Australia’s Inflation Rebounds Sharply in July Amid Electricity Shock, Cooling Rate-Cut Hopes

Economic

Summary:

Australia’s annual inflation surged to 2.8% in July, far exceeding expectations, as electricity costs spiked and core inflation rose, dampening the likelihood of an interest rate cut in September...

Sharp Inflation Surprise Driven by Electricity Price Spike

Australia’s consumer price index (CPI) rose by a striking 2.8% year-on-year in July, up from 1.9% in June and beating the consensus forecast of 2.3%. This jump in headline inflation, the highest in months, was primarily fueled by a 13% rise in electricity prices. The surge reflects the end of government rebates in New South Wales and the Australian Capital Territory, as well as scheduled annual electricity price revisions. As households faced increased out-of-pocket energy costs, the overall CPI climbed 0.9% month-on-month.

This price movement is causally linked to the withdrawal of federal subsidies and seasonal regulatory adjustments, as noted by Michelle Marquardt from the ABS. A partial reversal is expected in August, once new government rebates come into effect. However, the temporary nature of this reversal may not fully offset underlying price pressures in other areas.

Core Inflation and Services Point to Sticky Price Trends

The trimmed mean measure of core inflation rose to 2.7% in July, up from 2.1% in June, while a broader core index excluding volatile categories like fuel and travel jumped to 3.2%. These readings indicate that inflationary pressures are not confined to headline volatility but are instead embedded within the services sector, which continues to exhibit strong pricing momentum.

This persistence underscores a causal relationship between robust service demand and inflation stickiness, especially in categories like holiday accommodation, which rose 5% during the month due to strong school holiday demand. While seasonal factors may ease in August, the upward trajectory of core measures suggests the Reserve Bank of Australia (RBA) may adopt a more cautious stance on further easing.

Market Implications: September Cut Fades, November Still in Play

Investor expectations for a September rate cut fell from 30% to 22% following the data release, although a move in November remains widely anticipated. The Australian dollar briefly appreciated before flattening out at $0.6494, while three-year government bond futures trimmed losses.

Russel Chesler of VanEck noted that the inflation jump is unlikely to significantly alter broader economic momentum. However, the proximity of the July spike to the most recent RBA rate cut adds complexity to the bank’s upcoming decisions. The RBA’s forward guidance had already signaled that the pace of policy easing could vary based on evolving data.

Structural Indicators Reveal Mixed Signals

Beyond electricity, rents increased 3.9% year-on-year, the lowest annual rise since late 2022, indicating some cooling in housing pressures. Yet clothing and footwear saw a substantial 1.7% monthly rise, reflecting resilient discretionary spending in certain segments.

The labour market, while slightly softening, continues to show relative strength, providing further reason for the RBA to pause in the near term. Moody’s Analytics economist Sunny Kim Nguyen emphasized that the stickiness of core inflation reveals service prices have not yet fully normalized.

This dynamic reflects a correlational pattern between tight labour market conditions and sustained service-sector inflation, which continues to weigh on the RBA’s inflation outlook.

Rate Path Hinges on Core Data and Rebate Effects

Australia’s July inflation print has complicated the monetary policy outlook by reintroducing near-term upside risk to inflation, even as broader economic conditions remain stable. The central bank will closely monitor August data especially the impact of reinstated electricity rebates and shifts in service pricing to decide whether further cuts are appropriate by November.

While temporary shocks explain part of the increase, the trend in core inflation and the resilience of the labour market suggest that monetary easing may be slower and more data-dependent than previously anticipated.

Source: Reuters

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Daily News

[Quick Facts]

1. Trump discusses potential successors for Fed's Lisa Cook, citing "some really great candidates".

2. US Senate to hold hearing next week on Stephen Miran's Fed governor nomination.

3. French political uncertainty escalates, pushing up French banks' CDS spreads.

4. Tiff Macklem reaffirms 2% inflation target stance.

5. Thomas I. Barkin signals moderate rate adjustments if economy cools.

6. Catherine Mann advocates holding rates steady amid price stickiness.

7. Portugal's Centeno confirmed for ECB September rate meeting.

[News Details]

Trump discusses potential successors for Fed's Lisa Cook, citing "some really great candidates"

When asked about the successor to Federal Reserve Governor Lisa Cook, U.S. President Donald Trump stated, "We have some exceptional candidates. I believe we've narrowed it down to a few outstanding individuals."

Trump confirmed that Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick would be involved in the selection process for Cook's replacement.

US Senate to hold hearing next week on Stephen Miran's Fed governor nomination

According to Politico, two informed sources revealed that the U.S. Senate Banking Committee is expected to hold a hearing next week on Stephen Miran, President Trump's nominee for the Federal Reserve Board. The hearing, already in preparation prior to Trump's recent actions involving Lisa Cook, has not been officially announced.

The session will test Republican support for the Trump administration's push to reshape the Fed's structure. Simultaneously, it will serve as a key opportunity for Democrats to pressure Republicans into explicitly defending the Fed's independence.

A Republican congressional aide noted that the hearing has evolved beyond a mere nomination review, becoming a platform for political posturing and an indirect referendum on Trump. The situation has escalated beyond the nominee's control.

French political uncertainty escalates, pushing up French banks' CDS spreads

Investors are adopting a defensive stance amid heightened political uncertainty in France. The cost of insuring against default by French banks has risen, with credit default swaps (CDS) widening. French Prime Minister François Bayrou faces a confidence vote on September 8, triggering market unease.

Traders are growing concerned about renewed political turmoil that could escalate in coming weeks, noted Joshua Mahony of Rostro in a report. According to S&P Global Market Intelligence data: BNP Paribas' 5-year CDS spread climbed 1 basis point to 43 bps; Société Générale's 5-year CDS spread rose 3 basis points to 49 bps.

Tiff Macklem reaffirms 2% inflation target stance

Bank of Canada (BoC) Governor Tiff Macklem stated in a speech on Wednesday that the central bank will maintain its 2% inflation target. Meanwhile, the BoC is concurrently evaluating optimal methods to measure core inflation and explore how housing costs can be integrated into monetary policy decisions.

Macklem previewed key considerations for the bank's upcoming monetary policy framework review, noting that interest rates directly impact housing demand. "It is worth examining how monetary policy influences housing sector dynamics and how best to incorporate housing affordability into our broader focus on price stability," he said in prepared remarks.

The BoC conducts a five-year mandate review, with the next one scheduled for 2026. Macklem hinted at potential revisions to the methodology for assessing core inflation, reflecting evolving economic challenges.

Thomas I. Barkin signals moderate rate adjustments if economy cools

Richmond Fed President Thomas I. Barkin indicated on Wednesday that interest rates may undergo modest adjustments for the remainder of 2025, citing expectations of subdued economic activity.

"I see the economy operating at a moderate pace. If that holds, it would imply measured rate moves," Barkin stated, "while cautioning that the trajectory remains uncertain." He emphasized that his projection was contingent on evolving economic conditions, adding: "This is my current forecast, but forecasts can change."

The policymaker explicitly avoided signaling his stance for the September FOMC meeting, noting: "With three and a half weeks until the next meeting, I'll make the best judgment based on all available data when the time comes."

Catherine Mann advocates holding rates steady amid price stickiness

Catherine Mann, a member of the Bank of England (BoE)'s Monetary Policy Committee, said in a speech on Wednesday that borrowing costs should be kept at the current level for a longer period to prevent high inflation from persisting in the UK.

Mann stated in a speech delivered in Mexico on Tuesday that given her base-case assumption that elevated price pressures will last longer, it is appropriate to maintain the benchmark interest rate at the current level for a more extended period.

Mann is one of the most hawkish voices within the BoE. She was also one of the four rate-setters who opposed a 25bps cut to the benchmark interest rate earlier this month.

Portugal's Centeno confirmed for ECB September rate meeting

The Bank of Portugal confirmed in an email statement on Tuesday that Mario Centeno, the outgoing governor of the Bank of Portugal and a member of the European Central Bank (ECB)'s Governing Council, will participate in the ECB's interest-rate decision-making meeting on September 10-11. After completing a single term, Mario Centeno will be succeeded by Álvaro Santos Pereira, the chief economist of the Organisation for Economic Cooperation and Development (OECD). The appointment of the new governor of the Bank of Portugal will officially take effect after a parliamentary hearing on September 17.

Currently, the ECB is facing its most significant personnel reshuffle since 2019, including the replacement of new central bank governors in the Netherlands, Austria, and Portugal. As inflation has receded from its historical highs and trade tensions have weighed on the economy, the bank has cut borrowing costs eight times over the past year.

[Today's Focus]

UTC+8 16:00: ECB Governing Council Member Olli Rehn Speaks

UTC+8 17:00: Eurozone Economic Sentiment Indicator for August

UTC+8 19:30: ECB Releases Minutes of July Monetary Policy Meeting

UTC+8 22:00: Monthly Rate of Pending Home Sales Index in the US for July

TBD: The US Imposes an Additional 25% Tariff on India, with the Total Tariff Rate Reaching 50%

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Gerik

Economic

Moderating Profit Decline Signals Early Policy Impact

China’s industrial companies recorded a 1.5% year-over-year decline in profits for July 2025, marking a notable improvement from previous months and suggesting that recent efforts to tackle overcapacity and suppress destructive price competition may be beginning to yield results. For the cumulative January–July period, industrial profits contracted by 1.7%, showing a slight improvement in momentum after more severe declines earlier in the year.

This shift comes as the government intensifies its push to stabilize the industrial sector through targeted policy measures aimed at reducing excessive production and restoring pricing power. Statistician Yu Weining noted that these actions, implemented to encourage a “reasonable rebound” in prices, have started to lift corporate earnings in several sectors.

Manufacturing Sector Leads the Recovery

A key highlight in the July data is the robust rebound in manufacturing profits, which rose by 6.8% year-on-year an acceleration from the 1.4% increase in June. The most dramatic turnaround occurred among raw material producers, petroleum refiners, and steelmakers, who reversed previous losses and returned to profitability. This suggests that state-driven market interventions are particularly effective in capital-intensive and cyclical industries where margins are sensitive to pricing and demand shifts.

Moreover, high-tech manufacturing profits surged by 19% in July, driven by innovations in aerospace equipment and semiconductors. This performance is in line with Beijing’s strategic industrial policy that seeks to foster advanced manufacturing and reduce dependence on foreign technology.

These results indicate a causal relationship between government support measures such as subsidies for industrial upgrades and improved profit margins, especially in sectors aligned with long-term national objectives.

Deflation and Demand Weakness Continue to Undermine Broader Gains

Despite some positive developments, profit margins across the wider industrial economy remain under strain due to weak domestic demand and prolonged deflation. Producer prices have now fallen for 34 consecutive months, underscoring persistent disinflationary pressure that diminishes revenue potential and reduces the willingness of consumers and businesses to spend or invest.

Retail sales have also softened, and consumer inflation has dropped to zero, further illustrating how fragile demand conditions are restraining full recovery. This illustrates a correlational relationship between low consumer sentiment and the subdued pricing power of producers, which limits their profit growth even as policy support increases.

Mining Sector and Export Headwinds Weigh on Outlook

One of the sharpest declines continues to emerge in the mining sector, where profits fell nearly 32% year-over-year in the first seven months. Coal miners and washers were particularly hard-hit, suffering from a persistent supply glut that has defied recent attempts at rebalancing. These losses reflect the structural imbalance between capacity and demand in legacy sectors.

Externally, while China’s exports to non-US markets helped offset waning American demand, overall export conditions remain volatile. The gauge of new export orders fell at the fastest pace in three months, indicating that foreign demand particularly in advanced economies is likely to remain weak heading into Q4.

The July industrial profit data suggests that China’s state-led efforts to control overcapacity and stabilize prices are beginning to ease financial pressure in parts of the industrial economy. However, broader recovery will depend on whether domestic demand can rebound and whether global trade headwinds can be mitigated.

The divergence between sectors highlights a key dynamic: while strategic, high-tech, and policy-supported manufacturing is showing profit resilience, legacy sectors such as mining remain structurally challenged. The interplay of industrial policy, domestic demand trends, and global trade conditions will shape the trajectory of China's industrial earnings for the remainder of the year.

Source: Bloomberg

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IC Markets

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Forex

Political

Economic

US Stocks Push Higher as Trump Fires Fed Governor – S&P up 0.4%

US stocks moved higher in trading yesterday as President Trump increased his attack on the Federal Reserve Bank by firing Governor Lisa Cook. The Dow closed up 0.30% at 45,410, the S&P added 0.41% to move to 6,465, and the Nasdaq gained 0.44% to 21,544. The dollar and Treasury yields fell, with the DXY down 0.20% to 98.24, the 2-year yield down 4.5 basis points to 3.679%, and the benchmark 10-year yield down 1.4 basis points to 4.261%. Oil prices fell from 3-week highs, with Brent down 2.19% to $67.29 and WTI down 2.28% to $63.32 a barrel. Gold jumped higher on the back of haven flows, up 0.82% to $3,393.57 an ounce.

The Fed Remains Under Attack from the Oval Office

Traders and investors alike are now trying to analyse the potential impact of further attacks on the Federal Reserve Bank from President Trump and the White House. News that Trump had fired Governor Lisa Cook yesterday after fraud accusations (the irony was not lost on many!) caused shockwaves across the market in trading yesterday, and market reaction has so far been relatively muted, as it is not seen as having too much of an effect on Fed thinking. However, concern is starting to increase across all global financial markets that Trump is making a strong play to control the Fed, and if we see this behaviour continue—or indeed ramp up further—it would be detrimental to confidence in US markets as a whole. Another move in the short term could see a much stronger reaction, which could lead to sharp moves, with the dollar likely to take much of the pain, alongside US stocks.

Quiet Calendar Brings Geopolitics into Focus

It is a quiet day on the macroeconomic calendar today; however, traders are expecting to see more moves in the market on the back of any fresh geopolitical updates, with the Ukraine and Fed issues very much in focus. The main fundamental update of the day comes early, with all eyes on Australian markets in the Asian session for the release of the latest key inflation update. Market expectation is for the headline year-on-year number to come in at a 2.3% increase, and even though that is within the target range, it is substantially higher than the last 1.9% print. Traders are expecting that anything ±0.2% off that forecast is likely to see big moves in the Aussie. There is nothing of note being released in the London session, but we do have the usual weekly US Crude Oil Inventory data (exp. -1.7m barrels) coming out once New York opens, and we are set to hear from Fed member Thomas Barkin later in the day, which could see some volatility. However, any fresh updates are expected to have a greater effect on markets today.

Source: IC Markets

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Gerik

Economic

Commodity

Market Stabilizes Despite Tariff Threats

Oil prices remained steady on Wednesday following a 2% drop the day before, as market participants awaited clarity on the actual effects of new US tariffs on India, the world’s third-largest crude oil consumer. The US administration has officially enacted additional 25% tariffs on Indian goods starting Wednesday, raising the total tariff rate to 50%, in response to India’s ongoing purchases of Russian oil transactions Washington considers as undermining sanctions imposed after the Ukraine invasion.

While Brent crude inched up by 2 cents to $67.24 per barrel, West Texas Intermediate stayed flat at $63.25 during early trading in Asia. The previous day’s decline erased gains made at the start of the week when both benchmarks hit a two-week high.

India’s Oil Imports Reflect Price Over Politics

The US decision was rooted in India’s growing reliance on Russian crude, which surged after the Ukraine conflict began. Russia, faced with Western embargoes, began offering its oil at significant discounts an opportunity that India, aiming to secure affordable energy for its fast-growing economy, was quick to leverage. Initially, Indian refineries reduced their intake after the tariff warning and EU pressure on Nayara Energy, a Russian-linked Indian refinery. Yet state-backed refiners such as Indian Oil and Bharat Petroleum have reportedly resumed Russian crude imports for September and October, indicating that economic incentives still outweigh geopolitical signals.

This development casts doubt on the deterrent effect of the new tariffs. As ING’s head of commodity strategy Warren Patterson observed, the so-called “secondary tariffs” have yet to meaningfully disrupt Indian purchasing behavior. The market is therefore entering a wait-and-see phase, focusing on future shipping data to assess whether the punitive measures alter Indian energy strategies.

Geopolitical Frictions Add Complexity to Supply Side

The broader impact of the Ukraine war continues to ripple across global oil flows. Ukrainian drone strikes on Russian refineries have disrupted domestic refining capacity, prompting Moscow to increase crude exports from its western ports by 200,000 barrels per day in August. This adjustment serves as a short-term workaround for Russia to manage its surplus, but it also injects further complexity into an already volatile supply chain.

The imposition of higher US tariffs appears to be a politically charged maneuver aimed at penalizing India’s oil trade decisions. However, so far, the relationship between these sanctions and India’s crude buying habits appears more correlational than causal. The real test lies in how Indian refiners respond over the next few months and whether rising geopolitical tensions will significantly alter price behavior or global trade flows in the energy sector.

Source: Reuters

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Winkelmann

Economic

Cryptocurrency

Stocks

Forex

Crypto proponent John Squire recently published a post claiming that reports suggest JP Morgan may be quietly accumulating XRP in anticipation of possible spot ETF approvals. He described such a move, if accurate, as a “game-changer for institutional crypto adoption.”The post drew attention within the digital asset space, particularly as anticipation grows over the pending decisions on multiple spot XRP ETF applications currently under review by the United States Securities and Exchange Commission (SEC).

The timing of Squire’s remarks is significant, as six major asset managers, including Franklin Templeton, WisdomTree, and Grayscale, recently submitted amended filings for spot XRP ETFs.These applications have drawn scrutiny from regulators, with deadlines now extended into October 2025. Analysts have stated that institutional involvement would play a central role in the success of such products if approved.

RUMOR ALERT Community Reactions and Differing Views

In response to Squire’s post, X user Filipe Pereira questioned the reliability of the reports. Pereira acknowledged that if JP Morgan were indeed acquiring XRP, it would represent a major shift for institutional participation in the asset.However, he stressed the need for confirmation from credible sources before giving weight to the claims. He asked Squire directly for his interpretation of how such developments could affect XRP’s future if proven true.

Another user, going by the name goblue25, dismissed the report outright. He criticized Squire for sharing what he described as unverified information, accusing him of attempting to inflate expectations around XRP. His comment reflected the more skeptical segment of the digital asset community, which continues to question XRP’s long-term investment value compared to other cryptocurrencies such as Bitcoin.

Spot XRP ETFs Approval

The speculation comes at a time when optimism around spot XRP ETFs remains strong. Following recent legal clarity that programmatic sales of XRP are not considered securities, the path for regulatory approval appears clearer than in previous years.Market observers note that institutional confidence has grown in parallel with these developments, with several analysts suggesting the likelihood of ETF approvals before the end of 2025 is high.

If approved, experts estimate that billions in institutional capital could flow into XRP-backed funds, potentially driving a substantial increase in trading volumes and overall liquidity. Price forecasts have varied, with some analysts projecting ranges between $10 and $20 in scenarios where spot ETF products are green-lighted.

Market Impact

Reports of possible institutional accumulation, whether confirmed or not, highlight the heightened attention surrounding XRP at this stage of regulatory review. Even the suggestion of banks preparing for ETF-related opportunities has added momentum to the ongoing debate about the asset’s role in broader adoption.

While Squire characterized the potential involvement of JP Morgan as transformative, responses from other community members emphasized caution. The differing perspectives reflect the uncertainty that often surrounds the digital asset industry, where rumors frequently emerge ahead of major regulatory decisions.

The SEC’s extended review process will remain the focal point for investors awaiting clarity. Any confirmed institutional participation would likely reinforce the perception that XRP is positioned to play a role in future market infrastructure. Until then, the claims shared by Squire remain unverified.

Source: CryptoSlate

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Cryptocurrency

Forex

Technical Analysis

BTCUSD is consolidating after a sharp fall in past three days (down over 6%), mainly driven by strong institutional selling.The price edged higher after hitting six-week low today, although the upside remains limited and warning of persisting downside pressure.The latest fall broke through key supports at 111370 (50% of 98182/124558 rally / 100DMA), 110722 (base of thick daily cloud) and 110000 (psychological).

Violation of these levels generated strong bearish signal, with repeated daily close below, to validate signal and risk deeper correction from new all-time high.Bears eye initial target at 108258 (Fibo 61.8%), with stronger acceleration to target 105097 (July 2 higher low) and 104407 (Fibo 76.4%).Daily studies remain firmly bearish, with thick daily cloud weighing on price action, MA’s in full bearish configuration and very strong bearish momentum, with oversold Stochastic to partially counter pressure.

Ideally, consolidation should stay under the cloud, before larger bears regain full control again.Only sustained break above 100DMA would diminish downside risk and allow for stronger correction of 117169/108665 bear-leg.

Res: 110000; 110370; 110772; 111634Sup: 109379; 108665; 108258; 107419