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The US dollar index plunged during the session, and TACO trading appeared again!
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: The US dollar index plunged during the session, and TACO trading appears again!". Hope it will be helpful to you! The original content is as follows:
On Thursday, during the Asian session, spot gold trading was around $3,340.88 per ounce. Gold prices rose sharply on Wednesday after reports that U.S. President Trump planned to fire Fed Chairman Powell, but the rise in gold narrowed after Trump denied it; U.S. crude oil trading was around $65.42 per bin, and oil prices closed slightly lower on Wednesday as increased U.S. fuel inventories and concerns about the wider impact of U.S. tariffs on the economy overshadowed some signs of increased demand.
The dollar fell on Wednesday but got rid of its lows after U.S. President Donald Trump denied his plan to fire Fed Chairman Powell.
Bloomberg reported that the president may fire Powell soon. A source also told Reuters that Trump was open to the firing of Powell and had a positive response to some Republican lawmakers in a poll on the firing of Powell. But Trump said the reports were not true.
Trump said: "I don't rule out any possibility, but I think the possibility is small unless he has to leave because of fraud." Trump is referring to recent criticisms of the Fed's historic headquarters of $2.5 billion in renovation projects overspending in the Fed's historic headquarters in Washington.
Removing Powell's term before he ends in May next year will have a negative impact on the dollar because it will undermine the credibility of the U.S. financial system and the dollar's status as a safe-haven currency.
Juan Perez, senior trading director at MonexUSA, Washington, said: "What can kill the value of the dollar and absolutely destroy people's confidence in the dollar is to attack the independence and authority of the Federal Reserve in any way, form or form."
Trump has been slamming Powell for months for not cutting interest rates, saying interest rates should be 1% or less.
As the rise in xm-links.commodity costs due to import tariffs was offset by weakness in the service industry, U.S. producer prices remained unexpectedly flat in June.
Data released on Tuesday showed that U.S. consumer prices rose in June as costs of some xm-links.commodities rose, indicating that Trump's tariffs began to have an impact on inflation.
Investors continue to focus on tariff issues before the August 1 deadline, when many trading partners will face higher trade tariffs.
Trump said Wednesday that the United States may "maintain the tariff rate set by the tariff letter" for Japan and may reach another trade agreement with India, after he announced an agreement with Indonesia on Tuesday.
In Japan, investors are focusing on the possible transfer of power in the House of Lords elections this weekend, which could make an already fragile fiscal situation even more tense, with long-term bond yields soaring to record highs as the vote approaches.
Asian Market
According to official data released by the Australian Bureau of Statistics (ABS) on Thursday, Australia's unemployment rate rose from 4.1% in May to 4.3% in June. This figure is higher than the market's general expectations of 4.1%.
In addition, Australian employment changes fell from -1.1K (corrected to -2.5K) in May to 2K in June, while the market generally forecasts to 20K.
Australia's participation rate increased from 67.0% in May to 67.1% in June. Meanwhile, the number of full-time employment fell by 38.2K over the same period from the above value of 41.9K (revised to 38.7K). Part-time employment increased by 40.2K in June, xm-links.compared with -43K (corrected from -41.2K).
European Market
The EU proposes a seven-year budget of nearly 2 trillion euros, including a €589.6 billion xm-links.competitiveness, prosperity and security fund, of which €450.5 billion is designated for EU xm-links.competitiveness funds.
U.S. Market
New York Fed Chairman John Williams warned that the tariff effect has just begun to appear in the data and could push up inflation significantly in the xm-links.coming months. Williams said overnight that the full impact of U.S. tariffs will take time to show, but they are expected to increase inflation by "about 1 percentage point" by the second half of this year and early 2026. While he acknowledged that the current data showed an impact of “moderate”, he expects upward pressure to increase significantly.
Williams predicts that the average inflation rate in 2025 will be between 3% and 3.5%, then drop to around 2.5% in 2026, and will not return to the Fed's 2% target by 2027. Specifically by June, he expects the overall inflation rate to be 2.5% and the core inflation rate to be 2.75%. In addition to rising price pressures, he also predicts that the economy will slow down, with growth slowing to around 1% this year, the unemployment rate will rise to 4.5% from its current 4.1%.
In this context, Williams supports keeping interest rates at current levels. "It is perfectly appropriate to maintain this moderately restricted monetary policy stance," he said, suggesting that despite the cooling of growth, the Fed is not in a hurry to cut interest rates.
Atlanta Fed Chairman Raphael Bostic warned that rising inflation related to import tariffs could delay any rate cuts. In an interview with FoxBusiness, Bostic admitted that Trump's trade actions brought uncertainty. He added that price pressures throughout the Southeast are now obvious. “Price pressure is real,” he said, citing business feedback and internal investigations.
Bostic said that the June CPI report showed that widespread price increases—especially the price increase of a large number of imported goods—could mark a "turning point." He stressed that the overall inflation rate is further away from the Fed's 2% target. “We saw the highest price increase throughout the year,” he added. He believes that this background requires caution.
Bostic does not rule out this possibility when asked about the possibility of not cutting interest rates by 2026. “Everything is on the table,” he said, stressing that the policy path will be entirely dependent on how inflation evolves. "If prices continue to steadily deviate from our targets, we will have to consider what kind of policy response is appropriate."
The Fed's latest Beige Book report said that from the end of May to early July, U.S. economic activity rebounded slightly, slightly improved from the previous version. Five school districts saw a slight or moderate increase, while five school districts remained flat, and two school districts reported a decline.
Businesses, however, remain cautious, with uncertainty still high, and the overall outlook is described as "neutral to slightly pessimistic." Only two school districts expect future activity to rebound. Labor conditions remained cautious, employment only increased slightly, and wages increased moderately.
Price pressure continues to increase, and regions are described as moderate to moderate. The input costs associated with tariffs (especially manufacturing and construction industries) are widely cited, and most businesses are facing “from moderate to obvious” cost pressure.
More and more xm-links.companies are starting to pass on these higher costs to consumers through price increases or surcharges. Other xm-links.companies are limited by customer price sensitivity and choose to absorb gains and xm-links.compress profit margins. With the general expectation of continued cost pressure in the xm-links.coming months, the Fed noted that “by the end of summer, consumer prices will start to rise at a faster pace.”
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