Forex Analysis

Growing U.S.-China Trade Disputes Affect the World Economy

In early February 2025, the U.S. and China’s ongoing trade disagreements got worse, creating big impacts on the global economy. These tensions are causing problems for businesses, shoppers, and even gas prices worldwide.

A Back-and-Forth Tariff Fight
On February 4th, the U.S. added a 10% tax on many products imported from China, like electronics and clothes. The U.S. government says this is to stop unfair trade practices and illegal drugs like fentanyl from entering the country. But this tax also means American companies now pay more to buy Chinese goods. Over time, this could make everyday items more expensive for U.S. shoppers.

China didn’t stay quiet. On February 10th, they announced their own taxes on American products:
• A 15% tax on U.S. coal and natural gas.
• A 10% tax on U.S. oil, farm tools, and some cars.

Since China buys a lot of U.S. oil and natural gas, these taxes could hurt American energy companies. If China starts buying these supplies from cheaper countries (like Russia), U.S. companies might struggle to sell their products, which could shake up global energy prices.

Why Are the U.S. and China Fighting?
The U.S. wants China to follow three main rules to make trade fairer:
1. Protect American ideas and technology: U.S. companies say China sometimes copies or steals their technology. The U.S. wants China to stop forcing companies to share secret tech info to do business there.

2. Stop favoring Chinese companies: The U.S. claims China gives its state-owned companies extra help (like money from the government), making it hard for American businesses to compete.

3. Remove hidden trade barriers: China has rules, like strict permits or limits on imports, that make it tough for U.S. companies to sell products there. The U.S. wants these rules gone.
China, on the other hand, is using tariffs to push back, especially targeting industries where the U.S. is strong, like energy.

Currencies Are Getting Shaky
The trade fight is also affecting money values around the world:
• China’s yuan: China might make the yuan weaker on purpose. This makes Chinese products cheaper for other countries to buy, helping China sell more despite U.S. taxes. But it could also make everyday items in China more expensive.

• U.S. dollar: Investors see the dollar as a safer choice during uncertain times, so its value has gone up. But a stronger dollar makes American products pricier for other countries, hurting U.S. exporters.

• Other currencies: Countries like those in Europe or Canada, which trade a lot with both the U.S. and China, are seeing their currencies lose value because of the uncertainty.

What Happens Next?
If the U.S. and China don’t reach a deal soon:
• Prices for things like gas, electronics, and clothes could keep rising.

• U.S. energy companies might lose money if China buys less from them.

• Chinese factories relying on U.S. technology could face delays or shortages.

The whole world is watching to see if these two economic giants can work things out. Until then, everyone—from businesses to families—should prepare for more ups and downs in prices and markets.

Symbol: AUD/JPY
Action: SELL
Entry Range: 96.691 - 96.009

Target 1: 95.054
Target 2: 94.339
Target 3: 93.640
Target 4: 92.771

Stop Loss: 97.733

Risk Disclosure

The White House has announced a one-month delay on the planned 25% tariffs on Mexican imports. This decision follows an agreement between U.S. President Donald Trump and Mexican President Claudia Sheinbaum, wherein Mexico will deploy 10,000 National Guard troops to enhance border security and combat fentanyl trafficking and illegal immigration.

Outcomes from this News:

Less Economic Impact: The delay may prevent immediate economic disruptions, such as increased consumer prices and potential job losses in industries reliant on Mexican imports. 

Improved Diplomatic Relations: The agreement could lead to improved diplomatic relations between the U.S. and Mexico, fostering cooperation on border security and trade issues.

Understanding the January 2025 U.S. Jobs Report

The U.S. jobs report for January 2025 is scheduled for release on Friday, February 7, 2025, at 7:30 AM (ET). 

Key Expectations:

Job Growth: Economists anticipate the addition of approximately 170,000 jobs in January, a decrease from the 256,000 jobs added in December. This slowdown is attributed to factors such as California wildfires, cold weather, and industrial strikes, which could reduce the total job gains by 60,000 to 80,000. 

Average Hourly Earnings: A 0.3% increase is expected, bringing the annual wage growth to 3.8%, slightly down from 3.9% in December.

Unemployment Rate: Predicted to remain steady at 4.1%, indicating that most individuals seeking employment are able to find work.

Implications for the Economy:

While job growth is slowing, the labor market remains stable. The Federal Reserve is not expected to make significant changes to its policies based on this report, suggesting that the economy is not facing major issues but is not growing as quickly as it was last year.

How Trump’s Tariffs Are Shaking Up Forex and Commodity Markets

President Trump’s latest tariff moves have sent shockwaves through global markets, especially in forex and commodities. It’s a messy, unpredictable situation, but let’s break it down, how currencies are reacting, what’s happening to oil and gold, and why these tariffs even exist in the first place.

1. Currency Market Chaos

The Dollar’s Power Move

The U.S. dollar has been flexing, gaining strength against currencies like the Mexican peso and Canadian dollar. After the tariff announcement, the dollar shot up more than 2% against the peso and about 1% against the Canadian dollar. Why? Because in times of uncertainty, investors rush to what they see as “safe” assets, and the U.S. dollar is still one of the safest bets out there.

Emerging Market Currencies Taking a Hit

Meanwhile, currencies in emerging markets—especially in Mexico and Canada—are feeling the pressure. With tariffs threatening trade, investors get nervous, causing these currencies to dip. Less trade means less economic activity, and that’s never a good sign for a country’s currency.

2. Commodity Market Shake-Up

Oil Prices Are in Trouble

One of the biggest shocks is in oil. The U.S. just applied a 10% tariff on Canadian oil. Since Canada is one of the biggest oil suppliers to the U.S., this could cause a $3-$4 discount on Canadian crude. Canadian oil companies now have two choices: eat the losses or offer discounts to stay competitive. Either way, U.S. refineries that rely on Canadian oil might start looking elsewhere, which could cause ripple effects in the global oil market.

Gold Prices on the Rise

Whenever there’s economic uncertainty, people rush to gold—it’s the classic “safe haven” asset. With trade tensions heating up, gold prices could climb toward $3,000 per ounce as investors look for ways to hedge against risk.

Base Metals Feeling the Pressure

Copper, aluminum, and other base metals are also caught in the crossfire. JP Morgan has already warned that prices for these metals could drop. Why? Because tariffs can slow down trade, which slows down demand, which then drags prices down. Simple as that.

3. Stock Markets Getting Jittery

Nobody likes uncertainty, least of all investors. Stock markets in the U.S., Canada, and Mexico all took a hit after the tariff announcement. Investors are worried that this trade fight could spiral into something bigger—possibly even a recession in some countries. If that happens, markets could see even more volatility in the months ahead.

4. Retaliation: The Trade War Escalates

Trade wars aren’t one-sided, and Canada and Mexico aren’t just sitting back. They’ve already announced retaliatory tariffs on U.S. products, hitting everything from agriculture to alcohol. This tit-for-tat escalation is making investors even more nervous, and if it keeps up, it could seriously mess with global supply chains.

5. The Bigger Economic Picture

Inflation Concerns

Tariffs don’t just hurt businesses—they hit consumers, too. Prices for things like avocados, beer, electronics, and even cherry tomatoes could go up in the U.S. as imports become more expensive. That, in turn, could fuel inflation, making everyday life a little more expensive for everyone.

Global Economic Fallout

Economists are already warning that these tariffs could push Canada and Mexico toward a recession. Both countries rely heavily on trade with the U.S., so if their economies slow down, it could send shockwaves through global markets.

6. Why Is Trump Doing This?

The Tariffs: What and Why?
• What’s Being Taxed? Starting February 4, 2025, the U.S. has imposed:
• 25% tariffs on Canadian and Mexican goods
• 10% tariffs on Chinese goods and Canadian oil
• Why? The Trump administration is justifying these tariffs under the International Emergency Economic Powers Act, citing national security concerns. But what does that really mean?

National Security or Negotiation Tactic?

Trump’s reasoning falls into three main areas:
1. Illegal Immigration: The U.S.

wants Mexico to tighten border security and stop illegal crossings. By using tariffs, Trump hopes to pressure Mexico into taking stronger action.
2. Fentanyl Smuggling: A huge concern is fentanyl, a deadly drug that has been flowing into the U.S. from Mexico. These tariffs are meant to push Mexico to crack down harder on drug trafficking.
3. Economic Leverage: Beyond security, this is also about trade negotiations. By making imports from Canada and Mexico more expensive, the U.S. is trying to gain an upper hand in trade talks.

7. Who’s Getting Hit the Hardest?

The tariffs aren’t just about oil and raw materials—they’re affecting a wide range of industries.
• Automobiles: Car prices could rise as tariffs hit auto parts and manufacturing costs.
• Agriculture: Farmers could take a serious hit, especially if Canada and Mexico stop buying U.S. products in retaliation.
• Electronics & Consumer Goods: Expect price hikes on imported tech and everyday items.

Final Thoughts: What Does This Mean for You?

At the end of the day, Trump’s tariffs are a high-stakes economic gamble.
• For traders: Buckle up—markets are going to be volatile. If you’re trading forex or commodities, these tariffs create both risks and opportunities. Stay on top of the news because things can change fast.
• For consumers: Prices on imported goods might go up, and businesses that rely on international trade could struggle. Whether this will help U.S. workers in the long run or just make things more expensive remains to be seen.
• For the global economy: The big question is whether this turns into a full-blown trade war. If that happens, the fallout could be serious, with ripple effects across multiple industries and countries.

At its core, tariffs are a tool—a way to force other countries to play by new rules. But like any tool, they can be helpful or destructive, depending on how they’re used. Will Trump’s strategy work? Only time will tell.


Risk Disclosure

Symbol: USD/JPY
Action: SELL
Entry Range: 154.701 - 155.124

Target 1: 153.698
Target 2: 152.806
Target 3: 151.981
Target 4: 150.911

Stop Loss: 155.152

Risk Disclosure

Fed Holds Interest Rates at 4.50%
(https://www.federalreserve.gov/monetarypolicy/files/monetary20250129a1.pdf)

As of January 30, 2025, the Federal Reserve has opted to maintain the target range for the federal funds rate at 4.50%. This decision reflects the Fed’s ongoing concerns about inflation and economic stability.

Key Points:
• Economic Growth: The Fed states that economic activity continues to expand at a solid pace, indicating resilience in the U.S. economy.

• Labor Market: The unemployment rate remains low and stable, reflecting strong labor market conditions.

• Inflation: Inflation remains somewhat elevated, requiring the Fed to remain cautious before easing policy.

• Monetary Policy Stance: The Fed remains committed to achieving maximum employment and bringing inflation back to its 2% target over the long term.

• Balance Sheet Reduction: The Fed is continuing to reduce its holdings of Treasury securities, agency debt, and mortgage-backed securities (MBS) to influence financial conditions.


Monetary Policy Implementation:

• Interest Rate on Reserve Balances: Maintained at 4.4%, effective January 30, 2025.

• Overnight Repurchase Agreement (Repo) Operations: A minimum bid rate of 4.5% is set, with an aggregate operation limit of $500 billion.

• Overnight Reverse Repurchase Agreement (Reverse Repo) Operations: Offering rate set at 4.25%, with a per-counterparty limit of $160 billion per day.

• Holdings of Treasury Securities: The Fed will roll over principal payments exceeding $25 billion per month, redeeming Treasury coupon securities and Treasury bills as needed.

• Mortgage-Backed Securities (MBS): The Fed will reinvest principal payments exceeding $35 billion per month into Treasury securities to roughly match the composition of outstanding Treasury securities.

What’s Next?

The Fed emphasized that future interest rate decisions will depend on incoming economic data, particularly inflation and labor market trends. While risks to achieving the Fed’s dual mandate appear balanced, uncertainty remains high. The Fed will closely monitor:
• Inflation trends and expectations
• Labor market conditions
• Financial and international developments

Will the Fed Cut Rates in 2025?

The Fed has not provided an explicit signal for an immediate rate cut but remains prepared to adjust monetary policy as needed if economic conditions warrant it. The next key indicators is inflation and employment reports in the coming months it will be critical in shaping future rate decisions.


Risk Disclosure

Symbol: EUR/USD
Action: SELL
Entry Range: 1.04616 - 1.04941

Target 1: 1.04097
Target 2: 1.03772
Target 3: 1.03361
Target 4: 1.02863

Stop Loss: 1.05613

Symbol: CAD/JPY
Action: SELL
Entry Range: 107.902 - 108.246

Target 1: 107.335
Target 2: 106.323
Target 3: 105.533
Target 4: 104.298

Stop Loss: 109.067

Symbol: USD/CHF
Action: SELL
Entry Range: 0.90865 - 0.91123

Target 1: 0.90037
Target 2: 0.89590
Target 3: 0.88611
Target 4: 0.87781

Stop Loss: 0.92229

Symbol: NZD/USD
Action: BUY
Entry Range: 0.56499 - 0.56228

Target 1: 0.57083
Target 2: 0.57655
Target 3: 0.58351
Target 4: 0.59220

Stop Loss: 0.55384

HAPPY NEW YEAR

Symbol: EUR/USD
Action: BUY
Entry Range: 1.04728 - 1.04468

Target 1: 1.05277
Target 2: 1.06418
Target 3: 1.07351
Target 4: 1.08907

Stop Loss: 1.03200

Symbol: XAU/USD (GOLD)
Action: SELL
Entry Range: 2673.94 - 2678.32

Target 1: 2664.49
Target 2: 2655.06
Target 3: 2646.30
Target 4: 2637.08

Stop Loss: 2686.20

Symbol: AUD/CAD
Action: SELL
Entry Range: 0.90463 - 0.90661

Target 1: 0.90028
Target 2: 0.89454
Target 3: 0.88743
Target 4: 0.87754

Stop Loss: 0.91451

Symbol: GBP/USD
Action: BUY
Entry Range: 1.26346 - 1.25881

Target 1: 1.27161
Target 2: 1.28212
Target 3: 1.29262
Target 4: 1.30379

Stop Loss: 1.25017

Symbol: AUD/JPY
Action: SELL
Entry Range: 99.348 - 99.664

Target 1: 98.463
Target 2: 97.167
Target 3: 95.919
Target 4: 94.765

Stop Loss: 100.850

Risk Disclosure

Symbol: EUR/NZD
Action: SELL
Entry Range: 1.79519 - 1.79769

Target 1: 1.79152
Target 2: 1.78216
Target 3: 1.77097
Target 4: 1.76074

Stop Loss: 1.80812

Symbol: GBP/USD
Action: BUY
Entry Range: 1.31096 - 1.31341

Target 1: 1.32584
Target 2: 1.34145
Target 3: 1.35799
Target 4: 1.37707

Stop Loss: 1.28235

Symbol: USD/JPY
Action: SELL
Entry Range: 150.506 - 149.859

Target 1: 148.243
Target 2: 146.480
Target 3: 144.306
Target 4: 141.926

Stop Loss: 153.767

Symbol: GBP/USD
Action: SELL
Entry Range: 1.30043 - 1.30191

Target 1: 1.29650
Target 2: 1.29246
Target 3: 1.28682
Target 4: 1.28130

Stop Loss: 1.30741

Symbol: EUR/AUD
Action: SELL
Entry Range: 1.62947 - 1.63212

Target 1: 1.62276
Target 2: 1.61759
Target 3: 1.61242
Target 4: 1.60597

Stop Loss: 1.63870

Symbol: USD/CAD
Action: BUY
Entry Range: 1.38325 - 1.37912

Target 1: 1.38676
Target 2: 1.39036
Target 3: 1.39440
Target 4: 1.4002

Stop Loss: 1.37089

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Symbol: GBP/NZD
Action: SELL
Entry Range: 2.12581 - 2.12398

Target 1: 2.11663
Target 2: 2.10914
Target 3: 2.09924
Target 4: 2.09062

Stop Loss: 2.13868

Risk Disclosure

Jerome Powell’s Key Speech: What You Need to Know

Federal Reserve Chair Jerome Powell recently delivered an important speech at the Jackson Hole retreat, touching on key economic issues and the Fed’s potential future moves. While much of the attention has been on inflation and interest rates, Powell’s address also covered some less-discussed but equally important topics.

The Fed’s Changing Approach

Powell hinted that the Federal Reserve might be shifting its approach soon. While he didn’t commit to specific actions, his comments suggest the Fed is considering a change in its monetary policy. Powell’s exact words were, “The time has come for policy to adjust.” This indicates that the Fed is moving away from its aggressive stance on inflation and starting to think about the broader economy.

Reflecting on Past Decisions

A significant portion of Powell’s speech was dedicated to reflecting on the past decisions made by the Fed, especially during the height of the inflation surge. Over the past couple of years, the Fed implemented 11 interest rate hikes to tackle inflation, which had reached alarming levels. Powell acknowledged the challenges faced during this period and the difficult decisions that had to be made.

What stood out was Powell’s reflection on the Fed’s initial belief that inflation was “transitory,” meaning temporary. He admitted that this assumption, widely shared by economists, turned out to be incorrect. This misjudgment led to a delay in taking action, requiring the Fed to later ramp up its efforts to control rising prices.

Acknowledging Global Factors

Powell didn’t just focus on domestic issues. He emphasized that the inflationary pressures were part of a global trend, not just a U.S. problem. The pandemic caused disruptions worldwide, leading to strained supply chains, tight labor markets, and rising commodity prices across the globe. This global perspective was crucial in understanding the broader context of the Fed’s actions.

Progress and Challenges Ahead

While Powell noted the progress made in reducing inflation, he was clear that the journey isn’t over. Inflation has come down, but Powell stressed that the Fed’s work is ongoing. He made it clear that the central bank’s focus is not just on controlling prices but also on maintaining a strong labor market.

Looking ahead, Powell did not provide a clear timeline for when the Fed might start cutting interest rates. However, he did mention that any future decisions will be heavily influenced by new economic data and the overall economic outlook.

The Market’s Reaction

As Powell delivered his speech, the financial markets reacted almost immediately. The stock market saw gains, and Treasury yields fell as traders began to anticipate a possible interest rate cut in the near future. Some market watchers believe that a rate cut could come as soon as September, though nothing is set in stone.

Final Thoughts

In his concluding remarks, Powell left the door open for different interpretations of the Fed’s actions. He acknowledged that while the Fed has made significant progress, there is still much to learn and understand about the current economic environment.

Overall, Powell’s speech was a careful balancing act—acknowledging past mistakes, signaling possible future changes, and keeping options open as the Fed navigates the complex economic landscape ahead.


SOURCE : CNBC (https://www.cnbc.com/2024/08/23/fed-c...)


Risk Disclosure

Key Points from Jerome Powell’s Economic Address

Federal Reserve Chair Jerome Powell recently delivered a speech at an economic symposium in Jackson Hole, Wyoming. He discussed the current economic conditions, the effectiveness of monetary policy, and the path forward. Below are the most significant points:

1. Economic Recovery Post-COVID: Powell emphasized that the severe economic disruptions caused by the COVID-19 pandemic are gradually diminishing. He pointed out that inflation has notably decreased, the job market has cooled down, and supply chain issues have largely been resolved. The Federal Reserve has made significant strides in achieving price stability while also supporting a robust labor market.

2. Present Economic Status: Powell highlighted that inflation, which had been a significant concern over the last three years, has shown signs of moderation, with prices rising by 2.5% over the past year. He expressed optimism that inflation is on a sustainable trajectory toward the Federal Reserve’s 2% target.

3. Labor Market Trends: The labor market has eased from its previously overheated state. The unemployment rate has risen to 4.3%, yet it remains relatively low by historical standards. This increase is largely due to an expanding labor force and a slowdown in hiring rather than a surge in layoffs. Powell stressed that the labor market is no longer a major driver of inflation.

4. Economic Growth: Despite the cooling in the labor market, the economy continues to grow steadily. Powell noted that the risks have shifted, with the potential for inflation being less of a concern and the risks to employment becoming more significant. He suggested that the Federal Reserve may adjust its policies in response to these changing conditions.

5. Monetary Policy Outlook: Powell suggested that it might be time for the Federal Reserve to make policy adjustments, with the direction being clear, but the timing and pace depending on future economic data. The Federal Reserve remains dedicated to supporting a strong labor market while continuing progress toward stable prices.

6. Understanding Inflation: Powell discussed the factors that led to the rise in inflation to its highest levels in decades and the reasons for its recent decline, despite low unemployment. He explained that the pandemic caused major disruptions in both supply and demand, contributing to inflation. However, the easing of these disruptions, along with the Federal Reserve’s restrictive monetary policy, has helped to reduce inflationary pressures.

7. Federal Reserve’s Response to Inflation: The Federal Reserve initially believed that inflation would be temporary, but as it became more persistent and widespread, the Fed took a more aggressive approach by raising interest rates significantly to control inflation.

8. Global Inflation Trends: Powell pointed out that high inflation was not just a U.S. issue but a global one, driven by similar factors across the world, such as supply chain challenges, tight labor markets, and rising commodity prices.

9. Labor Market’s Role in Reducing Inflation: The cooling of the labor market has been crucial in bringing down inflation without causing a sharp rise in unemployment. The job market has stabilized, with fewer job vacancies and slower wage growth, which has helped to keep inflation under control.

10. Future Considerations: Although progress has been made, Powell warned that it is too early to declare victory. The Federal Reserve remains alert and ready to adjust its policies as needed to ensure that inflation continues to decline and the labor market stays strong.

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Risk Disclosure

Symbol: CAD/JPY
Action: SELL
Entry Range: 107.099 - 106.855

Target 1: 106.194
Target 2: 105.303
Target 3: 104.454
Target 4: 103.424

Stop Loss: 108.311

Risk Disclosure

Fed Faces Potential Job Losses in Revised Data

Recent updates suggest that U.S. job growth from the past year might have been much weaker than first reported. This could raise concerns that the Federal Reserve might be lagging behind in its plans to reduce interest rates.

Key Points:

(A) Economists at Goldman Sachs and Wells Fargo predict that government revisions could show job growth was 600,000 less than originally estimated, or about 50,000 fewer jobs per month.

(B) JPMorgan Chase expects a smaller reduction of about 360,000 jobs, but Goldman Sachs warns it could be as high as 1 million.

(C) If the downward revision exceeds 501,000 jobs, it would be the largest in 15 years, suggesting the labor market has been slowing down for a longer time than previously thought. Final numbers are expected early next year.

Impact on the Federal Reserve:

(A) This data could influence Fed Chair Jerome Powell’s upcoming speech in Jackson Hole, Wyoming, as investors are eager to understand when the Fed might start lowering interest rates.

(B) According to Wells Fargo economists, a significant negative revision would indicate that job growth was already slowing before April, making the risks to the Fed’s goal of full employment more apparent.

About the Revision Process:

(A) The Bureau of Labor Statistics (BLS) annually updates March payroll data using a more accurate data source, the Quarterly Census of Employment and Wages (QCEW). This census hinted at weaker job growth last year.

(B) Currently, BLS data shows 2.9 million jobs were added in the year through March 2024. Even if the revision reduces this by 1 million, job growth would still average 158,000 per month, which is slower but still healthy.

(C) Some experts, like Omair Sharif of Inflation Insights, believe the final revision might be on the lower side because QCEW data often gets adjusted upwards due to reporting delays.

Broader Economic Concerns:

(A) The preliminary revision might spark debate about whether the labor market slowdown could lead to a sharper economic downturn. Hiring was significantly reduced in July, and unemployment has been rising for four consecutive months.

(B) Although the job market is still considered strong, policymakers are likely to start lowering interest rates in September.

(C) Powell and other Fed officials have been focusing more on labor market data, and Wednesday’s payroll revision will be key in shaping their outlook.

Challenges with Data Models:

(A) In recent years, monthly payroll figures have often been higher than QCEW data, partly due to adjustments for the birth and death of businesses. However, these adjustments might not be as accurate in the post-pandemic world.

(B) Some, like Anna Wong from Bloomberg Economics, believe job gains have been overstated and expect that April and July 2024 payrolls might be revised close to zero, far below a rate consistent with neutral unemployment.

(C) Ronnie Walker of Goldman Sachs suggests that the QCEW figures might overstate the slowdown in job growth, as they likely exclude unauthorized immigrants who have contributed significantly to job growth.

Risk Disclosure

Global Economic Developments: Key Insights and Market Implications

Recent economic data reveals significant shifts in global markets, highlighting the resilience of the U.S. economy, ongoing struggles in Europe, and growing concerns about China’s economic outlook. These developments have profound implications for forex markets and commodities.

U.S. Economy: Sustained Strength Amid Inflation Easing

In July, U.S. retail sales saw a notable increase, marking the most substantial rise since early 2023. This uptick, coupled with a decrease in unemployment benefit applications, suggests that the U.S. economy remains robust despite the challenges posed by high-interest rates.

Retail sales data from major players like Walmart also indicates that while consumers are becoming more selective, they continue to spend, reflecting underlying economic strength.

Inflation in the U.S. has continued to ease, marking the fourth consecutive month of decline on an annual basis. This trend could prompt the Federal Reserve to consider lowering interest rates in the near future.

However, the report highlighted a persistent rise in shelter costs, which could complicate efforts to bring inflation closer to the Fed’s 2% target.

Additionally, labor market dynamics are shifting, with fewer young men actively seeking employment, which may impact future economic growth.

Europe: Mixed Economic Signals and Policy Dilemmas

The U.K. economy showed surprising resilience with a drop in unemployment, driven by the strongest hiring pace since November.

However, wage growth has cooled to its lowest level in over a year, complicating the Bank of England’s approach to interest rate adjustments. While lower wage growth might ease inflationary pressures, it also raises concerns about consumer spending power.

In the eurozone, economic weaknesses are becoming more apparent. Productivity has declined for the sixth consecutive quarter, and job growth is slowing, particularly in Germany, the region’s largest economy. Despite significant wage increases, consumer spending remains sluggish, indicating broader economic challenges. These developments are likely to lead the European Central Bank (ECB) to implement more frequent rate cuts, potentially accelerating its easing cycle.

Asia: Growing Concerns Over China’s Economic Outlook

China’s economic outlook is increasingly worrying, as foreign direct investment (FDI) saw a record decline in the second quarter, dropping nearly $15 billion. This significant outflow reflects deepening investor pessimism about China’s growth prospects. The downturn in FDI could signal long-term challenges for the world’s second-largest economy, with potential ripple effects across global markets.

Meanwhile, Australia continues to grapple with persistent inflation, driven by elevated wage growth in the second quarter. This ongoing inflationary pressure suggests that the Reserve Bank of Australia may delay interest rate cuts, as it seeks to manage the economic fallout from rising costs.

Emerging Markets and Global Dynamics

Emerging markets are experiencing a range of economic pressures. In Argentina, extreme austerity measures have led to soaring inflation, plummeting consumer spending, and rising unemployment.

Despite these challenges, President Javier Milei’s popularity remains steady, highlighting the complex political and economic landscape in the country.


In Africa, Chinese miners and refiners are driving a significant increase in lithium production, with the continent expected to account for 11% of global supply this year. This surge in output reflects China’s strategic move to secure future supplies of critical battery metals, even amid concerns over potential oversupply in the market.

Globally, several central banks, including those in New Zealand, Namibia, and the Philippines, have begun cutting interest rates in response to slowing economic growth and easing inflation.

However, others, like Zambia, are maintaining higher rates to support struggling economies, reflecting diverse approaches to monetary policy across the world.


Market Implications: Forex and Commodities

Forex Markets: The U.S. dollar is likely to remain strong, supported by robust economic data and potential interest rate cuts from the Federal Reserve. In contrast, the euro may face downward pressure as the ECB accelerates its rate-cutting cycle, while the British pound could experience volatility due to mixed economic signals. The Chinese yuan may weaken further as investor confidence in China’s economy continues to wane.

Commodities: Gold and silver prices could experience fluctuations based on the strength of the U.S. dollar and global economic uncertainty. Oil prices may be influenced by the balance between strong demand from the U.S. and potential demand weakness from China. Natural gas prices are likely to remain supported by steady industrial demand in the U.S., but global economic challenges could cap significant price increases.

Risk Disclosure

Goldman Sachs Reduces US Recession Risk Amid Strong Economic Data!!

(A) Recession Risk Estimate:

1. Goldman Sachs has lowered its estimate of a U.S. recession in the next year from 25% to 20%.

2. The reduction is based on strong economic indicators, including robust retail sales and lower-than-expected jobless claims.

3. If the upcoming August jobs report (due September 6th) shows positive results, the recession probability could be further reduced to 15%.

(B) Economic Data Highlights:

1. Retail sales in July marked the highest increase since early 2023.

2. Unemployment benefit applications last week were the lowest since early July.

3. Positive economic data has led to the best week of the year for U.S. stocks, as investors took advantage of a recent market dip.

(C) Federal Reserve and Interest Rates:

1. Goldman Sachs is increasingly confident that the Federal Reserve might cut interest rates by 25 basis points in their September meeting.

2. However, a weaker-than-expected jobs report on September 6th could lead to a more significant 50 basis-point reduction.

(D) Impact on Forex and Commodities:

- Forex:

1. The reduced recession risk and strong economic data could strengthen the U.S. dollar.

2. A stronger dollar may pressure other currencies, particularly those of emerging markets, as investors shift towards dollar-denominated assets.

3. Currencies like the Euro, Japanese Yen, and British Pound may weaken in comparison.

- Gold:

1. Gold might face downward pressure as a safe-haven asset if the U.S. economy continues to show resilience.

2. A strong dollar and potential for higher interest rates could reduce gold’s appeal, possibly leading to a decline in its price.

- Silver:

1. Similar to gold, silver may see decreased demand as a safe-haven asset.

2. However, its industrial applications could provide some support, especially if economic data continues to be strong, indicating increased industrial activity.

- Natural Gas and Oil:

1. Positive economic data could benefit energy commodities like natural gas and oil, as stronger economic growth typically increases demand for energy.

2. A stronger dollar might temper these gains by making oil more expensive in other currencies, which could dampen global demand.


Risk Disclosure

Symbol: USDCHF
Action: SELL
Entry Range: 0.87105 - 0.87350

Target 1: 0.86780
Target 2: 0.86197
Target 3: 0.85535
Target 4: 0.84760

Stop Loss: 0.88138

Risk Disclosure

Symbol: GBPAUD
Action: BUY
Entry Range: 1.94123 - 1.93892

Target 1: 1.94552
Target 2: 1.95015
Target 3: 1.95795
Target 4: 1.96721

Stop Loss: 1.93350

Risk Disclosure