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The market corrects Powell's dovish overreaction, and the US dollar rebounds sharply!
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Platform]: The market corrects Powell's dovish overreaction, and the US dollar rebounds sharply!". Hope it will be helpful to you! The original content is as follows:
Asian market market
On Monday, as the market's optimism about the prospect of interest rate cuts subsided, the US dollar index rebounded and returned to above the 98 mark. As of now, the US dollar is quoted at 98.31.
Trump: It will cut drug prices by 1,400% to 1,500%; it will quickly impose tariffs on drugs.
Trump met with South Korean President Lee Jae-ming at the White House, and the former told reporters that he hoped to meet with Kim Jong-un this year.
Trump plans to rename the Ministry of Defense to the Ministry of War.
The United States plans to include copper and potassium fertilizer on the list of key minerals.
Intel: Trump administration's holdings pose a risk to the business, and government holdings may rise to 15%. Trump: Will continue to reach a deal similar to Intel.
Federal Logan: Banking system reserves still have room for lowering, and permanent repurchase tools may be launched again in September. Discussion should continue to determine whether the continued www.xmmen.communication of the federal funds rate target through intervals is still the best choice.
White House National Economic www.xmmen.commission Director Hassett: It is appropriate for the Federal Reserve to consider a rate cut; it will take months to decide who the Federal Reserve Chairman will replace him.
Iran, Britain, France and Germany will start a new round of talks on the 26th.
Israel Prime Minister: If Hezbollah in Lebanon is disarmed, Israel will withdraw its troops from southern Lebanon.
Summary of institutional views
Analyst Stephen Innes: Trump's "revolver" has fired the first shot! The Fed's flag is shaking
No doubt, Trump threw another bombshell at the Fed. But this bomb is not a dud, but a live ammunition.
U.S. President Trump announced the immediate removal of Fed Director Cook, accusing her of forging mortgage documents and claiming that “the American people must be able to trust the honesty of those who are in charge of the central bank.” The news was released on TruthSocial like a shell, and before that, the Justice Department also began to investigate Cook for possible mortgage fraud at the time of the Federal Housing and Finance Director Bill Pulte.
This timing is no coincidence for Trump. He has been steadily putting pressure on Democratic figures, and is also pressing forward step by step against the Federal Reserve led by Powell. The dismissal of Cook was his biggest blow to date. Just a few days ago, Cook downplayed the storm as "bullying" and vowed not to leave the position of policymakers, but now she finds that she has been kicked out of the Federal Reserve.
The market immediately felt the impact. The U.S. Treasury yields fell, and the S&P 500 futures weakened under the heavy pressure of uncertainty. Traders know that when the White House's "circus" evolves into a market event, the entire "tent" will tremble. The independence of the Federal Reserve, this already shaky flag, seems even more dilapidated under the storm of politics.
At present, the Federal Reserve faces a lack of a voting seat. For the market, the question is no longer about Cook himself, but how many "bullets" hidden in Trump's remaining "revolver" that can alarm the entire market.
IGM Group: What does Trump fire Fed Director Cook mean to the market? (I)
This morning, Trump announced that he had fired Federal Reserve Director Lisa Cook. We believe the firing could trigger a major legal showdown. Under federal law, Fed directors can only be removed from office “for reasons”, specifically for malfeasance or misconduct, which sets a high legal threshold for dismissal. Cook's term as the Federal Reserve director was originally scheduled to be in 2038. The New York Times pointed out that the Supreme Court may step in if the judge allows Cook to continue serving during legal proceedings. This constitutional conflict represents an unknown area of the relationship between the executive branch and the Federal Reserve. Gold rose after Trump announced the news. The Trump move has strengthened expectations for a rate cut and also heightened concerns about the threat of the Fed's independence.
This will significantly reshape the Fed's Board of Governors if Trump's decision to fire Cook is maintained and appoint a successor. Two of the seven current Fed directors — Waller and Bowman — were appointed by Trump, who recently objected to the Fed's decision to keep interest rates stable. nowIn the early summer of the year, Kugler resigned and another seat was vacant, which gave Trump greater influence. This potential shift in power balance could lead to the majority of members of the Federal Reserve Board appointed by Trump, which could impact monetary policy decisions in the www.xmmen.coming years, as the Fed's directors usually serve 14 years.
IGM Group: What does Trump fire Fed Director Cook mean to the market? (II)
This move poses an unprecedented challenge to the Federal Reserve's political independence, which has been the cornerstone principle that has guided U.S. monetary policy for decades. Market participants are closely watching signs of increased influence of political forces on monetary policy decisions. The firing is widely seen as part of a broader pressure move to push the Fed to cut interest rates. Cook's dismissal and Trump's nomination for Milan "will not immediately and substantially change the www.xmmen.composition of the FOMC."
However, this precedent could severely undermine market confidence in the Fed's future autonomy. Some critics believe the action embodies a worrying pattern. In July, Trump also hinted that the $2.5 billion renovation plan for the Federal Reserve's Washington, D.C. headquarters may be enough to be a reason to fire Fed Chairman Powell.
In general, this unprecedented sack of the current Fed director marks a potential turning point in the relationship between the U.S. executive branch and the Federal Reserve, and will have a significant impact on monetary policy, institutional independence and market stability in the www.xmmen.coming months.
Dansker Bank: The market regards Powell's statement as a clear hint that non-agricultural farms became the "target" in August
At the Jackson Hall meeting last Friday night, Federal Reserve Chairman Powell sent a signal that a rate cut could be cut in September. Although he talked about the risks of rising inflation expectations that could lead to sustained inflation, it seems that the downside risks of the labor market are more focused on. Although he did not make any advance www.xmmen.commitments, the market still regards this as one of the clearest hints about the September rate cut and is the first to respond dovishly. The current interest rate market shows that the probability of the Federal Reserve cutting interest rates in September is as high as 90%.
But other Fed officials have different views on the prospect of a rate cut. Cleveland Fed Chairman Hamake (non-vote www.xmmen.committee) said the Fed "still has a significant gap in inflation targets", while St. Louis Fed Chairman Moussellum (non-vote www.xmmen.committee) said that the August non-farm report may be enough to serve as a justification for the Fed to cut interest rates in September, and of course, if it performs very well, it may not be enough to push the Fed to decide to cut interest rates. These remarks also led to the US non-farm report released next Friday becoming the "target of public criticism", and its actual performance will become an important bargaining weight for FOMC's voting.
Deshang Bank: What is the final decision for interest rate cuts in September, and how many room for interest rate cuts will be available in the future?
This week's economic schedule focuses on the Fed's policy trends and key data. Powell's speech at Jackson Hall conference is more dovish than expected, emphasizing the shift in the labor market risk balance, and release will probably drop in Septembera strong signal of the news. Therefore, we expect a 25 basis point cut in September, followed by another 25 basis points in December and March 2026. Fed officials' speeches this week are expected to be divided: Logan may hold a hawkish stance, and Williams and Waller may echo Powell's dovish tone. In terms of data, the core PCE of the United States in July released on Friday is expected to record a monthly rate of 0.29% in July and an annual rate of 2.9%. Personal consumption and income are also worth paying attention to. In addition, the number of initial unemployment benefits and the labor sub-item in the consumer confidence index will provide clues to the employment market. However, these data may only be the "appetizer" before the release of non-agricultural and CPI data in August, which can only be a final result for the decision-making of the FOMC meeting in September.
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