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Hello everyone, today XM Foreign Exchange will bring you "[XM official website]: The United States and Britain reach a trade agreement boosts risky sentiment, and the US dollar index rises." Hope it will be helpful to you! The original content is as follows:
On the Asian session on Friday, the US dollar index hovered above the 100 mark. After the announcement of the UK-US trade agreement, major Wall Street stock indexes, including the S&P 500, were boosted by the market's optimism about the trade agreement, safe-haven assets were sold, and the yen, Swiss franc and gold prices all fell to varying degrees. The US dollar index also rose sharply, hitting a new high since April 11 to 100.76 on Thursday, closing at 100.63, up two consecutive trading days. This trading day requires close attention to news related to the international trade situation and changes in market sentiment. In addition, many Fed officials will make speeches, and investors also need to pay attention.
Dollar: As of press time, the U.S. dollar index hovers around 100.71, market sentiment remains firmly high and boosts the U.S. dollar (USD) after the Trump administration announced the upcoming U.S.-U.K. trade agreement that will allow Britain to avoid high "peer-to-peer" tariffs that will take effect on July 9. President Trump temporarily withdrew his own "liberation day" tariffs. The United States will still impose a 10% tariff on all imports from the UK, which may curb market sentiment in the near future. Technically, in terms of MACD indicators, the DIFF line and the DEA line are still below the 0 axis, and the short trend has not yet reversed; while the RSI (14) is at 45.28, indicating that it has not entered the overbought or oversold range at present, and there is still room for oscillation. The CCI indicator rebounded rapidly to 93.57, indicating that there may be a certain rebound momentum in the short term, but the direction confirmation still requires breakthrough cooperation.
In the view of securities firms, the strong U.S. employment data and weak consumer confidence have made the work of Fed policymakers particularly difficult. The risk of stagflation in the US economy may be an important reason for the Fed to hold its back continuously. After the Fed's May interest rate resolution was announced, some institutions have postponed the expectation of the Fed's restart of interest rate cuts from June to July, and waiting and waiting has become the main policy tone of the Fed's current policy. "Looking back, before the international trade situation and the US economic situation are clear, the only certain thing is uncertainty. "Xiang Yuan, chief economist of Guosheng Securities, reminded that overseas markets have related news about the international trade situation and the United StatesThe sensitivity of national economic data will increase, and we need to be wary of the situation where the fluctuations in overseas asset prices may be significantly amplified.
Bank of Canada Governor McClum spoke out on Thursday to support Federal Reserve Chairman Powell, saying that the independence of the central bank is "sacred and inviolable." When asked about Trump's pressure on Powell, McClum said: "The central bank operates independently and has clear goals. This mechanism brings significant benefits to the Canadian people, and so are other countries. I don't think any behavior that threatens the independence of the central bank is desirable." Trump has criticized Powell many times, calling him a "big loser" and a "fool" and hinting that interest rates should be cut.
On Thursday, after Trump announced a trade agreement with the United Kingdom, US Secretary of Commerce Lutnik said that increasing market access to U.S. exporters will bring billions of dollars in revenue. "They agreed to open up the market, which will add $5 billion to U.S. exporters," Lutnik said in the Oval Office. "We still have 10% tariffs, which will bring $6 billion in revenue to the U.S.." Lutnik said the agreement will not put pressure on the British economy and British workers will not be negatively affected by the agreement. He added that the agreement means the UK can export 100,000 cars to the United States, "only pay a 10% tariff."
United Bank economist Alvin Liew said that the Federal Reserve may postpone interest rate cuts due to tariff risks. Fed Chairman Powell said central bank officials are not in a hurry to adjust interest rates because "the cost of waiting is quite low," the economist said. In view of the Federal Reserve's warnings on the risks of rising inflation and unemployment caused by U.S. tariffs, UOB continues to believe that there will be three interest rate cuts in 2025, each of which is 25 basis points. The economist said UOB delayed its expected schedule to meetings in September, October and December. UOB still believes there will be two rate cuts in 2026, which means the federal funds rate will drop to 3.25% next year.
Goldman Sachs warned that Trump's global trade war could waste much of the progress made in the anti-inflation war. The Wall Street bank told clients in a report Wednesday that key inflation indicators are expected to soar in the coming months due to the harmful combination of high tariffs and a weaker dollar. Goldman Sachs currently expects core inflation annual rate (excluding food and energy) to accelerate from 2.6% in March to 3.8% in December. This is based on the Fed's favored PCE price index. Goldman Sachs believes that prices are rising much more than the Fed’s forecast in March, when the United States has not announced the largest tariffs. The Fed expects core PCE inflation to be 2.8% in December. Worse, Goldman Sachs expects annual rate of core commodity inflation to soar from 0.4% in March to 6.3% in December. By December, prices for used cars (+8.3%), household appliances (+7.8%), video/audio/computer (+7.7%), jewelry/watches (+5.9%) and pharmaceutical/medical (+7.8%) will rise significantly.
HSBC Asset Management's Hussein Mehdi said in a report that the Bank of England may cut interest rates again next month after slashing the benchmark interest rate by 25 basis points to 4.25% on Thursday. "As inflation data move in the right direction, the Monetary Policy Committee now seems more willing to cut interest rates. We believe that rate cuts are necessary to boost economic growth and possibly alleviate pressure on government financing costs." He said the Bank of England could cut interest rates by a total of 125 basis points this year. If service sector inflation and wage growth slows further, interest rate cuts may be advanced to next month.
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