31/07/2025 Daily Reports
• Powell’s hawkish tone fuels USD rally
Despite two dissenting votes, the Fed remained firm. Chair Powell’s stance on inflation dashed hopes of a September rate cut and pushed the dollar higher.
• Market repricing in real-time
After Powell’s comments, expectations for a September rate cut dropped from 16 basis points to 11. The dollar’s strength continued.
• Core PCE in focus today
Based on GDP deflator data, June Core PCE could reach 0.46% month-on-month – higher than the 0.3% consensus forecast. This would further support a hawkish Fed stance.
• Labor market still resilient
Weekly jobless claims have declined for six consecutive weeks – the longest streak since 2022 – suggesting continued strength in employment.
• Euro still looks vulnerable
Despite better-than-expected second-quarter GDP, EUR/USD remains under pressure. Weak inflation prospects and poor growth outlook keep downside risks intact.
• ECB caution lingers
Most ECB easing bets for 2025 have been priced out. However, upcoming low inflation figures from major economies could revive dovish expectations.
• Bank of Japan turns slightly hawkish
The BOJ kept its policy rate at 0.5% but raised its inflation forecast for fiscal year 2025 from 2.2% to 2.7%. A subtle shift, but one to watch.
• USD still has room to run
With Powell focused on inflation and upcoming data likely to stay firm, the US dollar rally may continue in the near term.
• What’s Next?
The Fed made it clear this week that it won’t be rushed into easing. Powell’s message was strong: inflation must be controlled before rate cuts are considered. As long as US data holds steady and Europe stays soft, the dollar is likely to remain strong into August.
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Qualcomm Stock Drops on Dampened Smartphone Sales Amid Tariff Concerns; Microsoft Surges Toward $4 Trillion Market Capitalization After Surprise Earnings; US Labor Costs Rise as Market Eases
• The biggest smartphone chipmaker, Qualcomm Inc., lost shares after it posted below-projected sales of phones-related sales during the third quarter of its fiscal year. Such lackluster performance, with $6.33 billion worth of phone-related sales short of analysts’ expectations, increased jitters that tariffs globally would take a toll on the industry.
• At the same time, Microsoft Corp. is about to become the second multinational company to have a market capitalization of $4 trillion. Its stock climbed in premarket trading after the technology giant posted quarterly profits far beyond Wall Street estimates on the back of strong growth in cloud business led by Azure.
• Meanwhile, US labor costs increased fractionally higher than predicted in the second quarter with the Employment Cost Index rising 0.9%. That is a moderate improvement in wage levels at a point when other signs of faltering labor market conditions such as the number of job openings per unemployed worker declining. A report by the Labor Department said that firms remained cautious on hiring due to uncertainty over future rates of tariffs.
