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On the ultimate decisive day, tonight's employment data set the market direction, and the unemployment rate becomes the biggest suspense!
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The ultimate decisive day, tonight's employment data set the market direction, and the unemployment rate becomes the biggest suspense!". Hope it will be helpful to you! The original content is as follows:
Yesterday's market review
On Thursday, the US dollar index rose in the short term after the Federal Reserve's favorite inflation indicator rebounded, and stood above the 100 integer mark for the first time in two months. As of now, the US dollar is quoted at 99.95.
1. Tariffs
① US White House: Trump signed an executive order to modify the reciprocal tariff rates for certain countries. Countries listed in Annex I of the Executive Order will be subject to the tariffs stipulated in it. Countries not included in Annex I will be subject to 10% tariffs; Canadian tariffs will be raised from 25% to 35%, and higher tariffs will take effect on August 1, 2025. Goods transferred to evade Canada's 35% tariff will be subject to a 40% transshipment tariff.
②U.S. Treasury Secretary: The entire trade team is frustrated with India.
③Malaysian Prime Minister: The tariff rate imposed by the United States on Malaysian goods will be announced in the near future.
④ It is reported that India hopes to sign free trade agreements with several countries.
⑤ Trump said that the U.S. tariff agreement with Mexico will be extended by 90 days, that is, Mexico will continue to pay 25% fentanyl tariffs, 25% automobile tariffs and 50% steel, aluminum and copper tariffs.
⑥ EU spokesperson: Before a new agreement is reached, European wines and spirits will face 15% U.S. tariffs starting from August 1.
⑦IndonesiaChief Negotiator: Indonesia may receive less than 19% refined copper tariffs from the United States.
⑧Brazil Vice President: Trump excludes 45% of our products exported to the United States from 50% tariffs.
2. A list of US economic data
① U.S. challenger www.xm-forex.companies laid off 62,075 employees in July, the largest number of layoffs in July since 2020.
②The annual rate of core PCE inflation in the United States unexpectedly rebounded to 2.8% in June, while consumer spending was almost stagnant.
③The number of initial unemployment claims in the United States last week was roughly stable, but economists fear potential weakness.
3. Trump News:
① Trump: (Talk about Powell) He is a bad Federal Reserve Chairman, and it is a mistake to appoint Powell as Federal Reserve Chairman.
②Trump: Witkov, the special envoy for the Middle East, will travel to Russia after visiting Israel.
Trump wrote to 17 pharmaceutical giants around the world, urging them to significantly cut US drug prices.
The Trump team took the lead in a rare earth meeting last week to provide enterprises with minimum price guarantees and financial support.
U.S. Treasury Secretary Bescent: It is expected that the Federal Reserve nomination will be announced before the end of the year, and there will be two seats vacant seats in the Federal Reserve Board of Directors.
Iranian Foreign Minister: The United States needs to www.xm-forex.compensate Iran for losses during the conflict in Israel and Israel before nuclear negotiations can be restarted.
World Gold Council: The total value of gold demand soared to a new record of US$132 billion in the second quarter, with a total increase of 166 tons of global official gold reserves.
Summary of institutional views
Bank of America's forward-looking non-agricultural jobs: data may be "breathless", but the unemployment rate is the most important
Number of new jobs: 60,000; unemployment rate: 4.2%; average hourly wage monthly rate: 0.3%
We expect the number of non-agricultural jobs in the United States to increase by 60,000 in July, lower than the general market expectations. If the prediction is accurate, then the market instinct reaction may be dovish. However, we encourage investors to focus more on private sector employment growth and unemployment rates.
In June, federal, state and local government jobs surged by 73,000, www.xm-forex.compared with an average increase of 13,000 in the first five months of this year. The surge in June was due to seemingly seasonal distortions in state and local education sector jobs that should be filled in July. We assume that the total number of government jobs will decrease by 25,000, and if the supplement occurs when schools resume classes, there is an upward risk. Meanwhile, we believe private sector jobs will accelerate from 74,000 in June to 85,000 in July. From our perspective, this is more important. Another way to understand overall job growth data is to simply look at the two-month average. Given the continued slowdown in labor supply, an increase of around 100,000 (close to our forecast) will indicate that the labor market remains resilient.
However, perhaps more important than private sector job growthThe unemployment rate is. We think the final response of the market to Friday’s employment report should depend on the unemployment rate. Overall, unemployment rate of 4.1% or less will be seen as a hawkish stance, while 4.3% or more indicates a heightened labor market weakness. We believe that the 4.2% forecast indicates that the supply and demand of labor remain in a good balance. But the second place after the decimal point may be important, and if it is close to the 4.3% level, the market may send a dovish signal.
TSLombard: The Fed has reached the limit of a "skipping" strategy
The Fed's July meeting perfectly continued the tradition of the past six months - without providing substantial policy guidance, while Powell tried to disclose as little information as possible on the future path of monetary policy. It is not surprising that the Fed is in this situation. They have been bound by the new government's policies, trapped between two threats it believes to be a conflict to the dual mission—the risk of inflation upside and the risk of output/employment downside. Demand has indeed fallen, but most members of the www.xm-forex.committee believe that the supply side is also shrinking. The CPI data has been above the target level for four consecutive years, and a new round of inflation - even if it is "temporary" - will make the Fed extremely embarrassed.
For Fed observers, the good news is that we are finally going to see the limits of the Fed's "skipping" strategy. As internal discrepancies intensify, the FOMC reached some kind of www.xm-forex.compromise in June: if tariff inflation still does not appear by September, it will end the policy paralysis and implement the long-awaited interest rate cuts in the market. However, the first two-vote objection since 1993 shows that it is obvious that not all www.xm-forex.committee members are satisfied with the June www.xm-forex.compromise, or that may be just a "faithfulness" to President Trump)
Although we still doubt whether inflation data allows a rate cut in September meetings—the impact of tariffs has finally begun to be reflected in the CPI, and more obvious effects are expected in the www.xm-forex.coming reports—but inflation data may not deteriorate enough to prevent the September policy shift. Two CPI reports will be released before this, but if the Fed decides to send a signal at the Jackson Hall meeting, there will be only one report left. This will bring a pretty interesting prospect: the Fed may have just announced a new interest rate cut cycle when it sees a sudden reversal of inflation data, causing market expectations to fluctuate violently again.
JPMorgan Chase's forward-looking non-agricultural work: the results will be mixed,... may become a key variable
Number of new jobs: 100,000; unemployment rate: 4.2%; average hourly wage monthly rate: 0.3%
In terms of employment: The recent signals of a series of labor market indicators are not consistent. The number of initial unemployment claims for the reference week in July decreased by 25,000 from June, but the four-week average of renewed unemployment claims this month was higher than last month. Furthermore, a significant slowdown in private sector employment growth and working hours means that some significant loss of momentum may occur in the labor market, which has been quite resilient to date.
We expect the employment of private services to grow moderately, and the number of employment of www.xm-forex.commodity industriesThere will be a small net increase, with the overall increase of 85,000 private sector employment. We wouldn't be surprised if job growth continues to focus on private education and healthcare and gets some support from the leisure and hospitality industry. However, these categories may also be more vulnerable to immigration strikes. Furthermore, we expect government employment to normalize significantly following an unexpected surge in recruitment in state and local educational institutions in June. We predict that the number of government jobs will increase by 15,000 in July.
Average hourly wages: Wage growth seems to have stabilized recently after the continuous cooling, which may reflect the stability of labor demand.
In terms of unemployment rate: Labor participation has been declining in the past few months. Labor participation rate is expected to rebound slightly in July, but is still 62.3%. However, this is enough to raise the unemployment rate to 4.2% in July.
The above content is about "[XM Foreign Exchange Decision Analysis]: The Ultimate Decision Day, tonight's employment data set the market direction, and the unemployment rate becomes the biggest suspense!", which was carefully www.xm-forex.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your transactions! Thanks for the support!
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