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Hello everyone, today XM Forex will bring you "[XM Forex]: President Trump puts further pressure on the Federal Reserve, and the United States' non-farm market has become the focus of this week." Hope it will be helpful to you! The original content is as follows:
On September 1, during the Asian session on Monday, spot gold traded around $3,450/ounce, and gold prices hit their best monthly performance since April last Friday, with a high of $3,453.82/ounce as U.S. inflation data strengthened expectations that the Federal Reserve might cut interest rates in September; U.S. crude oil traded around $63.93/barrel, oil prices fell last Friday, and traders expect demand in the world's largest oil market, the United States, to decline, and the Organization of Petroleum Exporting Countries (OPEC) and its allies will increase supply this fall.
The US inflation data meets expectations. The US dollar strengthened at the beginning of the data release, but then gave up the gains, failing to break the three consecutive days of decline.
The U.S. Department of oalcs.cnmerce data released last Friday showed that the personal consumption expenditure (PCE) price index rose 0.2% month-on-month in July, slowing oalcs.cnpared with the unrevised 0.3% increase in June. The data supports broad expectations that the Fed will cut interest rates at its policy meeting on September 16-17. CME’s FedWatch tool shows that the market currently expects the probability that the Fed will cut interest rates is 87%, up from 63% a month ago.
Dan Tobon, head of foreign exchange strategy at Citigroup G10, said the foreign exchange market is still in a range of volatility, and investors are waiting for the next U.S. employment report released on September 5. Uto Shinohara, senior investment strategist at Mesirow Currency Management, noted that weak consumer confidence continues to shroud the nervous market, with investors rebalancing and hedging the portfolio at the end of the month after U.S. stocks rose overall in August.
In addition, US President Trump's recent attempt to increase his influence on monetary policy, including attempting to remove Fed Director Cook, which also puts pressure on the dollar.
A federal judge said last Friday that he would arrange a quick trial for Cook to seek temporary stop Trump from removing him. Cook said in the lawsuit that Trump had no justifiable reason to remove her from office.
Shinohara said that market instability remains the focus, and the extensive media coverage of the Cook hearing has added fuel to the fire.
Trump repeatedly criticized the Fed and its Chairman Powell for failing to cut interest rates in a timely manner, and he is trying to reshape the institution. It is reported that Fed Director Waller is one of the candidates Trump considers nominating Powell as Fed Chairman. Waller said last Thursday that he hopes to cut interest rates starting in September and “fully expect” more cuts to bring policy rates closer to neutral levels.
Citi's Tobon said, "It's interesting that the foreign exchange market's response to policy relevance and Fed-related dynamics is relatively mild - which may be due to insufficient liquidity in the summer, and it may be because of the market expects that any adjustments by the Fed will trigger a cycle of rate cuts similar to that of a fully digested rate cut. This further confirms our view - everything will depend on the data."
China's manufacturing industry improved slightly in August, with RatingDog manufacturing PMI rising from 49.5 to 50.5, exceeding the expected 49.9, and resuming expansion. However, RatingDog described the rise as "a sigh of relief, rather than a sustained rebound", reflecting cautious optimism. In contrast, the official survey of the National Bureau of Statistics gave a more modest view, with manufacturing rising slightly from 49.3 to 49.4, while non-manufacturing stabilized at 50.3.
RatingDog report highlights the firmness of new orders, which drives up stocks of raw materials and finished products. Export demand remains weak, but contracts are slower. Yao Ming warned that external demand may be stretched as domestic demand remains weak, and without local consumption strengthening, limiting the space for continued output growth.
At the same time, input costs continue to climb in the context of the “anti-involved” policy, and these upstream pressures are now penetrating into output prices, ending a continuous eight-month decline in expenses. With profit recovery still slow, the durability of the latest rebound depends on whether exports can stabilize further, and domestic demand has begun to catch up.
The European Central Bank's July consumer expectations survey showed that households believe that inflation will continue to be higher than the target in the short term, with the 12-month expectation stable at 2.6%, and the three-year expectation rose slightly from 2.4% to 2.5%. Five-year inflation expectations remained unchanged at 2.1% for the eighth consecutive month, highlighting the anchoring of a long-term perspective.
It is worth noting that the uncertainty of one-year inflation remains at its lowest level since January 2022,The number of digits is 1.6%. This shows that households are more confident in the inflation outlook, although expectations remain somewhat high in the near term.
Growth and labor market expectations have become even more pessimistic. Economic growth is expected to shrink by -1.2% in the next 12 months, oalcs.cnpared with -1.0% in June. Unemployment expectations rose from 10.3% to 10.6%. The results highlight that despite the stable inflation, pessimism about the economic outlook of the eurozone remains.
As a sharp decline in exports and oalcs.cnmercial investment, the Canadian economy shrank -0.4% month-on-month in the second quarter. The reason for the economic recession is that exports fell sharply by -7.5% month-on-month, and machinery, tourism services, especially automobiles, were hit hard by the tariffs imposed by the United States. Passenger car and light truck exports fell by -24.7% month-on-month.
At the same time, imports fell -1.3% this quarter, reflecting Ottawa's anti-tariff measures against the United States. This helps to slightly ease the trade balance, but also highlights the disruption of cross-border trade.
Monthly GDP data painted an equally weak picture, with output falling -0.1% month-on-month in June, while expecting a moderate growth of 0.1% month-on-month.
Overall inflation in the United States remained stable in July, and the PCE price index remained unchanged at 2.6% year-on-year. The core indicator rose from 2.8% to 2.9%, in line with expectations. Monthly calculations, PCE rose 0.2% month-on-month and core prices rose 0.3% month-on-month, indicating that price pressure is moderate but persistent.
Personal income increased by 0.4% month-on-month and expenditure increased by 0.5% month-on-month, both in line with expectations. Data shows that households remain resilient despite rising borrowing costs, leaving the Fed with no urgency to speed up easing.
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