Europe’s Labor Market Paradox: High Unemployment Amid Worsening Skill Shortages

Economic

Summary:

Despite over 13 million unemployed individuals across the European Union, millions of jobs remain unfilled due to a severe mismatch between available skills and market needs...

A Deepening Labor Paradox

Europe is confronting a troubling paradox in its labor market: unemployment remains high while many industries struggle to find skilled workers. This imbalance between labor supply and demand is not only hampering business operations but also threatening the EU’s long-term strategic goals.

As of Q2 2025, the EU reported more than 13 million unemployed people, yet key economies are facing severe labor shortages. Germany has over 1 million job vacancies, while France reports nearly half a million. The EU's overall job vacancy rate stands at 2.1%, with sharp differences across countries from 0.6% in Romania to 4.2% in the Netherlands.

Even in countries like Germany, where the unemployment rate is relatively low (3%), more than 1.7 million jobs remain unfilled. In France, unemployment remains high but sectors like construction and engineering suffer from a lack of skilled labor.

Skill Mismatch as a Primary Barrier

At the core of this paradox is a widespread skills gap. According to recent surveys, more than 75% of businesses in 21 EU countries report difficulty finding suitable candidates. Small and medium-sized enterprises are particularly affected, with over half citing skill shortages as one of the top three recruitment challenges.

Sectors most affected include IT, healthcare, construction, and renewable energy. Meanwhile, other fields such as administrative support, design, and manual labor are oversaturated. This imbalance is driving up recruitment costs, delaying project timelines, and making business expansion more difficult.

Economic and Social Implications

The skill mismatch has broad social and economic consequences. Youth and women are the most affected groups. In Spain, for example, youth unemployment remains stubbornly high at 24–25%, despite a recovery fueled by immigration.

The lack of skilled labor is also slowing the EU’s clean energy transition and digital infrastructure rollout both of which are vital for the bloc’s competitiveness and sustainability goals. Governments are under pressure to increase unemployment benefits, even as high-value jobs remain vacant and tax revenues decline.

The Urgent Need for Skills Investment

Solving Europe’s labor paradox isn’t just about creating more jobs it’s about equipping the existing workforce with the right skills. Massive investments in reskilling and upskilling programs are essential. In Italy, some companies have resorted to launching in-house training programs due to the inability to hire qualified staff externally.

Europe stands at a critical crossroads: either close the skills gap or risk falling behind in the global race for innovation, clean energy, and economic leadership. The labor shortage is no longer just a workforce issue it’s a structural threat to the continent’s future prosperity and strategic autonomy.

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Economic

Commodity

Crude Prices Rise on Renewed Supply Disruption Fears

Oil markets gained ground on Tuesday as rising geopolitical tensions particularly the escalation in the Russia-Ukraine conflict rekindled fears of supply instability. Brent crude climbed 0.59% to $68.55 per barrel, while West Texas Intermediate (WTI) advanced 1.64% to $65.06.

The gains were partly driven by the impact of recent Ukrainian drone strikes, which have reportedly disabled oil processing facilities responsible for 17% of Russia’s total refining capacity amounting to roughly 1.1 million barrels per day. This capacity reduction signals a tangible threat to global oil supply, especially from the world’s second-largest exporter.

The connection between these attacks and price movements is directly causal: infrastructure damage reduces available export volumes, heightens risk premiums, and tightens the physical market.

Ukraine’s Offensive and Broader Strategic Aims

Ukrainian President Volodymyr Zelenskiy announced plans for deeper strikes into Russian territory, building on weeks of intensified efforts to disrupt Russia’s energy and logistics backbone. In response, Russia has increased its own aerial campaigns, targeting Ukraine’s energy grid and transport infrastructure.

This tit-for-tat escalation has raised the specter of prolonged and wider disruptions to Eastern European energy flows. Daniel Hynes of ANZ noted in a market brief that “ongoing risks to energy infrastructure in Russia remain high,” with Ukrainian strikes over the weekend reinforcing market nervousness.

While these developments remain regional in scope, their global implications are substantial due to the centrality of Russian crude in global supply chains. As more facilities are disabled or operate at limited capacity, global inventories may tighten further.

Geopolitical Undercurrents: China’s Global South Push

Beyond the battlefield, geopolitics added another layer of uncertainty. At a recent multilateral summit, Chinese President Xi Jinping reiterated his vision for a "new global order" prioritizing the Global South an explicit challenge to U.S.-led economic systems. The summit, attended by Russian and Indian leaders, signals growing coordination among major non-Western energy consumers and producers.

China and India remain Russia’s top crude buyers. While Trump has levied punitive tariffs on India for continuing Russian oil purchases, he has notably refrained from targeting China an asymmetry that may influence future trade dynamics and energy alignment.

The correlation here is strategic rather than reactive: shifts in geopolitical blocs may reshape long-term oil flows, alliances, and pricing structures, reinforcing regionalism in global energy trade.

Market Outlook Ahead of OPEC+ Meeting

With the next OPEC+ meeting scheduled for September 7, markets are now pivoting their attention to the group’s output guidance for October. Recent production discipline has been central to price stability, but speculation lingers on whether supply adjustments will be made in light of the ongoing conflict and weakening global demand.

The expectation of supply stability from OPEC+ acts as a partial anchor on price volatility, although any surprise adjustment could serve as a catalyst. Current prices remain about 8% lower year-to-date, reflecting broader macroeconomic concerns despite localized supply risks.

Oil’s latest uptick reflects mounting anxieties over global energy security, as the Russia-Ukraine war intensifies and geopolitical posturing from China compounds market tension. With physical disruptions now impacting millions of barrels per day and a pivotal OPEC+ decision looming, volatility is likely to persist. Investors are watching not just barrels, but borders where energy, diplomacy, and power politics are increasingly converging.

Source: Reuters

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Rethinking Battery Chemistry: A Strategic Alternative to Lithium

Offgrid Energy Labs, a deep-tech energy storage startup based in India, is challenging lithium’s long-standing dominance in the battery market by developing and commercializing a zinc-bromine battery system called ZincGel. Amid volatile lithium supply chains, limited mineral access, and high costs, the startup offers a timely alternative for stationary energy storage.

ZincGel delivers 80–90% of the energy efficiency of lithium-ion batteries but offers lower levelized costs and longer service life. The technology also utilizes a proprietary water-based electrolyte, greatly minimizing fire risks, and boasts resilience under extreme temperature conditions, including operations at –10°C. With improved safety, affordability, and endurance, ZincGel positions itself as a strategic option for net-zero industries and off-grid energy applications.

The causal relationship is clear: the rising global dependence on lithium heavily sourced and refined in China creates systemic risk. Offgrid’s zinc-based approach directly mitigates this vulnerability by leveraging more abundant, safer, and regionally accessible materials.

Strategic Capital to Accelerate Commercialization

The $15 million Series A funding round, led by Archean Chemicals and joined by Ankur Capital, values Offgrid at approximately $58 million post-money. Archean now holds a 21% stake, a move aligned with its existing strengths in bromine production and supply chain management. This strategic alignment provides both material access and scale-up capabilities that are crucial for Offgrid’s next growth phase.

The funding will support the construction of a 10-megawatt-hour demonstration facility in the UK by Q1 2026, followed by commercialization and plans for an Indian gigafactory. Offgrid’s U.K. facility is designed to operate with a carbon footprint 50% lower than conventional lithium battery plants, thanks to simpler manufacturing processes and reduced material intensity.

While India remains a major target market, Offgrid chose the UK for its initial pilot due to Europe’s advanced battery manufacturing ecosystem, easier access to early customers, and the presence of two co-founders already based in the region.

Technology and Intellectual Property: A Differentiated Edge

Founded in 2018 at IIT Kanpur by Tejas Kusurkar, Brindan Tulachan, Rishi Srivastava, and Ankur Agarwal, Offgrid has spent its formative years building core intellectual property. To date, the company has secured more than 25 IP families and 50 assets across global markets, including the U.S., U.K., China, India, Australia, and Japan.

Compared to other zinc-bromine battery players such as EOS Energy Enterprises, Offgrid claims its proprietary electrolyte chemistry and carbon-based cathodes enable both fast charging and long-duration discharges (6–12 hours), while significantly lowering material costs by reducing the use of graphite.

These performance metrics when paired with flexible application tuning and long cycle life allow the ZincGel system to meet a variety of industrial energy storage needs that lithium batteries cannot serve as effectively.

Commercial and Global Traction: Positioning for Deployment

Offgrid’s early customer base includes notable names such as Shell and Tata Power, both of which are testing ZincGel for integration into peak-shaving, grid stability, and decentralized power scenarios. The startup is also in discussions with global utility players like Enel Group to tailor battery systems for specific European requirements.

Its early production has been manual, conducted in a lab in Noida, India, but with new capital and facilities, the firm is preparing to enter commercial-scale manufacturing. The flexibility of the technology also allows Offgrid to customize battery configurations based on end-user needs, expanding its applicability across industrial, renewable, and off-grid segments.

The startup’s business case rests on delivering the same (or better) performance at lower cost a value proposition that targets customers looking for both economic and environmental sustainability.

Offgrid Energy Labs’ zinc-bromine battery platform represents a decisive shift in energy storage innovation one that challenges the status quo of lithium-centric solutions. With robust IP, strategic investors, and clear market applications, the company is poised to become a major player in the global battery transition. As countries like India and the U.K. seek to scale renewable infrastructure without relying entirely on lithium, Offgrid’s ZincGel may offer a sustainable, cost-efficient alternative built for the next era of clean energy resilience.

Source: TechCrunch

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Political

Economic

Chinese President Xi Jinping will host his country's largest-ever military parade this week, as he seeks to recast Beijing as the custodian of a post-U.S. international order at a time of deep geopolitical uncertainty.More than 20 world leaders including Russia's Vladimir Putin and reclusive North Korean leader Kim Jong Un will gather in Beijing for the September 3 "Victory Day" event marking 80 years since Japan's defeat at the end of World War Two.

The highly choreographed spectacle aims to project China's military might and diplomatic clout amid doubts over the United States' global role, as President Donald Trump slashes foreign aid, retreats from international institutions and wages a sweeping trade war on allies and rivals alike.The unprecedented joint appearance of Xi flanked by Putin and Kim overseeing the showcase of cutting-edge equipment like hypersonic missiles and drones, may well be the defining image of the parade, an "Axis of Upheaval" defying the West.

For Kim, who crossed into China on his special train early on Tuesday, it will be his first major multilateral event and the first time a North Korean leader has attended a Chinese military parade in 66 years."The presence of Vladimir Putin, (Iran's) Masoud Pezeshkian, and Kim Jong Un underscores China's role as the world's leading authoritarian power," said Neil Thomas, a Chinese politics expert at the Asia Society Policy Institute's Center for China Analysis.

The increase in leaders from Central Asian, West Asian and Southeast Asian countries attending this year's parade compared to the last one in 2015 highlight's Beijing's progress in regional diplomacy, Thomas added.Proceedings will kick off at 9 a.m. (0100GMT), according to China's official Xinhua news agency.Slovakian Prime Minster Robert Fico and Serbia's Aleksandar Vucic, both critical of sanctions on Russia over its war in Ukraine, are the only Western leaders attending.

Trump, whose own June military parade drew the largest nationwide protests since his return to power, has repeatedly talked up his close relations with Xi, Putin and Kim but has failed to make any major diplomatic breakthroughs.

'MEMORY WAR'

Earlier this week, Xi rallied leaders of developing nations to advocate for a more equal, multipolar world and promote the "correct historical perspective" of World War Two at a regional security forum in the port city of Tianjin.The parade too is part of a "memory war" in which China and Russia offer an alternative history to a Western narrative they believe underplays their role in fighting fascist forces, the Brookings Institution wrote in a paper last week.Xi has cast the war as a major turning point in the "great rejuvenation of the Chinese nation" in which it overcame Japan's invasion to become an economic and geopolitical powerhouse.

While some residents have requested patriotic and military-themed haircuts ahead of the parade, such enthusiasm may be not be shared by all ordinary Chinese people.Downtown Beijing has been virtually paralysed by security measures and traffic controls in the weeks leading up to the parade.Nationwide, local governments have mobilised tens of thousands of volunteers and Communist Party members to monitor for any signs of potential unrest ahead of the parade, estimates based on online recruitment notices show.

Taiwanese officials on Monday estimated Beijing was spending $5 billion - the equivalent of 2% of its entire defence budget - on the parade.

Source: Reuters

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Russia-Ukraine Conflict

European Commission President Ursula von der Leyen told the Financial Times that European nations are developing detailed plans to potentially send troops to Ukraine as part of a future peace agreement, despite it being obvious to all the world that Moscow would never agree to this as a basis of peace or ceasefire.

Hawkish European leaders continue to claim they have support from President Donald Trump for pursuing such a plan, which would see a joint multinational force of troops from various European armies, backed by a US security guarantee. "President Trump made it very clear that the US would be part of the security backstop," von der Leyen said."Security guarantees are paramount and absolutely crucial," she described of the European consensus. "We have a clear road map and we had an agreement in the White House... and this work is going forward very well."

She had also said that "President Trump reassured us that there will be [an] American presence as part of the backstop. That was very clear and repeatedly affirmed."Indeed Trump had declared immediately after hosting European leaders at the White House last month, "We’re willing to help, especially from the air - because no one has what we have."However, there still appears to be some distance between Washington and European expectations, with one senior official recently explaining to Axios, "Europe can’t drag out this war with unreasonable expectations and expect the US. to foot the bill. If Europe chooses to escalate, that’s their decision - but they risk turning a potential win into a loss."

Von der Leyen admitted there's a long road ahead in terms of organizing a joint commitment for a multinational 'peacekeeping' force for Ukraine."Of course, it always needs the political decision of the respective country, because deploying troops is one of the most important sovereign decisions of a nation," she said, adding that "the sense of urgency is very high . . . it’s moving forward. It’s really taking shape."

Her words were issued during a tour of European countries which lie close to Russia, which the Kremlin is sure to see as provocative in its own right - given for example she was at a military base in Estonia, and at one point was along the Poland-Belarus border, and in Bulgaria, and toured arms depots and factories in 'NATO's eastern flank'.She called for greater EU investment in drones and missile defense, as well as cyber warfare, and even space tech. "The role of the commission is paramount in enabling the member states to finance a surge in defense." She added: "The character of warfare has completely changed,” she added, citing the need for EU militaries to invest in drones, air and missile defense, space and cyber capabilities."

But Germany didn't get the memo, with its defense minister Boris Pistorius questioning on Monday, "Those are things that you don't discuss before you sit down at the negotiating table with many parties that have a say in the matter.""I would know better than to comment or confirm such considerations in any way, apart from the fact that the European Union has no mandate or competency whatsoever when it comes to positioning troops," Pistorius followed with.

Source: Zero Hedge

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Sudden Tariff Escalation Reignites Trade Frictions

In a post on Truth Social, President Donald Trump announced that India had offered to eliminate tariffs in response to the U.S. decision last week to impose sweeping 50% tariffs on Indian goods doubling the previous 25% rate. The move stunned Indian officials and disrupted months of ongoing trade dialogue between Washington and New Delhi. Trump’s tone, however, suggested skepticism, remarking that “it’s getting late” and that such offers “should have been made years ago.”

The timing and scope of India’s offer remain unclear. The White House has not confirmed whether negotiations will be reopened, and there has been no official comment from India’s Ministry of External Affairs or the Office of the U.S. Trade Representative.

The relationship between India’s tariff offer and the punitive U.S. measures is clearly causal: Washington’s abrupt imposition of elevated tariffs triggered a defensive recalibration from India, though with uncertain diplomatic leverage at this stage.

Indian Exports Under Pressure, With Key Sectors Spared

The new U.S. tariffs affect more than 55% of Indian exports to the United States, its largest export destination. Labor-intensive sectors such as textiles, garments, and jewelry are particularly exposed to the new levies. Electronics and pharmaceutical products, including those aligned with U.S. strategic interests, have been exempted protecting major U.S. firms like Apple Inc., which recently scaled up factory investments in India.

Although India has previously offered zero tariffs on specific U.S. products like auto components and pharmaceuticals, key sectors such as agriculture and dairy have remained off-limits due to domestic sensitivities. Past U.S. frustrations centered on these long-standing protectionist barriers, which hindered broader trade liberalization.

India has tried to placate U.S. concerns in 2025 by lowering duties on high-profile American goods like bourbon and Harley-Davidson motorcycles, signaling goodwill. Yet these gestures appear to have fallen short in the eyes of the Trump administration, which remains fixated on India’s energy dealings with Russia.

Oil Purchases from Russia Erode U.S. Trust

Trump’s latest trade retaliation was explicitly linked to India’s continued importation of Russian oil. Despite mounting pressure, Prime Minister Narendra Modi has maintained strong ties with Moscow, emphasizing a “special relationship” during his recent meeting with President Vladimir Putin in China.

This sustained energy cooperation runs counter to Washington’s broader sanctions strategy aimed at isolating the Kremlin, fueling Trump’s anger over perceived defiance. The connection between India’s energy decisions and the U.S. trade response is not merely diplomatic but punitive: Trump is using tariffs as an enforcement tool to curb geopolitical divergence.

Diplomatic Balancing Act Between China, Russia, and the U.S.

India’s geopolitical stance appears increasingly multipolar. Following his meeting with Putin, Modi also met with Chinese President Xi Jinping in Tianjin at a regional summit, signaling a move to ease tensions with Beijing. The two leaders reportedly discussed resuming direct flights, border stabilization, and expanded trade suggesting that India is actively seeking to diversify its diplomatic channels and avoid overreliance on any single power bloc.

The correlation between India’s broader foreign policy outreach and U.S. tariff escalation is significant. As India strengthens ties with both Russia and China, its strategic alignment appears less tethered to Washington, reducing the effectiveness of unilateral U.S. economic pressure.

Trump’s announcement that India offered to slash tariffs to “nothing” underscores the intensifying strain in U.S.-India trade relations amid broader geopolitical disagreements. While India’s proposed concession may signal willingness to negotiate, its concurrent outreach to Russia and China highlights a more assertive, multi-vector foreign policy. With major trade talks now at a crossroads and trust further eroded, the path to a sustainable U.S.-India trade agreement remains deeply uncertain.

Source: Bloomberg

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Commodity

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Economic

What happened in the U.S session?

The U.S. session was dominated by mixed macroeconomic signals and unprecedented political pressure on the Federal Reserve. While manufacturing data showed improvement and corporate earnings remained robust, persistent inflation concerns and deteriorating consumer sentiment highlighted ongoing economic challenges. The most significant development was Trump’s attempt to remove Fed Governor Lisa Cook, creating substantial uncertainty about central bank independence. Financial markets reacted with typical risk-off behavior, benefiting safe-haven assets like gold while pressuring technology stocks and the dollar.

What does it mean for the Asia sessions?

Asian traders should focus on three key themes for Tuesday’s session: the US ISM Manufacturing data that could influence Fed rate cut expectations, Eurozone inflation data that may impact ECB policy, and the ongoing Federal Reserve independence crisis. China’s AI-driven market surge, led by Alibaba’s spectacular performance, continues to support regional sentiment, while persistent inflation across major Asian economies complicates central bank policy decisions. The combination of geopolitical tensions, AI technology momentum, and evolving monetary policy expectations creates a complex but potentially opportunistic trading environment for the Asian session..

The Dollar Index (DXY)

The US dollar faces significant downward pressure from multiple converging factors: high probability of Fed rate cuts starting in September, deteriorating labor market conditions, and unprecedented political interference in Fed independence. The Trump administration’s attempt to remove Fed Governor Lisa Cook represents the most serious threat to central bank autonomy in decades, adding uncertainty to monetary policy expectations. Manufacturing data continues to show contraction, with the ISM PMI expected to remain below 50 on September 2. While GDP growth has been resilient, the combination of weakening employment, political pressures on the Fed, and market expectations for aggressive rate cuts suggests continued dollar weakness in the near term.Central Bank Notes:

● The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25% to 4.50% at its meeting on July 29–30, 2025, keeping policy unchanged for the fifth consecutive meeting.

● The Committee reiterated its objective of achieving maximum employment and inflation at the rate of 2% over the longer run. While uncertainty around the economic outlook has diminished since earlier in the year, the Committee notes that challenges remain and continued vigilance is warranted.

● Policymakers remain highly attentive to risks on both sides of their dual mandate. The unemployment rate remains low, near 4.2%–4.5%, and labor market conditions are described as solid. However, inflation is still somewhat elevated, with the PCE price index at 2.6% and core inflation forecast at 3.1% for year-end 2025, up from earlier projections; tariff-related pressures are cited as a contributing factor.

● The Committee acknowledged that recent economic activity has expanded at a solid pace, with second-quarter annualized growth estimates near 2.4%. However, GDP growth for 2025 has been revised downward to 1.4% (from 1.7% projected in March), reflecting expectations of a slowdown in the coming quarters.

● In the revised Summary of Economic Projections, the unemployment rate is expected to average 4.5% in 2025, and headline PCE inflation is forecast at 3.0% for the year, with core PCE at 3.1%. Policymakers continue to anticipate that inflation will moderate gradually, with ongoing risks from tariffs and global conditions.

● The Committee reaffirmed its data-dependent and risk-aware approach to future policy decisions. Officials stated they are prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede progress toward the Fed’s goals.

● As previously outlined, the Committee continues the measured run-off of its securities holdings. The pace of balance sheet reduction, which slowed since April (monthly redemption cap on Treasury securities reduced from $25B to $5B, while holding agency MBS cap steady at $35B), was left unchanged this month to support orderly market functioning and financial conditions.

● The next meeting is scheduled for 16 to 17 September 2025.

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Dovish Fed expectations, political uncertainty, dollar weakness, and robust institutional demand. With central banks continuing their strategic shift toward gold and geopolitical tensions providing ongoing support, the precious metal appears well-positioned for further gains. However, Friday’s jobs report could be the decisive factor determining whether gold breaks through $3,500 or experiences a temporary consolidation. The market consensus remains broadly bullish, with most analysts expecting gold to test new all-time highs in the near term.Next 24 Hours Bias

Medium Bullish

The Australian Dollar (AUD)

The Australian Dollar’s recent strength reflects a combination of domestic resilience in manufacturing and employment, dovish Federal Reserve expectations, and technical momentum. However, underlying economic growth remains subdued, and the currency faces headwinds from China’s mixed economic performance and global trade uncertainties.RBA minutes from the August meeting revealed a data-dependent approach going forward, with policymakers highlighting both upside and downside risks to the economic outlook. The central bank emphasized that further easing would depend on incoming data regarding labor market conditions and inflation trends.

Central Bank Notes:

● The RBA held its cash rate steady at 3.85% at the August meeting on 11–12 August 2025, maintaining its stance after keeping rates unchanged in July. The decision was widely expected, reflecting confidence that inflation is settling sustainably within the target.

● Inflation continues to moderate, though headline outcomes for the September quarter are not yet available. Timely indicators suggest price pressures in housing-related services and insurance remain elevated, even as tradables inflation stays subdued.

● The RBA’s preferred measure, trimmed mean inflation, is estimated to track close to 2.8 — 2.9%, signaling continued progress toward the midpoint of the 2–3% target range. Headline CPI is likely near 2.3%, subject to volatility in energy and food prices.

● Global conditions remain a source of uncertainty. The market reaction to ongoing U.S.–EU trade frictions has tempered slightly, but volatility persists across equity and commodity markets. These developments continue to feed into Australia’s trade outlook and business sentiment.

● Domestic demand showed further signs of recovery. Household consumption strengthened modestly over the winter months, helped by improving real incomes and a stabilizing housing market. However, business investment intentions remain mixed, with service industries stronger than manufacturing and construction.

● Labour market conditions remain relatively tight, but indicators point to reduced momentum compared with the first half of 2025. Job vacancies have eased, and while employment growth continues, underutilization edged slightly higher for the first time this year.

● Wage growth has moderated further, consistent with easing labour demand, though unit labour costs remain above average due to weak productivity performance. The RBA continues to flag productivity as a medium-term risk to cost dynamics.

● Forward-looking indicators suggest consumption growth may be softer than previously assumed, with households cautious despite modest income gains. Elevated rents and high borrowing costs continue to weigh on discretionary spending.

● The Board reasserted the risk that household spending may underperform forecasts, potentially dampening business conditions and leading to weaker labour demand if confidence fails to strengthen.

● The overall stance of monetary policy remains mildly restrictive, consistent with inflation outcomes near target and ongoing progress toward balance in the economy. The Board judged it prudent to leave rates unchanged, while emphasizing that adjustments remain contingent on incoming data.

● The Reserve Bank reaffirmed its commitment to price stability and full employment, noting its readiness to adjust settings if conditions diverge materially from baseline projections..

● The next meeting is on 8 to 9 September 2025.

Next 24 Hours Bias

Weak BullishThe Kiwi Dollar (NZD)

The New Zealand Dollar has shown notable strength in early September 2025, driven primarily by Chinese economic improvements and broad US Dollar weakness ahead of expected Fed rate cuts. However, the currency’s medium-term outlook remains mixed, with the RBNZ’s dovish monetary policy stance and domestic economic headwinds likely to cap significant upside potential. The combination of external support from favorable global monetary conditions and internal challenges from a slowing economy suggests the NZD will likely remain range-bound with vulnerability to both domestic disappointments and shifts in global risk sentiment.Central Bank Notes:

● The Monetary Policy Committee (MPC) agreed to cut the Official Cash Rate (OCR) by 25 basis points to 3.00% on 20 August 2025, marking a three-year low and continuing the easing cycle after July’s pause. The vote was split 4-2, with two members advocating a 50-basis-point cut, highlighting diverging views within the Committee.

● Policymakers indicated that significant uncertainty and a stalling economic recovery prompted this move, leaving the door open for further rate cuts later in the year, with a possible trough around 2.5% by December.

● Annual consumer price index inflation rose to 2.7% in the June quarter and is expected to reach 3% for the September quarter—at the upper end of the MPC’s 1 to 3% target band—but medium-term expectations remain anchored near the 2% midpoint..

● Despite the near-term uptick, headline inflation is projected to return toward 2% by mid-2026, as tradables inflation pressures ease and significant spare capacity continues to dampen domestic price momentum.

● Domestic financial conditions are broadly aligning with MPC expectations, as lower wholesale rates have translated into reduced borrowing costs for households. However, declining consumption and investment demand, higher unemployment, and subdued wage growth reflect ongoing economic slack.

● GDP growth stalled in the second quarter of 2025, contrasting with earlier projections. High-frequency indicators point to continued weakness driven by rising prices for essentials, weakening household savings, and constrained business lending.

● The MPC cautioned that ongoing global tariff uncertainties and policy shifts, especially recent changes in US trade regulations, could amplify market volatility and present both upside and downside risks to New Zealand’s recovery.

● Subject to medium-term inflation pressures continuing to ease as projected, the MPC signaled scope for further OCR cuts, possibly down to 2.5% by year-end, consistent with the latest Monetary Policy Statement outlook.

● The next meeting is on 22 October 2025.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

The Japanese Yen is positioned for potential further strength, supported by persistent inflation above the BoJ’s target, improving economic fundamentals, and growing expectations for an October rate hike. While manufacturing faces headwinds from global trade tensions, the resolution of US-Japan trade negotiations and diversification strategies provide some stability. The divergence between expected BoJ tightening and Fed easing creates a favorable backdrop for yen appreciation, with key technical support holding around 146.50-147.00 levels.

Central Bank Notes:

● The Policy Board of the Bank of Japan decided on 31 July, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:

● The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.

● The BOJ will maintain its gradual reduction of monthly outright purchases of Japanese Government Bonds (JGBs). The scheduled amount of long-term government bond purchases will, in principle, continue to decrease by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, targeting a purchase level near ¥2 trillion in January to March 2027.

● Japan’s economy is experiencing a moderate recovery overall, though some sectors remain sluggish. Overseas economies are generally growing moderately, but recent trade policies in major economies have introduced pockets of weakness. Exports and industrial production in Japan are essentially flat, with any uptick largely driven by front-loaded demand ahead of U.S. tariff increases.

● On the price front, the year-on-year rate of change in consumer prices (excluding fresh food) remains in the mid-3% range. This reflects continued wage pass-through, previous import cost surges, and further increases in food prices, particularly rice. Expectations for future inflation have begun to rise moderately.

● The effects of the earlier import price and food cost increases are expected to fade during the outlook period. There may be a temporary stagnation in core inflation as overall growth momentum softens.

● Looking forward, the economy is likely to see a slower growth pace in the near term as overseas economies feel the pinch of ongoing global trade policies, putting downward pressure on Japanese corporate profits. Accommodative financial conditions are expected to buffer these headwinds somewhat. In the medium term, as global growth recovers, Japan’s growth rate is also expected to improve.

● With renewed economic expansion, intensifying labor shortages, and a steady rise in medium- to long-term expected inflation rates, core inflation is projected to gradually pick up. By the latter half of the BOJ’s projection period, inflation is forecast to move in line with the 2% price stability target.

● There are multiple risks to the outlook, with especially elevated uncertainty regarding the future path of global trade policies and overseas price trends. The BOJ will continue to closely monitor their impact on financial and foreign exchange markets, as well as on Japan’s economy and inflation.

● The next meeting is scheduled for 17 to 18 September 2025.

Next 24 Hours BiasMedium Bullish

Oil

Oil markets on Tuesday, September 2, 2025, are characterized by competing forces: geopolitical supply risks from intensified Ukraine-Russia conflict providing upward price support, while structural oversupply concerns and weakening demand growth create significant downward pressure. The upcoming OPEC+ meeting on September 7 will be critical in determining whether the group pauses its production restoration or continues with additional increases. With global inventory builds expected to accelerate in Q4 2025, oil prices face a challenging environment ahead, potentially testing the $50/bbl level by early 2026 unless geopolitical risks materially disrupt supply flows.

Next 24 Hours Bias

Medium Bearish