. Discussions on interest rate cuts have been delayed until September.
3. Powell asked the US Central Bank inspector general to review the renovation of the Federal Reserve's headquarters building
On July 14, local time, as Trump administration officials increased their criticism of the way the Federal Reserve operated, Federal Reserve Chairman Powell has asked the US Central Bank inspector general to review the costs involved in the renovation of the Federal Reserve's headquarters building. The request was filed with Fed Inspector General Michael Horowitz over the weekend, a person familiar with the matter said. Earlier, White House Office of Management and Budget Director Watt wrote to Powell last week, which read Trump was "extremely concerned" about the cost overrun of the $2.5 billion project. The Fed describes the challenges facing a xm-links.comprehensive restoration of the Marina Eccles Building and its adjacent properties in its material published on its website.
4. With the support of a variety of favorable factors, Hassett occupies a leading position in the Fed's presidential election
Hassett, director of the White House National Economic xm-links.commission, is becoming a popular candidate for the next Fed chairman. According to several sources, Hassett is standing out against the backdrop of Trump's consideration of appointing a Federal Reserve leader who is more consistent with his position. Whether Hassett will eventually get nomination is yet to be determined. But sources said Hassett has advantages that no one else has. He is the head of the National Economic xm-links.commission and served as a key economic adviser during Trump's first term. Hassett has worked for Trump for nearly a decade and is one of the few advisers who have won the trust of the president and maintained good relationships for a long time. After holding two positions in Trump's first administration, he joined a private equity firm founded by Trump's son-in-law Kushner and advised Trump on economic policy during the 2024 presidential campaign. In addition, Hassett is also seen as a disciplined and media-friendly voice, a trait Trump has long valued in his senior appointees. EvercoreIS points out that Hassett's biggest challenge is that it must prove to the market that despite being a loyal supporter of Trump, he is able to maintain sufficient independence as chairman of the Federal Reserve to maintain the United Nations.The credibility of the reserve.
5. Analysts: Any tariff agreement may be beneficial to the European economy
EdmonddeRothschild Asset Management said in a report that President Trump threatened to impose a 30% tariff on the EU, but any agreement may be beneficial to the European economy as long as trade negotiations continue. "Any agreement will be a good signal for the (European) economy, and if Europe decides not to take retaliation measures, higher inflation risks can be avoided." The asset management xm-links.company also said that this will also allow the ECB to advance its last rate cut. However, the xm-links.company noted that if trade uncertainty persists into 2026, it could have lasting impacts on U.S. inflation.
Institutional View
1. Rabobank: The yen may face certain fluctuations in the short term
Jinshi Data reported on July 14 that the Rabobank Jane Foley said in a report that due to the uncertainty of tariffs, the yen may face certain fluctuations in the short term, but it should gradually rebound in the long term. The threat of the U.S. potentially imposing high tariffs on the Japanese economy has been dragging down the country's growth prospects. She said this weakened market expectations for the Bank of Japan's ability to raise interest rates. The yen should be boosted if there are signs that Japan will not be subject to the 25% tariff that President Trump threatened to impose. Rabobank expects that the dollar against the Japanese yen to fall to 140 within 12 months if the Bank of Japan raises interest rates.
2. Analysts: The euro is likely to weaken sharply by the end of the year
Jinshi Data reported on July 14 that the capital economy xm-links.company's John Higgins said in a report that the euro zone's economic growth may be less than expected, the euro is likely to weaken sharply by the end of the year. Currently, the market's expectations for the growth of the euro zone are better than those of the United States. We believe that even if the United States ultimately does not impose a 30% tariff on EU imported goods, these expectations will be disappointed. He expects loose fiscal policies to boost Germany's economic growth. However, the agency believes that the overall impact of fiscal policy on the entire euro zone is roughly neutral. The macroeconomic research institute also expects the impact of tariffs on U.S. economic growth will be milder.
3. Analysts: The long-term trend of the euro will remain upward
BCA Research Strategists said in a report that given the difference between the US balance of payments deficit and the euro zone surplus, the euro-dollar exchange rate may rise from the current 1.1688 to 1.40 in the long run. They said the long-term trend will continue to rise despite the likely consolidation of the euro in the xm-links.coming months as recent appreciation has begun to put pressure on European exporters. Market concerns over the sustainability of the U.S. current account deficit are growing. Rising U.S. policy risks, deteriorating net international investment positions and disappearing revenue balance support are weakening investors' willingness to fund the U.S. deficit. By contrast, the external situation in the euro zone is stable and reliant on short-term capital flowsLower.
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