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The US PMI has fallen at a high level and is still in an expansion range, and the dollar remains resilience against the background of interest rate cuts
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Hello everyone, today XM Foreign Exchange will bring you "[XM official website]: The US PMI has fallen at a high level and is still in the expansion range, and the US dollar is still resilient under the background of interest rate cuts." Hope it will be helpful to you! The original content is as follows:
Asian market market
On Tuesday, the US dollar index fluctuated above the 97 mark and finally closed down 0.08%. As of now, the US dollar is priced at 97.37.
Feder Chairman Powell: Policy interest rates are still slightly restrictive, but allow the Fed to better cope with potential economic progress; tariffs are expected to be a one-time transmission effect; decisions "will never be based on political factors." The "Federal Message Bottle" pointed out that Powell's remarks indicate that he believes interest rates are still tight, which may open up space for further interest rate cuts.
Federal Goulsby: No 50 basis points cut is considered at present. In the end, the Fed's interest rate may stabilize at around 3%. Director Bowman: It is expected that interest rate cuts will be three times in 2025; Bostic: It believes that the current real neutral interest rate is 1.25%; at some stage in the future, it may support setting the inflation target range from 1.75% to 2.25%.
U.S. President Trump: If Russia is unwilling to reach an agreement, the United States is ready to impose tariffs; Ukraine has the ability to regain all lost land with the support of the EU; NATO countries should shoot down Russian aircraft when they enter NATO airspace; the relationship with Putin is "unfortunately meaningless."
Polish Prime Minister Tusk said that the border port with Belarus will be reopened in the early morning of the 25th.
Trump cancels temporary appropriations bill related to DemocratsThe meeting plan said that the meeting could not be fruitful.
Source: If negotiations between Iran and European countries have not yet made progress by September 27, the latter will resume UN sanctions on Iran.
The Trump administration proposed a new H-1B visa process, which is more conducive to highly skilled and high-paying workers; after the H-1B visa dispute, India sought personnel access in trade negotiations with the United States.
Indonesia and the EU are about to sign a free trade agreement, and 80% of exported goods will enjoy zero tariffs.
OECD: Global economic growth is expected to be 3.2% in 2025 (previously forecasted at 2.9%) and 2.9% in 2026 (consistent with previous forecasts).
Summary of institutional views
Fanong Credit: The triple shackles trap the Bank of Japan, and the fastest time for the next rate hike should be in X month
The current next rate hike is as early as January next year. However, according to the political and economic situation, the time for the resumption of interest rate hikes is entirely possible. We believe that the Bank of Japan faces triple resistance to restarting interest rate hikes:
The first resistance: uncertainty in the political environment
If Shiro Ishiba's cabinet, which attaches importance to fiscal rectification, is replaced by a conservative regime that advocates a "high-pressure economy", the Bank of Japan may fall into a policy paralysis for a year. The independence of the central bank is not absolute - its monetary policy needs to be consistent with the government's basic economic policies and guidelines. The inflation target may also change from "accurate 2%" to "2% range". If real wages continue to grow, the negative impact of target adjustment is limited; if the centrist wins the election, the expectation of a rate hike in January will remain unchanged.
The second resistance: slowdown in inflation and technological substitution pressure
Japan's core CPI in August has stabilized at around 1.6% for 14 consecutive months, and is below the 2% target. Although the Bank of Japan expects inflation to be weak due to the slowdown, it underestimates the labor substitution effect brought by capital investment - the ratio of real capital investment to GDP in the second quarter of 2025 has reached 16.6%, approaching the key ceiling of 17%. The central bank's underestimation of private sector innovation capabilities such as AI and digital transformation may lead to premature interest rate hikes to curb investment enthusiasm, miss opportunities for labor productivity improvement, and even cause a virtuous cycle of growth and wages to die. If capital substitution is faster than expected, inflation may slow to the 1% low.
The third resistance: priority adjustment for policy normalization
This month, the Bank of Japan announced that it would gradually sell ETFs and J-REITs holdings in accordance with the principles of avoiding losses and reducing market shocks. The scale is based on the previous plan of holdings and disposal of financial institutions, and retain the flexibility to adjust the pace of stock selling according to market conditions. The central bank needs to give priority to promoting policy normalization (such as reducing holdings of ETFs and reducing purchases of treasury bonds) rather than rushing to raise interest rates. The current urgency of exiting unconventional policies has exceeded the adjustment of policy interest rates.
Bank: Is it expected to get ammunition again in October? PCE will drive...
The core PCE monthly rate in August is expected to be 0.23%, xn--xm-6d1dw86k.compared withOur initial estimate of 0.27% fell by 4 basis points, while the overall PCE rate was 0.25% monthly and 2.7% annually. Weak PCE data will slightly increase the risk of the Fed's rate cut again in October, but we think the results for October will ultimately depend on the labor data. In addition, although non-farm employment is close to flat, steady wage growth should support the growth of personal income by 0.3% in August. Meanwhile, we expect nominal spending to grow by 0.4%. The retail data of the control group performed strongly in August. The service sector should also see substantial growth in light of the rebound in air transport and food service spending. However, car sales fell after soaring in July, which would offset some of the spending growth.
Nomura Securities
We expect the final U.S. real GDP value in the second quarter will be raised to 3.4% from the previous 3.3%. The increase in retail sales and non-residential construction and residential investment sub-items pushed up real GDP growth in the second quarter. Meanwhile, PCE data over the past five years will also be revised. xn--xm-6d1dw86k.combined with the annual revised values of CPI and the latest seasonal adjustments, the core PCE monthly rates in March, August and September may be raised by 1-2 basis points, while the core PCE data in January, February, April and May may be downgraded by the same amount. Despite uncertainty over the impact of the annual revised data, CPI and PPI and import price data for August showed that core PCE inflation in August would drop to 0.218% month-on-month from 0.273% in July. On the same period last year, the core PCE inflation rate may remain unchanged at 2.9%.
However, the PCE inflation rate of core xn--xm-6d1dw86k.commodities may turn negative, down 0.1% month-on-month in August, because the xn--xm-6d1dw86k.components of CPI products with higher PCE weights are negative (for example, household linen products, medicines, xn--xm-6d1dw86k.computer software, and newspapers and magazines). Conversely, the accelerated inflation of labor-intensive service prices (such as hotel prices and catering services), as well as a significant increase in portfolio management services and investment proposal prices, suggesting that the Super Core PCE remained at a 0.30% quarter-on-month high in August after rising 0.39% in July.
JPMorgan Chase
We expect the core PCE of the United States to rise by 0.26% month-on-month in August, and the year-on-year growth rate will rise from 2.9% in July to 3.0%. Although retail sales increased by 0.6% month-on-month in August, we expect actual personal consumption to increase by 0.1% month-on-month. The sales data of automobiles flowing into actual expenditures are weaker than retail sales, and service consumption has been weak. The growth rate of actual personal expenditures slowed to 1.1% based on the three-month seasonally adjusted data, far lower than the level in previous years.
We expect employee xn--xm-6d1dw86k.compensation to increase by 0.3% month-on-month in August, which is mainly affected by the total number of private sector jobs, and total personal income is also expected to increase by 0.3% month-on-month. The real consumer price index (DPI) will fall by 0.1% month-on-month, breaking the momentum of continued improvement earlier this year. Previously, as retrospective payments under the Social Security Fair Act began to normal in MayThe consumer price index has dropped significantly. The savings rate is expected to drop to 4.2% in August from 4.4% in July, wiping out the improvement momentum since the beginning of last year.
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