Powell is in a dilemma, and the short-term trend analysis of spot gold, silver, crude oil and foreign exchange on August 20

Global Market Review

1. European and American market trends

The three major U.S. stock index futures fell, Dow futures fell 0.11%, S&P 500 futures fell 0.08%, and Nasdaq futures fell 0.16%. The German DAX index fell 0.41%, the UK FTSE 100 index rose 0.26%, the French CAC40 index rose 0.12%, and the European Stoke 50 index rose 0.00%.

2. Interpretation of market news

Powell is in a dilemma: whether to cut interest rates to save the market or fight inflation

⑴ Federal Reserve Chairman Powell remains open to policy options for the next meeting and said he will "look forward" to the impact of Trump's tariff remarks on the economy. Despite weak employment data, inflation shows signs of acceleration, and investors generally expect the Fed to cut interest rates in September, with a probability of 85%. ⑵ However, there are differences within the Fed on how to deal with conflicting economic signals. On the one hand, the weak housing market (the residential builder confidence index hits a two-and-a-half low) needs loose policy support; on the other hand, huge investment in the field of artificial intelligence (AI) and the rising prices that may be triggered by Trump’s tariff rhetoric have increased inflationary pressure. ⑶ Jason Thomas, global research director of Carlisle Group, pointed out that the huge capital demand required for AI construction, coupled with the federal budget deficit, may lead to an overheating of the economy at this time. He stressed that policy makers need to weigh the degree of "crowding out effect" required to maintain price stability. ⑷ The market is paying close attention to Powell's annual meeting at Jackson Hole this FridaySpeech to find clues about whether it will suppress expectations of interest rate cuts. Key subsequent data points, including the Fed's favored personal consumption expenditure price index (PCE) released on August 29, and the employment report, producer and consumer price index in early September, will affect the Fed's final interest rate decision on September 17.

Trump allies call for investigation of Fed Director Cook on mortgage transactions, suggesting he may violate the criminal law

Federal Housing Finance Agency (FHFA) director and Trump's staunch ally Bill Poulter urges Attorney General Pam Bundy to investigate two mortgage transactions by Fed Director Cook. Pulte wrote to Bondy and Justice Department official Ed Martin on August 15, saying Cook "forged bank documents and property records to obtain more favorable loan conditions, which may constitute mortgage fraud under the criminal law." He said Cook had purchased a property and applied for a loan in Ann Arbor, Michigan and promised to use it as his primary residence for at least one year, but two weeks later, another mortgage in Georgia, also stating that he would use it as his primary residence. Pulte also cites four criminal law provisions, suggesting Bundy investigate whether there are potential crimes. No charges have been filed yet, and it is unclear whether Bundy will investigate.

Russian Foreign Minister xmniubi.commented on the U.S.-U.S. talks: no constructive remarks from European leaders

On the 20th local time, Russian Foreign Minister Lavrov said that Russia noticed that Europe was trying to change the position of the United States and did not hear constructive remarks from European leaders during the White House meeting. Lavrov also said that the statement of the EU's High Representative for Foreign Affairs and Security Policy Karas on "the EU will not allow any agreement with Russia" is a degradation of diplomatic means. The United States is looking for ways to mediate the Ukrainian conflict to ensure that the conflict does not occur again.

Beware! Japan's exports hit the biggest drop in more than four years, and the impact of tariffs cannot be underestimated. Data released by the Japanese government on Wednesday showed that total exports in July fell 2.6% year-on-year, the largest monthly decline since February 2021, and it has been the third consecutive month of decline. The decline exceeded analyst expectations, raising concerns about the prospects of Japan's export-dependent economy. ⑵ Data shows that due to Trump's tariff remarks, Japan's exports to the United States fell by 10% year-on-year in July, of which automobile exports plummeted by more than 28%, and automobile parts exports also decreased by 17.4%. Despite this, the volume of automobile exports fell by only 3.2%, indicating that Japanese automakers partially offset the impact of tariffs through price cuts and other means. ⑶ Although Japan and the United States reached an agreement to reduce the automobile tariff rate to 15%, this tax rate is still far higher than the previous 2.5%. In addition, Japan's exports to other regions also showed weakening, with exports to China falling by 3.5%. ⑷ Soft trade data resulted in a trade deficit of about US$795 million in July, which is very different from the market's expected surplus of US$1.33 billion.

On the eve of Powell's speech, the European debt market fell into a wait-and-see

⑴ On Wednesday, the euro zone government bond yields remained almost unchanged, and traders awaited further signals about potential rate cuts at the Jackson Hall Global Central Bank Annual Meeting. The eurozone benchmark German 10-year government bond yield fell 2.6 basis points to 2.728%. ⑵ Evelyne Gomez-Liechti, strategist at Ruisui International, pointed out that after the yield has risen sharply, the market is waiting for a speech by Federal Reserve Chairman Powell. She expects Powell to remain a wait-and-see attitude and may be more hawkish than other Fed members. ⑶ At present, the money market has almost xmniubi.completely digested the Fed's expectation of a 25 basis point cut at its September meeting. In contrast, futures markets show that the ECB will keep interest rates unchanged at its September meeting. ⑷ Data shows that the UK's inflation rate rose to 3.8% in July, the highest since early 2024. The final inflation rate in the euro zone was 2.0% in July. ⑸ The uncertainty of the French political situation has also attracted market attention. The spread between France's 10-year Treasury bond yield and Italy's 10-year Treasury bond yield has narrowed to about 13.5 basis points, its lowest level in 20 years. ⑹The yield on Italy's 10-year government bonds fell 2 basis points to 3.565%, while the yield on France's 10-year government bonds remained unchanged at 3.428%. The interest rate spread between the two and the German 10-year government bonds was 83 basis points and 69.1 basis points respectively.

Saudi Arabia's crude oil exports fell in June, what changes have been made in global market supply?

⑴ According to official data released by the Joint Organization Data Initiative (JODI) on Wednesday, Saudi Arabia's crude oil exports fell to 6.141 million barrels per day, down from 6.191 million barrels per day in May. ⑵This data is provided monthly by Saudi Arabia and other member states of the Organization of Petroleum Exporting Countries (OPEC). ⑶ As the world's largest oil exporter, Saudi Arabia's decline in its export volume may have an impact on global oil supply. ⑷The data changes reflect that Saudi Arabia's crude oil production and export strategies may be being adjusted under the current xmniubi.complex market environment.

Home purchase intentions have recovered, and the US mortgage market is still restricted

⑴ According to data from the American Mortgage Bankers Association (MBA), the US mortgage market index fell 1.4% month-on-month to 277.1 in the week ending August 15. ⑵ Data shows that the refinancing index fell by 3.1% to 926.1, which is the main reason for the overall index decline. At the same time, the home purchase index rose slightly by 0.1% month-on-month to 160.3. ⑶ The average contract interest rate for 30-year fixed-rate mortgages rose by 1 basis point to 6.68% this week. ⑷ These data show that although refinancing demand weakens due to rising interest rates, demand from potential homebuyers appears to have rebounded. The overall market is still restricted by interest rate fluctuations, showing the xmniubi.complex situation in the real estate market.

Inflation remains high, the Bank of England faces an "impossible" task

⑴ Analysts in Singer Capital MarketsJamie Constable noted in a report that high inflation poses challenges to the Bank of England. The central bank's main task is to maintain price stability and keep inflation near its target of 2%. ⑵Constable said high inflation makes it difficult for the Bank of England to stimulate economic growth by cutting interest rates. ⑶He suggested that the British government should consider revising the Bank of England's terms of reference to make its responsibilities more diverse. He believes that the Ministry of Finance should include targets such as employment and economic growth in the central bank's responsibilities so that it will no longer be limited to a single inflation target. ⑷ This view reflects the difficult trade-offs faced by the Bank of England in controlling prices and supporting economic growth under the current xmniubi.complex economic situation.

3. Trends of major currency pairs in the New York Stock Exchange before the New York Stock Exchange

Euro/USD: As of 20:23 Beijing time, the euro/USD rose, now at 1.1653, an increase of 0.05%. Before New York, the price of (Euro-USD) rose on the last trading day, trying to regain some of the previous losses, in addition to trying to get rid of the obvious oversold situation of (RSI), especially with the emergence of positive signals, retesting the key resistance level of 1.650 while touching its EMA50 resistance, which puts the price under negative pressure, causing it to reduce these gains while breaking the slight bullish bias previously on a short-term basis.

GBP/USD: As of 20:23 Beijing time, GBP/USD fell and is now at 1.3481, a drop of 0.07%. Before the New York Stock Exchange, the (GBPUSD) price fell on the last trading day, affected by breaking through the bullish correction bias line on a short-term basis. With the emergence of negative signals on (RSI), it surpassed its EMA50 support, which could intensify the negative pressure around the price and open up the way for recording more losses in the near future.

Spot gold: As of 20:23 Beijing time, spot gold rose, now at 3336.54, an increase of 0.64%. Before the New York Stock Exchange, the (gold) price rose in the last session, trading in the bearish correction channel range in the short term, negative pressure continued, and its trading price was lower than EMA50, trying to recover some of the previous losses, while successfully getting rid of the obvious oversold situation on (RSI), and with the emergence of positive signals, it reached an exaggerated overbought level xmniubi.compared to the price trend.

Spot silver: As of 20:23 Beijing time, spot silver fell, now at 37.325, a drop of 0.10%. Before the New York market, the price of (silver) closed with a sharp decline in the last session, and its trading exists on a short-term basis.A slight bearish tendency, whose trading xmniubi.comes from negative pressure below the EMA50 is still continuing, on the other hand, we noticed a positive overlap signal on the (RSI), which, after reaching the oversold level, offers an opportunity for some correction rebounds to try to get rid of this oversold situation.

Crude oil market: As of 20:23 Beijing time, U.S. oil rose, now at 62.430, an increase of 1.07%. Before the New York market, the (crude oil) price rose in the last session after reaching oversold levels, supported by positive signals from (RSI), which put the indicator into overbought levels, adding more negative momentum to the upcoming trading, especially as the short-term major bearish trend dominated, which hits the EMA50 resistance level.

4. Institutional View

HSBC: High inflation in the UK limits short-term interest rate cuts, the pound is difficult to obtain lasting support.

HSBC foreign exchange strategist Nick Andrews said that the higher-than-expected UK inflation data on Wednesday cast a shadow on the prospect of further short-term interest rate cuts, but this will not provide lasting support for the pound. "If inflation prevents the Bank of England from cutting interest rates, it may weaken the economy, leading to more rate cuts in the future." HSBC expects the Bank of England to lower interest rates from its current 4.0% to 3.0% by the third quarter of 2026, which will weaken the pound against the euro. He also said the fall budget also poses a risk to the pound as fiscal policy has had an impact on growth and inflation over the past year.

Penson Macro: The ECB may still cut interest rates again in September

Penson Macro's Melanie Debono wrote in the report that although there are no signs of easing inflation in the euro zone, the ECB may still cut interest rates again in September. Data shows that the annual inflation rate in the euro zone remained unchanged at 2.0% in July, and the core inflation rate was also stable. Debono said eurozone inflation may rebound again in the remaining months of this year as food inflation accelerates and the impact of the base oil price effect. But she pointed out that the ECB would consider volatile markets and weak U.S. economy as sufficient reasons to lower interest rates to 1.75% at its September meeting. This move will be further consolidated if core inflation drops in August.

The above content is all about "[XM Foreign Exchange Market Analysis]: Powell is in a dilemma, and the short-term trend analysis of spot gold, silver, crude oil, and foreign exchange on August 20" was carefully xmniubi.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!

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