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Powell stays and leaves + Japan's fiscal storm hits the bond market! The United States and Japan approach the key position, and CPI may trigger the market tonight
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: Powell stays and leaves + Japan's fiscal storm hits the bond market! The United States and Japan are approaching key positions, and CPI may trigger the market tonight." Hope it will be helpful to you! The original content is as follows:
Asian market market
On Monday, the US dollar index maintained a narrow range of fluctuations, and successfully stood above the 98 mark in the late trading session. As of now, the US dollar price is 98.
Tariff aspects
①Trump: If Russia cannot reach a conflict agreement between Russia and Ukraine within 50 days, it will impose a 100% secondary tariff on Russia. US official: Trump refers to the fact that if an agreement cannot be reached within 50 days, in addition to imposing 100% tariffs on Russia, it will also impose secondary sanctions on countries that purchase Russian oil.
②Brazil's vice president denied Brazil's request for the United States to reduce tariffs to 30% and postpone the tariff period by 90 days. Brazil will publish a reciprocal countermeasures law on U.S. tariffs.
③The EU is preparing to impose counter-tariff tariffs on 72 billion euros of US goods.
④Thailand Ministry of Finance: Consider imposing zero tariffs on more US imported products.
⑤ The US Department of www.xmhouses.commerce launches a 232 investigation into the import of drones and polysilicon.
Trump: The Federal Reserve should lower interest rates below 1%.
Hassett, director of the White House National Economic www.xmhouses.commission: The Federal Reserve should remain independent, (but) it is "very wrong" on tariffs.
Federal Hamak: There is no need to urgently cut interest rates.
Powell asked the Fed Inspector General to review the cost of renovation of the Fed building.
Summary of institutional views
Westpac looks forward to the US CPI: core inflation rises, and the inflation critical point caused by the tariff buffer period is...
The US CPI data in May performed moderately, with the overall and core CPI monthly rates rising by 0.1%. Despite the implementation of tariffs, the prices of core www.xmhouses.commodities remained stable, with the prices of core services rising slightly by 0.2%. We expect inflation may rise again to around 0.3% in June. Inflation is expected to be driven by core inflation, and food and energy inflation will offset its impact. Due to the 90-day tariff truce period (basically limiting the tax rates of each country to 10%), we will not see the real effect of the White House policy until at least July. Even so, weak consumer demand may slow down and partially offset tariff costs. In the www.xmhouses.coming months, the weakness of the dollar will further aggravate inflation even if it cannot be absorbed by profit margins of US www.xmhouses.companies.
ANZ Bank looks forward to the US CPI: Tariff costs have been digested into deep waters. How long can the Fed's patience last?
Overall CPI monthly rate: 0.24%; core CPI monthly rate: 0.29%
There are no obvious signs that the tariff increase has affected the published CPI data. Businesses may be selling products in stock before tariffs are raised. Profit margins may also be www.xmhouses.compressed to a certain extent. We expect CPI data in June to show that some of the tariff cost pressure faced by www.xmhouses.companies is being passed on to consumers. This may first be reflected in the rise in www.xmhouses.commodity prices, among which the prices of clothing and new cars are particularly sensitive to tariff increases.
Due to recent delays in the implementation of reciprocal tariffs and the possibility of new tariffs on specific industries/products at any time, the timing, size and duration of tariffs remain uncertain. If the June CPI data is significantly weaker and there is little evidence that tariffs will be transmitted to wider inflation, the Fed may consider a rate cut to offset a partial rise in real policy rates in the near future, although this is unlikely to occur. Our basic point is that the Fed will continue to be patient at its July meeting.
Analyst Valeria Bednarik: The 20-period and the 100-period moving average resonate, and European and American bulls held their last fortress
On Monday, due to the rising risk aversion sentiment in the financial market, European and American currency pairs were under pressure, weakening slightly below 1.1700. News over the weekend sparked market concerns, with U.S. President Trump threatening to impose new tariffs on Mexico and the EU, and the two economies will face a 30% tariff on all imported goods starting August 1.
The daily chart shows that Europe and the United States have encountered buying support near the slightly bullish 20-day SMA, which is currently located near 1.1660. Meanwhile, longer-term moving averages remain neutral to bullish slopes, much lower than the short-term moving averages. Finally, the technical indicators are down in the positive area, reflecting the continued pullback since the annual high of 1.1830.
Turn towards the 4-hour chart, the situation seems more www.xmhouses.complicated. justIn the downward tilted 20-period SMA, it is approaching the upward 100-period SMA, both of which will form a potential "dead fork" around 1.1700. This position will constitute a key resistance, and if the exchange rate fails to break through here for a long time, it is expected to increase downward pressure in the short term.
Support level: 1.1650, 1.1620, 1.1590
Resistance level: 1.1700, 1.1730, 1.1770
Barclays (II): "Economic Domino" of tariff escalation, EU deep recession warning
In response to the letter sent by US President Trump, European www.xmhouses.commission President von der Leyen said that while the negotiations continue, retaliatory measures are not ruled out. In an official statement, she said we are still ready to continue our efforts to reach an agreement by August 1. At the same time, we will also take all necessary measures, including taking reciprocal countermeasures when necessary to safeguard the interests of the EU.
At this stage, we will not change the existing economic forecasts, nor will we adjust the European Central Bank’s (ECB) monetary policy expectations: that is, the July meeting will keep interest rates unchanged, followed by a 25 basis point cut at the September and December meetings. This position reflects our view that there is still room for negotiation in the next three weeks, and that the current tariff structure may be maintained, namely, 10% tariffs on most www.xmhouses.commodities and existing industry-specific tariffs.
Even so, we still notice two important factors:
The end result may not be reached after a period of escalation—the United States may further raise tariffs if the European www.xmhouses.commission takes retaliation measures.
The possibility of more adverse results still exists. In this case, we expect a deeper contraction and a slower recovery in economic activity. Inflation could be below the 2% target more significantly and longer, prompting the ECB to adopt a looser monetary policy stance—deposit rates could reach 1% in the first quarter of 2026. We also expect some financial support measures to be introduced, especially for industries and unemployed families that are most affected by U.S. tariffs, although this may not be implemented until the second half of 2025 or 2026.
The above content is all about "[XM Foreign Exchange Market Review]: Powell stays and leaves + Japan's fiscal storm hits the bond market! The United States and Japan are approaching key positions, and CPI may trigger the market tonight" is carefully www.xmhouses.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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