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CPI weakening hits US dollar index, and bears break key gap
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Hello everyone, today XM Forex will bring you "[XM Group]: CPI weakened and broke the US index, and the bears broke the key gap." Hope it will be helpful to you! The original content is as follows:
Asian Market Review
On Wednesday, the US dollar index plunged in the session as a xm-forex.comprehensive lower than expected CPI data boosted the market's interest rate cut expectations. As of now, the US dollar is quoted at 98.28.
The US May CPI data were all lower than expected, and the core CPI only increased by 0.1%. Trump then called on the Fed to cut interest rates by 100 basis points.
Tensions in the Middle East have soared sharply—① Trump's confidence in reaching an Iran nuclear deal has weakened. ② Iranian Defense Minister: If nuclear negotiations fail and conflicts with the United States, Iran will attack US military bases in the region. ③ The US side authorizes US military families to voluntarily evacuate from the Middle East and reduce the size of US missions in Iraq. ④ It is reported that the possibility of the sixth round of nuclear negotiations in Iraq and the United States holding the sixth round of nuclear negotiations over the weekend is getting smaller and smaller.
Tariffs—① The EU hopes that the trade negotiations will be extended until after Trump sets a suspended deadline. ②Bester: As long as you show "sincerity" in the negotiations, the Trump administration is willing to extend the current 90-day tariff suspension period until after July 9. ③Trump will hold several bilateral talks during the G7 summit. ④ The total U.S. customs tax revenue reached a record $23 billion in May, an increase of nearly four times year-on-year. ⑤Lutnik: One deal after another will be concluded one after another.
Musk: I regretted my previous post about Trump. Trump: Reconciliation with Musk is not the top priority. It is reported that Musk expressed regretThe two sides had private exchanges.
Bester: He is willing to continue to serve as Finance Minister until 2029. If the debt ceiling problem is not resolved, it may face its biggest crisis since 2008.
The curfew is imposed in downtown Los Angeles until 6 a.m. local time on Wednesday. Mayor of Los Angeles, USA: The curfew will last until necessary. U.S. Attorney General: Trump will use the "Hobs Act" in California.
The UK has reached an agreement with the EU on Gibraltar border rules after Brexit.
Summary of institutional views
Goldman Sachs looks forward to May PCE: It is expected to accelerate, and the peak of tariff impact will be...
Although the CPI is lower than expected, Goldman Sachs expects the Fed's preferred inflation indicator core PCE index may rise by 0.2% in May, higher than 0.1% in April. This will increase the core PCE annual rate from 2.5% to 2.6%.
The expected rise is due to the recent implementation of tariff measures by the Trump administration, which will put upward pressure on inflation. Economists predict that the core PCE inflation rate may reach 3.5% by the end of 2025, mainly due to tariffs.
While the direct impact of tariffs is expected to be a one-time price level adjustment, the overall impact may become more pronounced in the xm-forex.coming months. The impact of tariffs on inflation may peak between May and August and then gradually fade.
Wells Fargo: It is too early to announce a victory in anti-inflation, and the Federal Reserve may be happy...
The overall performance of the US May CPI report released tonight is undoubtedly a clear positive for FOMC. The overall CPI monthly rate was only 0.1%, while the annual rate was 2.4%, far lower than the nominal wage growth rate of 3.5%-4.0% experienced by ordinary workers in the past year. The monthly rate of core CPI in May was only 0.1%, lower than general expectations, mainly due to the exceeding expectations of prices of core xm-forex.commodities and core service industries. The annualized growth rate of core CPI in the past three months was only 1.7%.
Nevertheless, I think it is too early to declare a victory, assert that a significant tariff increase in the past few months will not have any substantial impact on consumer price growth. Because most tariff hikes occurred between March and May, we suspect that the full impact of policy changes on output, recruitment and pricing will take time to fully demonstrate. We still expect core CPI to rise to just above 3% in the xm-forex.coming quarters, largely due to higher tariffs.
But for now, the FOMC may be happy to hold back at next week's meeting and wait for the next round of economic data before changing its monetary policy stance.
Analyst Brent Donnelly: Will the Fed be tempted as inflation levels continue to fall?
The US CPI data in May was once again lower than expected, confirming State Street's forecast. Judging from the recent data, the transmission of tariffsThe effect is minimal and almost zero. Although some xm-forex.commodities rose slightly under the influence of tariffs, the rest have cooled down due to weak domestic demand, low oil prices and reduced service costs.
This is good news for US short and arbitrage trading. After today, the release of important data in the United States in May has xm-forex.come to an end, and bears seem to have to wait another month before they can see the economic difficulties that the market generally expects to appear in the real world. At least so far, the impact of economic uncertainty and tariffs on real economy data has not been significant. "Soft Data" is greatly affected, but given the strong performance of the stock market and inflation remains low, sentiment data may also rebound. As the themes of artificial intelligence and quantum xm-forex.computing have recently regained attention, the stock market's seasonal positive trend will continue until the end of July, and the market still has room for the Fed to price more aggressively cuts.
The Fed's current policy stance remains quite tight, and if it ultimately takes action, a 100 basis point rate cut in the next 12 months seems to me to have good reason to support it. The current market pricing reflects that there will be a cumulative interest rate cut at this time next year, with a total of 25 basis points each time. In addition, the market will soon need to price changes in interest rate options skew curves after May 2026, as the next Fed chairman is likely to be a "super dove". After this date, the distribution of potential results will be non-standard, as the possibility of abnormal results such as rapid and substantial rate cuts will increase.
But this is likely just a fantasy, because the FOMC will restrain the "dove" chairman, but I doubt it. As debts rise rapidly force the U.S. government to implement wave after wave of financial suppression, we are moving towards economic central planning faster and faster.
If the US inflation level continues to fall in the future, and economists and the market overestimate the inflation impact brought by tariffs, then the current interest rate level will appear a bit too high. I think the neutral interest rate may be closer to around 2.5%.
Deutsche Bank: The US CPI was inferior to expectations in May, and is the Fed's interest rate cut stable in September?
The U.S. consumer price index rose less than expected for the fourth consecutive month in May. The overall inflation rate increased by only 0.1% month-on-month, and the inflation rate excluding energy and food also increased by only 0.1% month-on-month. Some xm-forex.commodities have become more expensive due to the impact of tariffs. Overall, however, price pressure remains low. We still expect a stronger increase in tariff-related prices in the xm-forex.coming months, partly because in some cases xm-forex.companies still benefit from stocks accumulated before the tariffs are introduced. However, relatively low inflation data in recent months have reduced the risk of price gains going out of control. This supports our forecast for the Fed's possible rate cut in September. Although the imposition of tariffs has had some impact in some areas, the impact in terms of overall price levels is weaker than previous market concerns - at least for now. This has increased the possibility of a Fed rate cut in the foreseeable future, but the possibility of immediate action on the meeting next week can basically be ruled out. Previous Fed's policy guidelinesIt has clearly sent signals to maintain the status quo, and decision makers are bound to hope to see if one or two inflation reports show a stronger transmission effect in the future. In addition, the current labor market is only slightly weak, and we believe that the probability of interest rate cuts in July FOMC meeting is also relatively low. We maintain our previous forecast that the Fed will most likely implement a 25 basis point rate cut in September. (Jinshi Data APP)
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