As we head into 2025, global financial markets remain highly sensitive due to a complex interplay of factors. On the one hand, the Federal Reserve has maintained its policy interest rate range at 4.25%-4.50% since December of last year, and market expectations for a September rate cut have gradually intensified. On the other hand, Trump's tariff rhetoric continues to inject uncertainty into the market, leading to higher business costs and a slight rebound in inflation expectations.

The current market focus is undoubtedly the power dynamic between the White House and the Federal Reserve. President Trump's attempt to fire Federal Reserve Governor Tim Cook has sparked deep market concerns about the Fed's independence. Cook subsequently filed a lawsuit, arguing that the president lacks the authority to remove him. This legal battle could reshape long-established norms governing Fed independence.

Last Week's Market Performance Review:

US stocks fell slightly last week as investors took profits ahead of the long weekend, following the S&P 500's record high and Nvidia's strong earnings report. However, newly released inflation data suggests that rising price risks remain, leading to a cautious market sentiment heading into the new month. The S&P 500 closed down 0.64% at 6,460.26, but still achieved its fourth consecutive month of gains. The Nasdaq Composite fell 1.15% to 21,455.55, while the Dow Jones Industrial Average dropped 92.02 points, or 0.20%, to 45,544.88.

Gold prices surged last week, approaching record highs, as investors weighed U.S. economic data against uncertainty surrounding the Federal Reserve's future course. Spot gold rose 0.81% to $3,445.00 per ounce, putting it on track for its best monthly performance since April. Gold's gains were driven by recent data showing stubbornly stubborn U.S. inflation: The Federal Reserve's preferred indicator, the Personal Consumption Expenditures (PCE) price index, remains well above policymakers' comfort zone. Meanwhile, U.S. consumer spending posted its largest increase in four months in July, suggesting continued strong demand.

Silver rose for a fourth consecutive day, with spot prices climbing to a 14-year high. The metal was trading around $39.970, surpassing its high of $39.53 reached on July 23rd, reaching its highest level since September 2011. Continued US dollar (USD) weakness and robust safe-haven demand kept buyers firmly in control.

Before the weekend, US personal consumption expenditures (PCE) inflation data met market expectations, with limited impact on interest rate expectations, and the US dollar index edged up to 97.86. Despite the in-line inflation data, traders remained focused on the Fed's next move and the yield curve's reaction, particularly as the dollar traded within a key retracement range.

The US dollar index remains trapped within a key retracement range, hovering below its 50-day simple moving average at 98.02. Ahead of the next jobs report, CPI data, or a significant change in Fed policy guidance, the US dollar index is likely to remain range-bound between 97.00 and 98.50.

The euro came under pressure against the dollar before the weekend, stabilizing around 1.1680 after the US July personal consumption expenditures (PCE) inflation report was broadly in line with expectations. The euro has risen 11% against the dollar so far this year, supported by EU stimulus plans and US fiscal uncertainty. USD/JPY remained range-bound between 148.18 and 146.76 last week, trading sideways for nearly four weeks as investors digested a series of economic reports. From a technical perspective, USD/JPY closed below its 50-day moving average (147.01) for the first time since early July.

After the US July personal consumption expenditures (PCE) price index, released broadly in line with expectations, GBP/USD found support during the US trading session, stabilizing above 1.3500. The British pound underperformed other currencies, retreating against the US dollar. The Australian dollar rose to around $0.6548 before the weekend, hitting a two-week high and marking its fourth consecutive day of gains as the US dollar remained under pressure.

International oil prices fell before the weekend as traders anticipated weakening demand from the United States (the world's largest oil consumer) and increased supply from OPEC and its allies this fall. Brent crude oil futures for October delivery fell $0.50, or 0.7%, to settle at $68.12 per barrel. West Texas Intermediate (WTI) futures fell approximately $0.45–$0.60, or nearly 0.7%–0.9%, to settle at approximately $64.10 per barrel. Spot crude oil closed at $63.75, down nearly 0.12%.

Bitcoin attempted to hold above $110,000 last week, rebounding from a six-week low set the previous week. However, despite the recovery, traders remain uneasy as miners are selling Bitcoin at the fastest pace in nine months. The question is whether this signals deeper trouble or if other factors are driving the recent outflows. Cryptocurrency markets briefly rebounded early Thursday, but continued to face selling pressure in the afternoon U.S. trading session. Bitcoin briefly surpassed $113,000 before retreating to $111,800, down about 0.7% over the past 24 hours.

The 10-year U.S. Treasury yield rose to 4.24% on Friday, from a two-week low of 4.3% earlier in the session, buoyed by further evidence of the resilience of the U.S. economy. Interest rate futures still widely predict a 25 basis point rate cut by the Federal Reserve at its upcoming September meeting, although two cuts are expected for the entire year, rather than the previous three. Despite the expected rate cut, concerns persist that the Fed's dovish shift next year could prevent inflation from returning to its 2% target, further intensifying the U.S. yield curve.

This Week's Market Outlook:

The first week of September will be a "super week" for global markets, with a series of important economic data and data influencing the Federal Reserve's interest rate decision set to be released. From the eurozone's manufacturing sector to key data that will determine the Fed's interest rate decision, each piece of information has the potential to trigger significant market volatility. Investors should plan ahead to mitigate potential risks and opportunities.

In addition to core economic data, investors should be wary of three potential risks: First, the Russia-Ukraine and Israel-Palestine conflicts could trigger increased risk aversion, benefiting safe-haven assets such as gold and the US dollar. Second, any speeches by officials from the Federal Reserve, the European Central Bank, and the Reserve Bank of Australia signaling a policy shift could rapidly revise market expectations and trigger short-term fluctuations in corresponding currencies. Third, any renewed escalation of international trade frictions, such as between India and the US, would dampen global sentiment towards risky assets.

Is the White House pressuring the Fed? Will this weaken support for the US dollar?

Political interference has cast a shadow on the Fed's credibility, and traders remain vigilant. President Trump's attempt to remove Federal Reserve Governor Lisa Cook and install a close aide on the Fed Board has not only sparked legal opposition but also reignited doubts about the central bank's independence. This suggests that the Fed's policy is likely to be more accommodative regardless of economic conditions. This expectation further pressures short-term Treasury yields and the US dollar exchange rate.

The US dollar index remains below its 50-day simple moving average, currently at 98.02. Since August, the US dollar index has repeatedly attempted to break through this level intraday, but each attempt has failed, confirming that 98.00 has become a key resistance zone. As long as the price remains below the 50-day moving average, market momentum will favor the bears; a trend reversal cannot be confirmed unless the US dollar index re-crosses and closes above it.

Overall positive US economic data, but slowing inflation, has failed to reverse the dollar's weakness. The market is not buying into the dollar for two reasons: First, the debate over the Fed's independence and the prospect of an "earlier and faster" shift to dovish policy continue to be traded back and forth; second, the misalignment between growth and inflation has exerted a two-way pull on long-term US Treasury yields. The lack of a trend upward in real interest rates has made it difficult for the dollar to maintain a sustained interest rate premium.

Given the US dollar index's inability to break through the psychological barrier of 98.00 and the 50-day simple moving average of 98.02, and given continued political pressure, the US dollar index is likely to remain capped below its 50-day simple moving average. Conversely, if inflation data exceeds expectations, it could trigger a repricing of interest rate expectations, pushing the US dollar index back towards the resistance range of 98.83 to 99.00.

The White House's "battle" with the Federal Reserve has ignited the market! Gold prices soar to a five-week high.

Spot gold prices surged through the psychological barrier of $3,400 last week, reaching a high of $3,423.50 per ounce, a five-week high since July 23. This surge in gold prices was driven by a combination of factors, including a weakening US dollar, concerns about the Federal Reserve's independence, and an influx of safe-haven funds. Market expectations for a Fed rate cut are continuing to rise. This strong expectation is changing the investment logic of the entire precious metals market.

The current market focus is undoubtedly the power struggle between the White House and the Federal Reserve. President Trump's attempt to fire Federal Reserve Governor Tim Cook has sparked deep market concerns about the Fed's independence. Cook subsequently filed a lawsuit, arguing that the president lacks the authority to remove him. This legal battle could reshape long-established norms governing Fed independence.

Trump's pressure has fueled investor concerns that the Federal Open Market Committee may cut interest rates more quickly and keep them low for longer, which is positive for gold prices. Political uncertainty has become a hidden driver of gold's price rise.

Faced with the rapid rise in gold prices, investors are most concerned about whether this rally can continue. Technically, gold has opened up upside potential after breaking through the important psychological resistance level of $3,400. From a fundamental perspective, the three major supportive factors of a weakening dollar, expectations of rate cuts, and political uncertainty are unlikely to dissipate in the short term. The issue of Fed independence, in particular, is likely to remain a key variable influencing the market in the long term.

Russian crude oil has returned to the market; the technical level of US crude oil at 64.80 has become a key watershed.

After Labor Day, Russian crude oil supply resumed, weakening oil demand. This has put pressure on the short-term outlook for crude oil. Any short-term factors supporting oil prices are gradually fading. The main reasons for this decline are a seasonal decline in demand and the resumption of crude oil supplies from Russia's Druzhba pipeline, which supplies Russian crude oil to Hungary and Slovakia. The resumption of supply from the Druzhba pipeline has exacerbated oil price pressure.

While geopolitical risks remain elevated, their impact on crude oil prices is currently limited. Meanwhile, traders are closely watching India's response to the US tariffs. Despite US pressure for India to restrict Russian crude oil imports, India is expected to continue purchasing, which could alleviate some global supply concerns. With summer demand fading, Russian supply recovering, and resistance levels holding firm, the short-term crude oil price outlook is bearish.

Currently, oil prices face a mixed bag of bullish and bearish factors: falling inventories and geopolitical tensions are providing support, while the seasonal trough in US demand and tariff pressures in India are limiting upside potential.

In the short term, a key turning point for crude oil is $65.76 (the 50.0% Fibonacci retracement of $54.78 to $76.74). If inventories continue to decline and demand remains strong, oil prices are expected to break through the $66 resistance level. Otherwise, a retest of the $60 mark is possible. Future trends will depend more on the Federal Reserve's interest rate decisions and the specific response of India's energy policies.

Conclusion:

Looking ahead, market trends will continue to evolve amidst the interplay of multiple factors. In the short term, the September Federal Reserve meeting will be a key focus. A modest surprise in PCE data may prompt the Fed to adopt a more cautious rate cut strategy, with a high probability of a 25 basis point cut. In the medium term, solid growth in consumer spending will support the economy, but rising costs caused by tariff rhetoric may gradually filter through to consumers in the coming months, pushing up inflation expectations. Institutional analysts point out that the speed of corporate inventory reduction and the efficiency of price transmission will be key variables. If inventories continue to decline, inflationary pressures may further emerge by the end of 2025.

Overview of Important Overseas Economic Events and Events This Week:

Monday (September 1): Eurozone August SPGI Manufacturing PMI Final Value; UK August SPGI Manufacturing PMI Final Value; Eurozone July Unemployment Rate (%); US Labor Day Market Closed

Tuesday (September 2): Australia ANZ Consumer Confidence Index for the Week Ending August 31; Australia Q2 Current Account (AUD 100 million); Eurozone August Harmonized CPI Annual Rate (Unadjusted) (Preliminary), US August ISM Manufacturing PMI

Wednesday (September 3): Australia Q2 GDP Quarterly Rate (%); UK August SPGI Services PMI Final Value; US July Durable Goods Orders Monthly Rate (%); US July Factory Orders Monthly Rate (%); US July JOLTs Job Vacancies (10,000); RBA Governor Bullock's Speech; ECB President Christine Lagarde's Speech; Bank of England monetary policymakers attend parliamentary hearing

Thursday (September 4): Australia's July exports (%); Eurozone retail sales (%); US ADP employment change (10,000); US trade balance (US$ billion); US ISM non-manufacturing PMI (August); US initial jobless claims (10,000) for the week ending August 30

Friday (September 5): UK retail sales (July), seasonally adjusted (%); Eurozone Q2 GDP (final), seasonally adjusted (%); US non-farm payroll change (10,000); US unemployment rate (August); US average hourly wage (August), annualized (%); Federal Reserve Board Governor Waller delivers speech on monetary policy

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