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Tariff threat is suspended but risks are undercurrent, US dollar and US bonds fall together, Powell may send key signals tonight
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: Tariff threat is temporarily suspended but risks are undercurrent, US dollar and US bonds fall together, Powell may send a key signal tonight." Hope it will be helpful to you! The original content is as follows:
Asian market market
On Monday, the US dollar index fell due to the strengthening of the stock market, and the US dollar index fell, breaking the 98 mark. As of now, the US dollar price is 97.92.
1. Tariffs
① EU diplomat: The EU is exploring broader potential countermeasures against US tariffs, but still prioritizes negotiations with the United States to resolve the problem.
②Indonesia: 19% of U.S. tariffs may xm-links.come into effect by August 1, depending on the joint statement.
③U.S. Treasury Secretary Bescent: Be more concerned about high-quality transactions than xm-links.completing transactions before August 1. There is no need to have a quarrel with Europe.
④ The Indian trade delegation has returned to India and is expected to reach a deal with the United States by September to October.
2. "Free Powell" storm
① US White House: Trump has no plan to fire Powell.
②Republican Rep. Luna sent a letter to the Department of Justice, saying that Powell xm-links.committed perjury twice and filed criminal charges.
③The Federal Reserve has added video guide content for the headquarters renovation project to its official website "FAQ page".
④ According to Semafor: Trump administration officials are considering visiting the Federal Reserve's renovation works as they review the Fed's renovation, and Senate Banking xm-links.committee Chairman Scott is also discussing whether to attend.
3. US Treasury Secretary Becent: If the inflation data is low, interest rates should be lowered. If secondary sanctions are imposed on Russia, Europe will be urged to follow the US approach.
4. Fitch Rating: Policy risks cast a shadow on the credit prospects of the United States.
5. Zelensky: A new round of negotiations between Ukraine and Russia is scheduled to be held on the 23rd.
6. Trump Media Technology Group announced that its total purchase of Bitcoin reserves has reached US$2 billion, and the group plans to continue to acquire Bitcoin and related assets.
7. Market news: The United States and Germany are close to reaching an agreement to provide Ukraine with air defense systems. The U.S.-German agreement involves the provision of two Patriot missile systems to Kyiv.
8. There are reports that the Chinese and US dollar heads may meet in the next few months, and the Ministry of Foreign Affairs responded.
Summary of institutional views
Berenberg Bank: The ECB's interest rate cut cycle may have been xm-links.completed, focusing on defense spending and household consumption
The ECB has lowered its deposit interest rate to 2%, and believes that the current interest rate level can respond well to the current uncertain environment. This supports our judgment that the ECB has xm-links.completed a rate cut cycle.
We expect the European Central Bank (ECB) rate cuts and the government’s increase in defense spending will support a solid recovery in the second half of 2025. Private consumption will benefit from wage growth that continues to exceed inflation. After slowing GDP growth in the second quarter caused by the shock of US tariffs, if trade tensions ease, we expect GDP growth to accelerate to 0.4% by the end of 2025.
However, if the trade conflict between the United States and Europe escalates, further easing may be required. It is expected that by 2027/28, the ECB may need to deal with wage pressure and a rebound in core inflation by raising deposit rates back to 3%.
The risk in the euro zone is biased downward. If negotiations are not successful this summer to last the cancellation of some newly imposed U.S. tariffs, external trade and xm-links.commercial investment will perform significantly weaker than we currently expect. Domestic, reversal of reform and other unwise domestic policies may mean that stronger demand will instead drive inflation higher than growth.
Analyst Stephen Innes: The US "doomsday theory" has suffered a heavy blow, and traders should start to retain ammunition for... (II)
Therefore, the Federal Reserve can be said to be "sitting firmly on the Diaoyutai" without making radical decisions. The July meeting rate cut is no longer under consideration, and the next key node is at the September meeting, but even so, the September meeting rate cut may show greater uncertainty xm-links.compared to previous weeks. As a always cautious dealer, the futures market is currently priced at a rate cut every two meetings in the next year - stable, predictable, and not surprising. And they do not price the potentially accelerated rate cuts when the Washington winds are almost bound to be in the air of a new Fed chairman next spring. Traders should probably start to keep bullets for this scenemedicine.
To sum up, I think the market has now changed from panic mode to poker face. It's not that it likes tariffs or thinks Powell is firmly sitting on the Diaoyutai - it just learned that bluffing without substantial action is not enough to be a reason to sell risky assets. Unless something really collapses—whether it is inflation, growth or geopolitical trust—the path to minimum resistance is still upward.
Yicun Bank: Eurozone bond market has hidden opportunities, grasp the low volatility window
Eurozone interest rates have risen recently, but are mainly concentrated on longer-term bonds, and have not yet had an impact on implicit volatility or realized volatility. Over the past few months, market expectations for deposit convenience rates at the end of 2025 have remained between 1.75% and 2%, and the short end of the eurozone yield curve has also been stable around these levels.
The current inflation outlook is clearer than in 2023, which provides a reason for a lower volatility indicator. However, the economic outlook is far from certain, and trade wars, deglobalization and geopolitical tensions may lead to rapid changes in the medium- and long-term picture. This will translate into higher volatility.
The most direct way to take advantage of the current lower implied volatility is to buy interest rate swap options or interest rate options.
Another strategy that is particularly popular in 2022 is to tactical purchase of ultra-long-term bonds. There are three attractive reasons for this strategy:
High convexity: These bonds have high convexity during periods of intensifying volatility, which is an ideal feature. This means that when interest rates fall, the bond price rises more than the price falls when interest rates rise.
Low volatility on key interest rate expectations: Ultra-long-term bonds are less affected by market volatility on key interest rate expectations.
Steepening of the curve: Purchasing 30-year bonds can take advantage of the steepening of the near-term yield curve, i.e. long-term interest rates rise faster relative to short-term interest rates, which may lead to higher returns.
Analyst Valeria Bednarik: Europe and the United States have recovered but encountered a 100-cycle SMA "Tieling", and the tariff countdown ignited counterattack artillery fire
This Monday, Europe and the United States entered a recovery mode, and the improvement of market sentiment boosted demand for the euro. In the absence of important news, the market focus remains on trade-related news, especially the progress of the trade agreement between the United States and the European Union.
U.S. xm-links.commerce Secretary Lutnik said on Sunday that he believes a trade deal can be reached with the EU, but he also stressed that the deadline for the implementation of the 30% benchmark tariff on August 1 is fixed. Meanwhile, the EU said it was preparing retaliatory tariffs, having prepared a tariff list for 21 billion euros and preparing a second round of 72 billion euros.
From a technical perspective, according to the 4-hour chart, Europe and the United States are showing a bullish trend. The pair runs above the moderately bullish 20- and 200-cycle SMAs, with the technical indicators upwards within the positive zone,And broke through last week's high. The upper resistance is located at a gradually flat 100-cycle SMA near 1.1705.
The above content is all about "[XM Forex]: Tariff threat is temporarily suspended but risks are undercurrent, US dollar and US bonds fall, Powell may release a key signal tonight". It is carefully xm-links.compiled and edited by the editor of XM Forex. I hope it will be helpful to your transactions! Thanks for the support!
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