Markets choppy after Trump’s Powell feud escalates
Updated Updated Wed, 2025 July 16 08:33
* Dollar pares earlier drop as Trump denies plans to fire Fed Chair
* Wall Street recovers from sharp fall after Trump letter
* US bank shares ease as second batch of big firms report
* Gold rallies after Trump letter to fire Powell
FX: USD started the day by modestly giving back some of its recent gains. PPI data was softer than the 0.2% benign print expected. Fed officials’ comments didn’t move the dial massively – the FOMC blackout starts this Saturday. But President Trump’s Fed feud reached a new level in the US session on reports that he drafted a letter to fire Fed Chair Powell. He even sought input from GOP leaders about the move. After leaks hit the wires, Trump reversed course with internal divisions apparent in the administration about the legality of removing the Fed Chair. The board could instead be in the crosshairs next. This theme is ongoing and could cause major volatility, though a dove-in-waiting would likely see markets potentially adjust quickly after the initial shake-out.
EUR found support at the April high at 1.1572. French politics moved back onto the radar yesterday after PM Bayrou unveiled his plans to bolster France’s finances with two national holidays scrapped to ease pressure on the deficit. His outline was subsequently met with threats of no confidence from the hard left and far right.
GBP was the third strongest major after CPI data came in hotter than estimates. Services inflation and some of the core measures remained elevated at 4.7% and could remain sticky for the rest of 2025. They are then predicted to drop sharply as all the April price rises fall out. Markets still expect a rate cut next month. Focus turns to today’s jobs data. Support in cable is at 1.3368 and 1.3434.
JPY outperformed after the Asian session saw fresh cycle highs at 149.18. The 200-day SMA sits at 149.60 and has acted as long-term resistance. Dollar weakness then saw the major spike down below 147 on the Trump/Powell speculation. A major Fib level (38.2%) of this year’s decline is at 147.13. The near-term BoJ outlook is neutral, owing to trade policy uncertainty. However, the longer-term risks remain tilted to further tightening with a possible rate hike as soon as October.
AUD was mid-table in the majors with prices not quite dropping to the 50-day SMA at 06488. Eyes are on the labour market data released today. CAD weakened initially as the major rose to its 50-day SMA at 1.3738 before retracing. The recent inflation data probably keeps the BoC on hold. PM Carney appeared to concede that tariffs would be part of the “commercial landscape” going forward.
US stocks: The S&P 500 printed up 0.32% at 6,263. The Nasdaq settled higher by 0.10% at 22,907. The Dow Jones finished up at 44,254, adding 0.53%. Equities finished the day green with outperformance in the Russell after the prior day’s underperformance, while the Nasdaq lagged after Tuesday’s outperformance. Sectors were predominantly green with outperformance in Health Care, Real Estate and Financials, while Energy, Communications and Consumer Discretionary were the only sectors in the red. Earnings saw solid Goldman Sachs and Bank of America reports, while Morgan Stanley finished flat after initially selling off as expenses and provisions for credit losses were above expectations. Meanwhile, European chip giant ASML disappointed on guidance for the next quarter and for 2026.
Asian stocks: Futures are mixed. APAC equities were muted after the mixed handover Stateside after the “something for everyone” US CPI data. The ASX200 saw most sectors in the red with miners not helped by Rio Tinto after its quarterly operations update. The Nikkei 225 traded indecisively again with political tensions rising ahead of Sunday’s upper house election. The Shanghai Comp and Hang Seng were mixed.
Gold remains stuck in its range as traders wait for the next major catalyst to see a breakout. As we always say, the longer an asset tracks sideways, the bigger the move should be. This is often in line with the dominant long-term trend. The Fed Chair leaving his post early would be a major risk event and likely see a sharp move into safe haven assets initially.
Day Ahead – Australia & UK Jobs, US Retail Sales
The Australian labour market is expected to show continued signs of resilience in June. The unemployment rate is likely to remain steady at 4.1% for a sixth month in a row. After a surprising small drop of 2.5k in May, weighed down by a loss of 41K part-time jobs, consensus sees a rebound of 20k in employment in June. This suggests underlying strength with jobs growth still robust beneath monthly volatility. This is the last jobs data before the next RBA meeting in August.
UK unemployment is forecast to remain at 4.6%, though there are still reliability issues with this data so the market may look through these figures. More important wage growth ex-bonuses are expected to cool to 5.3% from 5.6%. Base effects from lower wage settlements should be helpful in bringing down the data. Survey data point to a still weak jobs market but perhaps slightly better sentiment. Amid Wednesday’s still high (services) inflation, more downside in pay growth should help MPC officials remain comfortable voting for an August rate cut, which tallies with their current quarterly pace of rate reductions.
Consensus now forecast US retail sales to increase in June after two months of declines. Control group sales are expected to increase solidly. Lower vehicle sales and little change in seasonally adjusted gasoline prices may weigh. But overall, second quarter consumption growth should be stronger than in the first quarter, though generally softer than the pace of growth last year.
Chart of the Day – Bitcoin hovers around $120,000 after record spike high
The world’s most popular cryptocurrency broke through $123k to a fresh all-time top at $123,231 last week. Strong ETF inflows and support from the Trump administration and US policy developments saw bitcoin initially surge sharply above the previous high at $112k. Top analysts now forecast year-end targets between $150k and $250k. Ongoing institutional demand, improved accessibility to crypto-linked assets and post-halving supply effects are seen underpinning support. Support sits around $115k and then the first Fib retracement level (23.6%) of the bull move from the April low to recent high is at $111,711.
