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The dollar index rises, EU plans to upgrade countermeasures against US tariffs
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Hello everyone, today XM Foreign Exchange will bring you "[XM official website]: The US dollar index rises, and the EU plans to upgrade its countermeasures against the United States." Hope it will be helpful to you! The original content is as follows:
On July 18, during the Asian market on Friday, spot gold trading was around $3,341/ounce. Gold prices fell slightly on Thursday, affected by the strengthening of the US dollar and the strong U.S. economic data. At the same time, the market is waiting for the progress of tariffs to become clearer, and investors are still cautious; U.S. crude oil trading was around $66.24/barrel, U.S. oil rebounded after approaching the $65/barrel mark on Wednesday, as drones attacked Iraqi Kurdistan oil fields for the fourth consecutive day, indicating that risks in this turbulent area continue to exist.
The dollar rebounded across the board on Thursday, and the trend fluctuated on Wednesday, when U.S. President Trump denied reports that he planned to fire Fed Chairman Powell.
BannockburnGlobalForex chief market strategist Marc Chandler said: "After a historic sell-off in the first half of the year, the dollar began to strengthen in the second half of the year. This seems to be mainly due to the short cover of the stronger U.S. interest rates."
Earlier data showed that the rebound in US retail sales in June exceeded expectations, and the number of initial unemployment claims in the United States fell last week, and the US dollar continued its rise.
However, the dollar then quickly fell back to pre-release levels, which Chandler said indicates “a lack of short-term confidence.”
Investors are weighing the multiple factors that may affect the direction of the market, including the economic impact of Trump's tariff policy, the U.S. fiscal and debt prospects, and the independence of the Federal Reserve.
Former Fed governor Wash, who is seen as a potential successor to Fed Chairman Powell, said Thursday that a new deal is needed between the U.S. Treasury and the Fed.He mentioned the 1951 agreement that separates federal debt management from monetary policy.
Asian market
Japan core consumer inflation slowed for the first time in four months driven by a decline in energy prices. The core CPI, excluding fresh food, dropped from 3.7% to 3.3% year-on-year, in line with expectations. While still above the Bank of Japan's 2% target (which has been the case since April 2022), the slowdown suggests that the pressure on energy costs is weakening. Overall CPI also fell to 3.3% from 3.5% in May.
However, potential price pressures remain sticky. The core core CPI, excluding fresh food and energy, rose from 3.3% year-on-year to 3.4%, highlighting the continued inflation in services and food. The inflation rate of the service industry rose from 1.4% year-on-year to 1.5%. Food prices, excluding fresh food, soared 8.2% year-on-year, up from 7.7% in the same period last year. Rice inflation eased slightly, but it was still at a year-on-year historical high of 101.7%.
European market
The euro zone CPI was finalized at 2.0% annual rate in June, slightly higher than 1.9% in May. The core CPI (except energy, food, alcohol and tobacco) has remained stable at 2.3% for the second consecutive month.
The service industry contributes most of the euro zone's annual inflation (+1.51 percentage points), followed by food, alcohol and tobacco (+0.59 percentage points). The energy continues to exert slight resistance, reducing the -0.25 pages.
At the broader EU level, CPI rose to 2.3% year-on-year from 2.2% last month. Inflation rates in Cyprus and France were below 1%, while Eastern European countries led the gains – 5.8% in Romania and 5.2% in Estonia. Inflation rates rose in 22 of the 27 EU countries.
The UK employment fell by -41k in June, shrinking for the second consecutive month. Although May's declines were revised from the initial -109k to a milder -24k, the overall situation still indicates weak labor markets. The number of applicants increased by 25.8k, exceeding expectations. The unemployment rate rose slightly to 4.7% in the three months to May from 4.6%.
Wage growth has also lost some momentum, with the median monthly salary in June rising 5.6% year-on-year, down from 5.7% in May. For the three months to May, average earnings growth with and without bonuses slowed to 5.0%, which remained slightly higher than expected 4.9%.
U.S. Market
Federal Director Christopher Waller strengthened his call for a rate cut in July, believing that policy rates are too strict given the current economic situation.
Waller emphasized in a speech that recent tariffs will only cause prices to "shortly soar" rather than sustained inflation. The standard monetary policy practice is to "see through" this one-time price as long as expectations remain anchored.Horizontal impact.
Waller pointed out that slow growth and moderate inflation are the reasons for the rate cuts. He pointed out that real GDP may only grow by 1% in the first half of 2025, and is expected to remain weak for the rest of the year, well below FOMC's estimate of long-term growth. Waller said that after excluding the impact of tariffs, the unemployment rate was close to 4.1%, the inflation rate was close to 2%, and the policy "policy interest rate should be close to neutral", rather than nearly 125-150 basis points higher than the estimated neutral interest rate of 3%.
Waller also pointed to the fragility of the labor market, indicating that private employment growth “almost stagnates” once data corrections are taken into account. Waller said that as employment risks increase and inflationary pressures subside, “we should not wait until the labor market deteriorates before lowering policy interest rates.
The U.S. initial unemployment claims fell -7k to 221k, lower than expected 234k. The four-week moving average of initial unemployment claims fell -6k to 230k.
Continuous claims rose 2k to 1956k. The four-week moving average of continuous unemployment benefits rose 5k to 1958k, the highest since November 20, 2021.
U.S. retail sales in June increased by 0.6% month-on-month to $7201.B, well above the expected 0.2%. Sales except automobiles rose 0.5% month-on-month to USD583 .3B, higher than expected 0.3%. Sales without gasoline increased by 0.7% month-on-month to US$669.8B. Sales except automobiles and gasoline increased by 0.6% month-on-month to US$533.0B.
Total sales from April to June increased by 4.1% xmserving.compared with the same period last year.
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