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US-UK trade deal boosts risk sentiment, US dollar index rises
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Official Website]: The United States and the United Kingdom 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.
Analysis of major currencies
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.
1. The Federal Reserve's restart of interest rate cut expectations has been pushed back and is wary of the high volatility risk of overseas assets
In the eyes of securities firms, the strong US 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 Federal Reserve 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, in the international trade situationBefore the US economic situation became clear, the only certainty was uncertainty. "Xiang Yuan, chief economist of Guosheng Securities, reminded that overseas markets are concerned about the international trade situation and the sensitivity of various US economic data will increase, and we need to be wary of the situation where the fluctuations in overseas asset prices may be significantly amplified.
2. Bank of Canada Governor Powell: The independence of the central bank is sacred and inviolable.
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 the same is true for 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.
3. Economist: The UK-US trade agreement is welcome, but the impact is limited in the short term
EFGAssetManagement economist Joaquin Thul wrote in the report that given the uncertainty of tariffs and their economic impact hovering over the market, the news of the UK-US trade agreement between the United States is welcome, but its impact is limited in the short term. The agreement is not xmmarkets.cnprehensive and is a statement of intention to strive to improve trade between the two economies. "Overall, against the backdrop of uncertainty of global trade, the news of the UK-US trade agreement between the United States is welcome. ”
4. U.S.-U.S.-U.S.-U.S.-U.S.-U.S.-U.S.-U.S.-U.S.-U.S. xmmarkets.cnmerce Secretary Lutnik said on Thursday that increasing market access to U.S. exporters will bring billions of dollars in revenue. Lutnik said in the Oval Office: “They agree to open up the market, which will add $5 billion to U.S. exporters.” "We still have 10% tariffs, which will bring US $6 billion in revenue." "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 that the UK can export 100,000 cars to the United States, "only pay 10% tariffs."5. Analysts: The Federal Reserve may postpone interest rate cuts due to tariff risks
United Bank economist Alvin Liew said that the Federal Reserve may postpone interest rate cuts due to tariff risks. Reserve 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. Given that the Fed is still saying patience as it strengthens warnings about the risks of rising inflation and unemployment caused by U.S. tariffs, UOB continues to believe there will be three rate cuts in 2025, 25 basis points each. The economist said UOB delayed its expected schedule to meet in September, October and December. UOB still believes that 2026There will be two rate cuts this year, which means the federal funds rate will drop to 3.25% next year.
Institutional Views
1. Capitol Macro: Trump is eager to show the progress of tariffs. The details of the agreement are unclear. US President Trump announced a new trade agreement with the UK, but the details provided at the meeting were limited, which disappointed some analysts. "This rush to show the progress of the 'protocol' shows that the government is increasingly eager to recover tariffs before tariffs hit GDP growth and inflation. Although Trump's remarks suggest that the 10% benchmark tariff will still remain, even broad details still seem to be blurred."2. Goldman Sachs warned: U.S. inflation may reach nearly 4% by Christmas
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 xmmarkets.cning months due to the harmful xmmarkets.cnbination 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 xmmarkets.cnmodity 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.
3. HSBC: The Bank of England may cut interest rates again next month
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 xmmarkets.cnmittee 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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