Fed Rate Cut Bets Pressure Dollar as Bitcoin Hits New Record

Economic

Summary:

The U.S. dollar slid to multi-week lows as markets priced in a September Fed rate cut, with political pressure from the Trump administration intensifying expectations for deeper monetary easing...

Market Overview

The U.S. dollar index slipped to 97.673, weighed down by dovish Federal Reserve signals and speculation over the scale of the September 17 rate cut, with traders assigning a near-100% probability to at least a quarter-point reduction and even factoring in a 7% chance of a 50-basis-point move. Weakening labor market indicators and the absence of significant inflationary impact from recent tariffs have strengthened the case for easing. Political pressure is also a factor, with Treasury Secretary Scott Bessent openly advocating for multiple cuts and President Trump continuing to criticise Fed Chair Jerome Powell for not acting sooner.

Against this backdrop, the dollar dropped 0.7% against the yen to 146.38, while the euro and sterling reached their highest levels since late July at $1.1712 and $1.3590, respectively. The Australian dollar also rallied to $0.65685 after stronger-than-expected labor market data reduced the likelihood of back-to-back rate cuts from the Reserve Bank of Australia.

Market Sentiment and Crypto Surge

Risk appetite improved as investors anticipated easier monetary conditions, with bitcoin rallying to $124,480.82 before settling around $123,538. The move was supported by increased corporate treasury purchases from firms such as MicroStrategy and Block Inc., and by regulatory changes under President Trump, including an executive order enabling crypto assets in 401(k) retirement plans. Technical traders are eyeing $125,000 as a breakout threshold that could open the path toward $150,000.

In FX, a decisive break of USD/JPY below 146 could signal further downside toward the 144.80 area, while EUR/USD appears supported above 1.17 with potential to retest 1.1750–1.18 if dollar weakness persists. In crypto, sustained closes above $125,000 in bitcoin may fuel momentum buying, with upside targets near $150,000, though overbought signals could trigger short-term volatility.

Source: Reuters

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Economic

Indonesia Emerges as Strategic Tariff Haven

The U.S. currently applies tariffs of over 30% on Chinese goods, compared to a lower 19% rate for Indonesian exports, making Indonesia an attractive alternative production hub. The tariff advantage is further amplified by Indonesia’s appeal as the region’s most populous economy, giving Chinese companies access not just to the U.S. market but to more than 270 million domestic consumers. As Gao Xiaoyu of PT Yard Zeal Indonesia noted, her industrial land consulting firm has been inundated with investor enquiries, with activity levels in industrial parks reaching record highs since the U.S.-Indonesia tariff deal was announced.

Chinese and Hong Kong investment into Indonesia rose 6.5% year-on-year to $8.2 billion in the first half of 2025, helping to lift overall FDI by 2.58% to 432.6 trillion rupiah ($26.56 billion). The Subang Smartpolitan industrial park in West Java, strategically located near the Patimban deep-sea port, has become a focal point for this shift, fielding an influx of Chinese interest across sectors from toys and textiles to electric vehicles. The surge in demand has pushed industrial property prices and warehouse rents up by 15%–25% year-on-year in Q1 2025, the steepest increase in two decades.

Profit Margins and Consumer Market Appeal

Chinese exporters are also lured by significantly higher profit margins in Indonesia. While margins in China can be as slim as 3%, Chinese businessman Zhang Chao reported that 20%–30% is achievable in Indonesia. This profitability is bolstered by Indonesia’s expanding consumer spending, which grew 4.97% in Q2 2025 and accounts for more than half of GDP. As Marco Foster of Dezan Shira & Associates highlighted, Indonesia’s appeal lies not only in supply chain diversification but in the sheer scale of its domestic market an advantage many regional competitors lack.

Despite its promise, Indonesia’s investment landscape is not without obstacles. Investors face bureaucratic red tape, regulatory complexities, infrastructure gaps, and an incomplete industrial supply chain compared to China’s integrated manufacturing ecosystem. Additionally, President Prabowo Subianto’s populist fiscal policies, including large-scale social programmes, have raised concerns over budget sustainability. Nevertheless, the recent stabilisation of the rupiah and continued government courting of Chinese capital suggest the current investment momentum will persist into the second half of 2025.

The rapid relocation of Chinese production capacity to Indonesia underscores a broader regional reconfiguration of manufacturing in response to geopolitical trade frictions. If Indonesia can address its infrastructure and regulatory bottlenecks, it is well-positioned to entrench itself as a long-term alternative to China in select manufacturing sectors, while simultaneously leveraging its domestic consumer market to support sustained growth. However, execution will be critical without improvements to industrial capacity and supply chain depth, some of this investment may remain opportunistic rather than permanent.

Source: Reuters

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Economic

Commodity

Geopolitical Tensions Inject Risk Premium

After Wednesday’s sharp sell-off, Brent crude rose 0.43% to $65.91 a barrel and West Texas Intermediate climbed 0.37% to $62.89 in early Asian trading. The rebound was driven largely by geopolitical risk ahead of Friday’s meeting in Alaska between U.S. President Donald Trump and Russian President Vladimir Putin. Trump’s warning of “severe consequences” if no progress is made toward peace in Ukraine underscored the possibility of sanctions targeting Russian oil exports. With Russia still a critical supplier to global markets, any disruption in flows could tighten supply, prompting traders to price in additional risk premiums. Rystad Energy noted that the uncertainty surrounding the talks leaves scope for “unexpected surprises” in how Russian output and export channels evolve.

Beyond geopolitics, crude prices also found support from growing certainty that the U.S. Federal Reserve will cut interest rates in September. The CME FedWatch tool now assigns a 99.9% probability of at least a quarter-point reduction, with some policymakers such as Treasury Secretary Scott Bessent indicating that a more aggressive 50-basis-point cut is possible given recent soft employment data. Lower borrowing costs tend to stimulate economic activity, which can bolster oil demand. At the same time, the U.S. dollar has weakened to multi-week lows against the euro and sterling as rate cut bets intensify, making crude purchases cheaper for holders of other currencies and reinforcing demand-side support.

Bearish Fundamentals Limit the Rally

Despite these supportive factors, oil’s upside was capped by fresh evidence of oversupply. The U.S. Energy Information Administration reported an unexpected inventory build of 3 million barrels for the week ended August 8, defying consensus forecasts for a draw of 275,000 barrels. This signals that U.S. production remains resilient despite macroeconomic uncertainty. Meanwhile, the International Energy Agency’s updated forecast projects global oil supply in 2025 and 2026 will expand more rapidly than anticipated, fueled by increased OPEC+ output and accelerating production from non-OPEC sources. These developments raise the risk of a looser market in the medium term, potentially limiting sustained price gains.

The current market dynamic reflects a delicate balance: short-term geopolitical risks and monetary policy shifts are providing near-term lift to prices, but persistent concerns about oversupply and a sluggish demand recovery continue to temper bullish momentum. Traders are closely monitoring both the outcome of the Trump-Putin summit and the Federal Reserve’s policy stance, as these factors could determine whether crude stabilizes above current levels or retests recent lows. The broader narrative suggests that while risk premiums can trigger temporary rallies, the durability of oil’s recovery will depend on whether geopolitical events translate into actual supply disruptions against a backdrop of still-robust global production growth.

Source: Reuters

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Commodity

Market Recovery from Multi-Year Slump

Lithium prices, which had been in a prolonged downtrend due to slower-than-expected electric vehicle (EV) sales, have rebounded sharply in recent weeks. Hard rock spodumene prices have climbed from four-year lows near $610 per tonne in mid-June to around $880 per tonne. Although this is far below the 2022 peak above $6,000, it marks a significant turnaround for Australian producers, many of whom had been burning cash, mothballing plants, and considering asset sales to restore balance sheets.

The rebound has been strong enough to influence corporate strategy. Mineral Resources (MinRes) and Chile’s SQM, both previously exploring asset sales, are reportedly reconsidering divestment plans. IGO is also reviewing its loss-making lithium refinery joint venture with Tianqi Lithium, with market expectations of a potential sale now less certain. Analysts note that the rally likely fuelled in part by short-covering has relieved immediate financial pressure, allowing some producers to shelve “non-palatable” strategic options that had been considered during the downturn.

Drivers Behind the Rally

The catalyst for the price surge was supply disruption in China, particularly the suspension of mining by battery giant CATL in Yichun after a mining licence expired on August 9. These cuts have raised questions over whether the supply reduction is temporary or structural, with E&P Financial cautioning that the market remains difficult to call. Australia, the world’s largest lithium producer, has borne the brunt of recent global production cuts, but output could return quickly if prices continue to rise. Pilbara Minerals, for example, has indicated its Ngungaju plant could restart within four months if conditions improve.

Despite the short-term boost, lithium miners face ongoing uncertainty. The rally’s speculative nature and the potential for rapid supply reactivation mean prices could face renewed downward pressure. With Australian lithium stocks among the most heavily shorted on the ASX, market sentiment remains volatile. Furthermore, global EV demand growth must accelerate meaningfully to sustain a longer-term price recovery and justify restarting idled capacity.

Source: Reuters

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Daily News

[Quick Facts]

1. U.S. interest rate swaps show traders price in 100% probability of Fed rate cut in September.

2. Trump: Trilateral U.S.-Russia-Ukraine Meeting to be held if Trump-Putin Talks go smoothly.

3. Sources: Trump-Putin Meeting to focus on ceasefire, not territorial division.

4. Bessent: High probability of Fed rate cuts by 50 bps.

5. Russia to phase in production cuts before 2025 to compensate OPEC+.

6. Bostic: One rate cut in 2025.

7. Goolsbee: Meetings this fall will be 'Live'.

[News Details]

U.S. interest rate swaps show traders price in 100% probability of Fed rate cut in September

Overnight indexed swap (OIS) contracts tied to Federal Reserve meeting dates are fully priced in expectations of a 25-basis-point cut at the Federal Open Market Committee (FOMC) meeting in September by late Wednesday, with active trading in federal funds rate futures contracts. Before 3 p.m. New York time, federal funds rate futures for August and October were actively traded, while Secured Overnight Financing Rate (SOFR) futures for September 2025 saw heavy volume. OIS rates tied to the Fed's September policy meeting thus fell to an intraday low near 4.08%, indicating a 100% probability of a 25-basis-point reduction. Looking further out along the swap curve, markets now expect a total of 62 basis points of cuts across the remaining three FOMC meetings this year, up from 59 basis points at Tuesday's close.

Trump: Trilateral U.S.-Russia-Ukraine Meeting to be held if Trump-Putin Talks go smoothly

On August 13th, U.S. President Donald Trump stated that if his meeting with Russian President Vladimir Putin on the 15th proceeds smoothly, a second meeting would be held soon. Trump said the second meeting would include Ukrainian President Volodymyr Zelenskyy. He also noted that Russia would face 'severe consequences' if the conflict did not stop. On the same day, Trump held a video conference with European leaders and Zelenskyy. Informed sources said Trump discussed potential locations for future meetings with Zelenskyy and Putin following the Trump-Putin summit.

Sources: Trump-Putin Meeting to focus on ceasefire, not territorial division

On August 13th, two European officials and sources revealed that during a video call with European leaders, the EU, NATO, and Ukrainian President Zelenskyy, U.S. President Trump indicated that no discussions on possible territorial divisions would take place at his meeting with Russian President Putin on the 15th. The goal was to secure a ceasefire. Sources said Trump and the leaders agreed that a ceasefire should precede peace talks, with Ukraine needing to participate in negotiations and decide its own potential territorial concessions. If Putin rejects a ceasefire, Trump may impose new sanctions on Russia. Trump stated there was a 'high likelihood' of immediately scheduling a second round of talks with Putin and Zelenskyy after the summit, warning Russia would face 'severe consequences' if the conflict does not end. Sources added that after the video call, some European leaders expressed optimism about Trump's plans, believing his primary goal would be to achieve a ceasefire and trusting that territorial issues would not be discussed without Ukraine's participation.

Bessent: High probability of Fed rate cuts by 50 bps

U.S. Treasury Secretary Bessent stated in an interview that the Fed's interest rates should be 150-175 basis points lower than current levels, and if data support it, the Fed could have cut rates earlier. Bessent believes there is a possibility of a 50-bps rate cut, with a series of reductions potentially starting with a 50-bps cut in September. When discussing the Fed chair nomination, he mentioned that they would consider encompassing 10-11 candidates. He also noted that he had proposed establishing a "shadow Fed chair" but now deems it unnecessary. Additionally, Bessent believes the Fed does not need to reinstate large-scale asset purchases (QE). Regarding the jobs report, he said he does not support halting its release but emphasized the need for reliable data. Some analysts noted that the probability of a 50-basis-point rate cut by the Fed in September is currently nearly zero, adding that achieving this would likely require another weak nonfarm payrolls report in September.

Russia to phase in production cuts before 2025 to compensate OPEC+

Russia plans to extend its remaining production cuts, as it intends to compensate for overproduction above OPEC+ targets by an additional three months. According to the latest compensation schedule, Moscow now intends to cut production by 85,000 barrels per month from July to November, and by 9,000 barrels in December. The previous plan had only been set to run through September.

Bostic: One rate cut in 2025

Atlanta Fed President Raphael Bostic stated in remarks on Wednesday that his outlook for the remainder of this year still includes one rate cut. This projection assumes the labor market remains stable. If employment deteriorates significantly, the balance of risks will shift, and the policy path will need to adjust accordingly.

"I feel we have the luxury to do that because the labor market is pretty much at full employment." He added that the maximum employment goal is not under threat like the inflation target. The Fed should avoid policy volatility that could confuse the public and wait for things to become clear.

Goolsbee: Meetings this fall will be 'Live'

On Wednesday, Federal Reserve Bank of Chicago President Austan Goolsbee said the central bank's meetings this fall will be “live” as he and his colleagues try to interpret mixed economic data and how best to adjust interest rates in response.

"I think the state of the labor market is pretty strong, pretty solid," despite recent data showing a sharp reduction in hiring over the last three months, which is a decrease in immigrants.

The latest jobs report is just one month in a noisy sequence of data. However, rising service inflation, highlighted in the report, is the most concerning part of the inflation data. If sustained, it will be difficult to return to the 2% target. Goolsbee needs more certainty to rule out the possibility of this being a persistent inflation shock.

[Today's Focus]

UTC+8 14:00 UK Q2 GDP

UTC+8 20:30 U.S. July PPI Annual Rate

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Samantha Luan

Economic

Political

Forex

U.S. President Donald Trump has selected 11 Fed Chair candidates to replace Jerome Powell.Trump and his administration urged Powell to cut interest rates, resuming with a larger rate cut of at least 50 bps in September. In fact, Truflation data points to inflation at 1.83%, below the Federal Reserve’s 2% target.

Donald Trump Selects 11 Fed Chair Candidates

Trump threatened Fed Chair Powell with announcing 11 candidates and a lawsuit if he continues to defy interest rate cut calls.The candidates include Jefferies chief market strategist David Zervos, BlackRock CIO Rick Rieder, and former NEC director Kevin Hassett, along with several former and current Fed officials.

Kevin Warsh, Larry Lindsey, Michelle Bowman, Chris Waller, Philip Jefferson, Marc Summerlin, Lorie Logan, and James Bullard are among the other 11 candidates.

The Trump Administration believes Powell’s hawkish stance on rate cuts is impacting the economy. Treasury Secretary Scott Bessent said the cooling labor market and inflation hints at a 50 bps rate cut in September.As The Coin Republic reported, US CPI inflation data for July was lower than expected. Bessent claimed the Fed could have lowered rates at its last two meetings after downward revisions to nonfarm payrolls data.At the time of writing, the CME FedWatch tool showed a 99% probability of a 25 bps Fed rate cut in September. Moreover, the data points to three rate cuts for a total of 75 bps by the Federal Reserve this year.

Source: CryptoSlate

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Economic

Labour Market Recovery Signals Resilience

July’s employment data delivered a positive surprise for the Australian economy, with net employment rising by 24,500 jobs precisely in line with forecasts after a soft June gain of only 1,000 jobs. Full-time employment surged by 60,500, reversing the previous month’s decline, while part-time roles fell. The unemployment rate slipped from a 3½-year high of 4.3% to 4.2%, accompanied by a modest 0.3% increase in hours worked. This improvement came despite a slight fall in the participation rate to 67.0%, with a notable rise in female participation to a record 63.5%.

The data offers the RBA breathing space after its recent rate cut, easing pressure for an immediate follow-up move in September. The Australian dollar responded with a 0.3% rise to a two-week high at US$0.6566. While markets still price in another 25 bps cut to 3.35% in November, the RBA’s next moves will hinge on inflation’s path, particularly whether core inflation currently at 2.7% edges towards the 2–3% target midpoint. Governor Michele Bullock has signalled that up to 50 bps of further easing remains likely if disinflation continues.

Underlying Strengths and Headwinds

Leading indicators remain favourable, with job vacancies still almost 50% above pre-pandemic levels and the ratio of unemployed persons per vacancy at 1.8, far lower than the 3.1 recorded in early 2020. Business sentiment and consumer spending have also strengthened in recent months, buoyed by lower borrowing costs and past tax cuts. However, Oxford Economics warns that global uncertainty and weak domestic momentum will challenge the labour market in the months ahead.

Annual wage growth remained steady at 3.4% in Q2, well below its 2023 peak of 4.2%, indicating little risk of wage-driven inflation. This wage moderation, combined with resilient hiring, supports the RBA’s gradual easing stance rather than an aggressive rate-cut cycle.