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Hello everyone, today XM Foreign Exchange will bring you "【XM Group】: Initial data confirms that employment is weak and inflation is dull!". Hope it will be helpful to you! The original content is as follows:
On Thursday, the U.S. inflation data in August was slightly hot, and the initial unemployment claims data were weaker than expected, strengthening expectations for the Federal Reserve's interest rate cut. The US dollar index fell, and so far, the US dollar price is 97.62.
1. The US unseasonal adjustment annual CPI rate in August was 2.9%, the highest since January. The US seasonally adjusted CPI monthly rate in August was 0.4%, the highest since January.
2. The number of initial unemployment benefits in the United States recorded 263,000 in the week from September 6, surged to a high in the past four years. Traders fully price the Fed will cut interest rates three times by the end of 2025.
3. US media: ①Bester plans to add one or two more candidates to the list of candidates for the Federal Reserve Chairman, and three candidates have been basically finalized. ②Lutnick pushed the time window for Trump to achieve economic results backward, reflecting that the White House is trying to adjust public expectations.
4. The European Central Bank maintains the three key interest rates unchanged, in line with expectations. Sources said ECB officials see December as the next chance to cut interest rates.
5. The Brazilian Supreme Court sentenced former President Bolsonaro to 27 years and 3 months in prison for the crime of coup conspiracy.
The decision to keep interest rates unchanged on Thursday reflects the ECB's greater confidence that current interest rate levels are stofoco.comfortable. Although there are still good reasons to justify the preemptive rate cut, the ECB unanimous decision yesterday to keep interest rates unchanged. Lagarde's speech throughout the press conference was intended to convey the European Central Bank's firm belief in its current position. Lagarde said the deflation process is over, the risks faced by the economy are more balanced than before, and the inflation outlook is good. She also shunned all the questions about France.
However, from the details of the ECB forecast, inflation still has downside risks, so the possibility of another rate cut remains open, although Lagarde may not agree to the rate cut now. Core inflation forecasts have been lowered and may even hit 1.7% in 2027. Furthermore, the assumption that interest rates remain unchanged by 2027 clearly shows that the risks faced by the ECB’s “good status” are asymmetric: the probability of inflation falling below the target now appears to be greater than the probability of inflation exceeding the target. Therefore, while the threshold for another rate cut has been set very high, we cannot stofoco.completely rule out the possibility that the ECB may be forced to abandon its "good status" in the stofoco.coming months.
We believe that although the August CPI data is slightly higher than expected, the impact of tariffs on stofoco.commodity prices is still limited. On the contrary, after several months of milder gains, rent increases have become the main driver of core price increases. While the trend of slowing rents in August has not continued, we believe this is only temporary. The Zillow rental indicator has been lower than the historical trend this year and does not support another increase in rents.
At the same time, we predict that stofoco.commodity prices will continue to accelerate, and it may not yet fully reflect the impact of tariffs—large-scale stofoco.commodity imports and inventory accumulation before tariffs may alleviate short-term price increases pressure. stofoco.companies may also postpone price adjustments before the tariff policy is clear. But the key is that the weak labor market and economic environment will limit the ability of stofoco.companies to pass on costs to end consumers, forcing some of the costs to be digested by stofoco.companies themselves. In addition, sentiment indicators have shown signs of easing price pressure, coupled with the current risk of wage-inflation spiral far lower than the labor market overheating several years ago, these factors pose downside risks.
For the Fed, although the August CPI data did not open up the space for a 50 basis point interest rate cut in September (the market is still priced at a 25 basis point interest rate cut), the continued moderate tariff inflation effect means that the Fed can continue to focus on supporting the labor market and bring interest rates close to neutral levels through gradual interest rate cuts.
Most U.S. inflation data meet expectations, but this has not changed the Fed's expectations that it will resume interest rate cuts this month. Surprisingly, the number of people who requested unemployment benefits surged toThe highest level in four years may once again confirm market concerns that the labor market slowdown is accelerating. Furthermore, the tariff hike has not had a bearing on overall inflation as feared, which could strengthen market expectations of a more radical easing stance on the Fed. At present, the OIS market has digested expectations of the Federal Reserve's 25 basis points rate cuts next week and consecutive rate cuts in October and December.
We expect that the arbitrary and outdated inflation target of 2% will be stofoco.completely abandoned in the future, especially in the case of changes in the Fed mechanism. The figure did not originate from any precise economic formula, but became a practice after New Zealand took the lead in implementing the inflation target system in the early 1990s, and other central banks, including the Federal Reserve, followed suit. Several analysts and economists point out that economic conditions have changed significantly since the targets were set, and higher goals may provide greater flexibility for monetary policy. If 3% becomes the new 2%, you don't have to be surprised.
The Fed's loose policies, sticky inflation and fiscal stimulus measures adopted by the Big and U.S. Act mean that real U.S. interest rates will drop in the future, which increases the possibility of continued weakness in the U.S. dollar. Technically, after experiencing three rounds of corrections, the US dollar index rebounded from 96.377 to 100.257 and set a series of lower highs and lows. We think the US dollar will eventually retest 97.109, and if it falls below this, it is expected to look back at 96.377. However, regaining 98.834 will alleviate the selling pressure. But it is necessary to break through 99.32 to consolidate hope of rebounding from lows.
The United States may implement yield curve control, and the rise in gold prices is not just short-term volatility.
Gold prices have risen continuously in 2025 and may further climb to unprecedented levels in 2026. Behind it is a series of closely related macroeconomic and policy factors. The most direct driving stofoco.comes from the market's expectations of the Fed's monetary policy shift. Although interest rate cuts are about to begin, what is more critical is that the trend of the US fiscal and monetary policy synergistically turning to "Yield Curve Control" (YCC) is taking shape. This policy is not a stofoco.completely new tool - after the end of World War II, the United States used YCC to suppress interest rates and alleviate debt repayment pressure in the context of high debt-to-GDP ratio, and the current Treasury Secretary has publicly expressed this idea.
Due to the huge scale of US Treasury bonds, interest expenses have exceeded US$1 trillion in fiscal year 2025. Once the long-term interest rate rises to the level of 4%-5%, it will seriously threaten economic stability and intensify the fiscal crisis. In order to prevent the bond market from getting out of control, after Trump replaced Powell, he is expected to officially launch YCC in 2026. In the early stage, it may only guide market expectations through policy calls - just as the US during the 2020 epidemicThe Fed stabilizes sentiment by simply expressing its support for the corporate bond market - and the later period may require direct market intervention to anchor long-term interest rates.
This series of operations will cause the actual interest rate to enter the deep negative range. History shows that negative real interest rates greatly weaken the attractiveness of dollar-denominated assets and drive funds into non-interest-generating and value-preserving assets such as gold and silver. At the same time, technical analysis shows that gold prices have broken through the previous volatility range, and the target price before the policy is implemented in 2026 has been seen to US$4,000-4,200. After the YCC is officially implemented, the gold price may even exceed US$5,000.
Therefore, gold's rise this time is not a short-term volatility, but a concentrated reflection of the market's concerns about the US debt structure dilemma, monetary policy shift, and long-term credit currency value.
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