Fed's credibility on the line
The majority of the voting members at the Fed are primarily focused on tariffs that could lead to higher inflation.
Central banks globally cannot permit external interference in their monetary policies. The Fed's credibility is on the line.
Despite rumors, President Donald Trump has denied any plans to intervene. He stated to reporters, 'we are not planning on doing it,' but also noted that he does not rule out any possibilities.
The next challenge for the financial sector involves ongoing tariff negotiations, particularly with the European Union, despite their proposal for reduced tariffs on US goods.
The US is aiming for a tariff of 15% to 20% with Europe and is open to reciprocation. The deadline for these negotiations is August 1.
Tariffs present an additional burden that will ultimately be shouldered by consumers, which is inflationary in nature. However, the effects of these tariffs will have a delayed impact on the economy, becoming more apparent in the coming months.
The previous week has been quite volatile. The threat of tariffs and inflation continues to affect the market. The US dollar has benefited from its status as a safe haven, outperforming other currencies.
The Consumer Price Index (CPI) released last week indicates a rise in inflation driven by tariffs. This has led many traders to reconsider their support for a rate cut in July.
In the Eurozone, the European Central Bank (ECB) is set to announce its decision on interest rates on Thursday. Last month, they reduced rates by 25 basis points, bringing the deposit rate down to 2%.
The European economy appears stable with these developments, and a pause in rate changes is possible. It is anticipated that the ECB will implement one more rate cut this year.
On the other hand, the Pound Sterling, which saw a strong demand since June, has weakened as sellers have emerged due to declining economic conditions in the UK and a stronger USD.
Traders are increasingly focused on the British economy and expect a rate cut sooner than anticipated. Recent labour market data from the UK revealed eight consecutive months of job losses, while GDP shrank for the second straight month. This has prompted a downgrade in the outlook for the Pound Sterling. It needs to break above the 1.3580–00 range to regain its previous strength. Otherwise, a fall below 1.3320 could lead to further losses.
Recently, it has been observed that the future of Federal Reserve Chairman Powell is influencing gold prices positively.
Meanwhile, Central Banks and investors appear to be cautious regarding their next steps.
Geopolitical tensions have also lessened, at least for now. Gold has been facing challenges in gaining momentum and still needs to break through the $ 3420 level, which seems difficult without significant buying support.
The rapid fluctuations we often witness primarily stem from traders reacting to news and speculation, particularly regarding tariffs, which tend to settle down once there is some consensus or a postponement of deadlines.
In this context, I believe that, lacking any robust fundamentals, gold will likely trade within a wider range of $ 3200 to $ 3450 for a while.
WEEKLY OUTLOOK — July 21-25
GOLD @ $ 3350.50— On the upside, unless gold surpasses the range of $ 3380-85 and reaches $ 3415-20, there is a potential for a drop. A decline below $ 3315-30 might lead it down to $ 3292-96 or $ 3262.
EURO @ 1.1626— Euro is well-supported in the range of 1.1510-20. It may try to break through 1.1725 toward 1.1780. However, if it breaks below the support level, it could face a decline to test 1.1450 levels.
GBP @ 1.3409— Pound Sterling needs to break through the 1.3580-00 level, which may prove challenging for additional gains. On the lower end, it has support near 1.3280-00, a level that won't be easy to give up.
JPY @ 148.83— USD has strong support near 147.50, suggesting that any declines may be limited. At the same time, it must surpass 149.95 to reach 150.40.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
10 hours ago
- Business Recorder
Trump, EU's von der Leyen to meet on Sunday to clinch trade deal, avert trade war
BRUSSELS/EDINBURGH: European Commission President Ursula von der Leyen is set to meet US President Donald Trump on Sunday to clinch a trade deal for Europe that would likely see a 15% baseline tariff on most EU goods, but end months of uncertainty for EU companies. Trump, in Scotland for a few days of golfing and bilateral meetings, told reporters upon his arrival on Friday evening that von der Leyen was a highly respected leader and he was looking forward to meeting with her on his golf course in Turnberry. He said there was a 50-50 chance that the U.S. and the 27-member European Union could reach a framework trade pact, adding that Brussels wanted to 'make a deal very badly.' The EU faces U.S. tariffs on more than 70% of its exports, with 50% on steel and aluminium, 25% on cars and car parts and a 10% levy on most other EU goods. Trump has said he would hike the rate to 30% on August 1, a level EU officials said would wipe out whole chunks of transatlantic commerce. Further tariffs on copper and pharmaceuticals are looming. A 15% tariff on most EU goods would be seen by many in Europe as a poor outcome compared to the initial European ambition of a zero-for-zero tariff deal on all industrial goods. But it would be better than 30% and it would remove uncertainty about business conditions that has already hit profits of European companies. For Trump a deal with the EU would be the biggest trade agreement, surpassing the $550 billion accord reached with Japan earlier this week. Trump, who is seeking to reorder the global economy and reduce decades-old U.S. trade deficits, has so far reeled in agreements with Britain, Japan, Indonesia and Vietnam, although his administration has failed to deliver on a promise of '90 deals in 90 days.' The EU deal would be a huge prize, given that the US and EU are each other's largest trading partners by far and account for a third of global trade. While close, a deal still requires some final negotiations. US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick departed Washington for Scotland on Saturday for talks with EU Trade Commissioner Maros Sefcovic, who is also travelling to Scotland, before the Trump-von der Leyen meeting. 'We're cautiously optimistic that there will be a deal reached,' said a Trump administration official, who spoke on he condition of anonymity. 'But it's not over till it's over.' In case there is no deal and the U.S. imposes 30% tariffs from August 1, the EU prepared countertariffs on 93 billion euros ($109 billion) of U.S. goods. EU diplomats have said a possible deal would likely include a broad 15% tariff on EU goods imported into the US, mirroring the US-Japan deal, along with a 50% tariff on European steel and aluminium. Trump told reporters there was 'not a lot' of wiggle room on the 50% tariffs that the U.S. has on steel and aluminium imports, adding, 'because if I do it for one, I have to do it for all.' It remains unclear if Washington would exempt EU imports from other sectoral tariffs on automobiles, pharmaceuticals and other goods that have already been announced or are pending although EU officials are hopeful the 15% baseline tariff would apply also to cars and pharmaceuticals.
Express Tribune
13 hours ago
- Express Tribune
Investors eye US-Europe deal before deadline
Listen to article Investors are hopeful a potential trade deal between the US and European Union could bring more certainty to markets ahead of next Friday's tariffs deadline. European Commission President Ursula von der Leyen was set to meet US President Donald Trump on Sunday in Scotland after EU officials and diplomats said they expected to reach a framework deal this weekend. Trump on Friday said there was a 50-50 chance or perhaps less that the US would reach a trade agreement with the EU. Trade tensions between the US and Europe may have provided some investors with a rationale to be cautious, said Sameer Samana, Head of Global Equities and Real Assets at Wells Fargo Investment Institute. "It's one of our largest trading relationships... So if that last piece falls into place, then you've probably got at the margin more people that have to get back in the markets," Samana said. "It's been a source of uncertainty that will go away." A deal would likely include a 15% baseline tariff on all EU goods entering the US and probably a 50% tariff on European steel and aluminum, the officials and diplomats said. Optimism over easing trade tensions broadly has helped push US stocks to record highs. Trump's April 2 "Liberation Day" announcement of sweeping global tariffs sent stocks plunging in the immediate aftermath, due to spiking fears about a recession that have since faded. Still, investors have been bracing for increased volatility heading into August 1, which the US has set as a deadline for raising levies on a broad swath of trading partners. The EU is facing US tariffs on more than 70% of its exports – 50% on steel and aluminum, 25% on cars and car parts and a 10% levy on most other EU goods, which Trump has said he would hike to 30% on August 1. Hopes for a deal with Europe rose after Trump struck a trade agreement with Japan earlier in the week. "The deal with Japan and the likely one soon with the EU are especially important given both are major US trading partners, together accounting for about a quarter of all goods' imports," analysts at Capital Economics said in a note on Friday. In the agreement with Japan, the country's auto sector, which accounts for more than a quarter of its US exports, will see existing tariffs cut to 15% from levies totaling 27.5% previously. An agreement that also lowers EU auto tariffs to 15% "would be no small deal" for the region as well, as about 10% of its shipments to the US are in the same category, Capital Economics said. Investors over the weekend were also watching for developments on trade between the US and China. Officials from the two countries plan to meet in Stockholm next week to discuss extending an August 12 deadline for negotiating a deal. Seoul seeks mutually agreeable package Meanwhile, South Korea will prepare a trade package that is mutually agreeable with the US ahead of minister-level meetings planned for next week and a US tariff-pause deadline of August 1, the presidential office said on Saturday. The package will include shipbuilding cooperation, a sector of high interest to US Commerce Secretary Howard Lutnick, who discussed the matter with South Korea Industry Minister Kim Jung-kwan on Friday, it said in a statement. Friday's meeting was a follow-up to a meeting on Thursday, where Lutnick and Kim reaffirmed their commitment to reach a trade deal by August 1, after a joint meeting of finance ministers and top trade envoys that had been scheduled for Friday was postponed. South Korea, facing 25% tariffs, is rushing to reach a trade deal with Washington, with National Security Adviser Wi Sung-lac visiting the US recently for high-level talks and Minister for Trade Yeo Han-koo also in the US for negotiations, as pressure grows on officials to clinch a deal that is no worse than Japan's that cut tariffs to 15%. South Korea's trade negotiations with the US have included non-tariff barriers in the agricultural and digital service sectors, but foreign exchange has not been part of trade talks beyond usual consultations, according to South Korean officials. South Korea Finance Minister Koo Yun-cheol and Foreign Minister Cho Hyun will also hold meetings with US Treasury Secretary Scott Bessent and State Secretary Marco Rubio, respectively, next week.
Business Recorder
19 hours ago
- Business Recorder
Gold drops as dollar firms, trade deal hopes sap safe-haven demand
NEW YORK: Gold prices slipped on Friday, weighed down by a stronger US dollar and signs of progress in US-EU trade negotiations that dented safe-haven demand. Spot gold fell 0.7% at $3,343.69 per ounce by 9:31 a.m. ET (1331 GMT). US gold futures fell 0.8% to $3,345.20. The US dollar index rebounded from a more-than-two-week low, making bullion more expensive for overseas buyers, while benchmark 10-year US Treasury yields rose. 'The Japan deal was significant, and there's hope for a US-EU agreement before the August 1 deadline. That's sapping safe-haven demand as elevated risk appetite drives capital toward risk assets,' said Peter Grant, vice president and senior metals strategist at Zaner Metals. Following this week's US-Japan trade deal, the European Commission said a trade deal with the US is within reach, even as EU members approved counter-tariffs on US goods in case talks fail. On the data front, US jobless claims fell to a three-month low, signaling a stable labour market despite sluggish hiring. Stable labour market data is expected to give the Federal Reserve cover to hold rates steady at 4.25%-4.50% at its meeting next week, even as inflation shows signs of picking up due to US President Donald Trump's import tariffs. Trump's surprise visit to the central bank marked a fresh attempt to pressure Chair Jerome Powell, with the President again urging a deep rate cut. Gold may attract some 'buying interest probably at $3,300 level, but perhaps not breaking out to new all-time highs until after the Fed decision,' Grant said, adding that the meeting could signal rate cuts later this year. Gold typically performs well during periods of uncertainty and in low-interest-rate environments. Spot silver fell 0.4% to $38.91 per ounce, but was still on track for a weekly gain of about 2%. Platinum was 1.6% lower at $1,385.20, while palladium rose 0.2% at $1,229.94.
