Powell's Dovish Tone Boosts Rate Cut Expectations; BoJ and BoE Focus on Labor Tightness

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Summary:

ECB's Lagarde: Foreign workers drive Eurozone economic growth; Powell turns Dovish: Employment market risks become key trigger for rate cuts ......

[Quick Facts]

1. U.S. Vice President: New sanctions on Russia not off the table.

2. ECB's Lagarde: Foreign workers drive Eurozone economic growth.

3. Kazuo Ueda: Tight labor market expected to continue putting upward pressure on wages.

4. Ukraine: Zelenskyy will only discuss territorial issues with Putin.

5. Powell turns Dovish: Employment market risks become key trigger for rate cuts.

6. Bailey: Britain faces an "acute challenge" over its weak underlying economic growth and reduced labour force participation.

7. Kazaks: ECB in a 'Good Place' to observe the economy.

[News Details]

U.S. Vice President: New sanctions on Russia not off the table

On August 24th local time, U.S. Vice President J.D. Vance stated that imposing new sanctions on Russia to pressure it into ending the Russia-Ukraine conflict is off the table, as the United States has multiple options to exert pressure on Russia. Vance said that while the Trump administration is pushing to end the Russia-Ukraine conflict, security guarantees for Ukraine do not include the deployment of U.S. ground troops. He emphasized that the U.S. will not send ground forces to Ukraine. "But we are going to continue to play an active role in trying to ensure that the Ukrainians have the security guarantees and the confidence they need to stop the war on their end." He added.

ECB's Lagarde: Foreign workers drive Eurozone economic growth

European Central Bank President Christine Lagarde said on Saturday in Jackson Hole that the influx of foreign workers in recent years has injected momentum into the eurozone economy, helping to offset the impact of reduced working hours and declining real wages. Despite declining birth rates, immigration into the EU last year pushed its population to a historic high. However, due to domestic public dissatisfaction, governments are restricting the entry of new immigrants.

Lagarde pointed out that the increasing number of workers from outside the eurozone is a key factor supporting the region's economy, even as some sectors show a growing preference for shorter working hours. In her speech, she noted that although they represented only around 9% of the total labour force in 2022, foreign workers have accounted for half of its growth over the past three years. Without this contribution, labour market conditions could be tighter and output lower.

In Germany, for example, GDP would be around 6% lower than in 2019 without the contribution of foreign workers (assuming no behavioural changes among domestic workers). Spain's strong post-pandemic GDP performance – which has helped support the euro area aggregate – also owes much to the contribution of foreign labour. Last year, the EU population reached a record high of 450.4 million, with net migration offsetting natural population decline for the fourth consecutive year. However, this has also triggered political backlash among local voters, with growing support for far-right parties. For example, the new German government has suspended family reunification and resettlement programs in an attempt to win back voters attracted by the Alternative for Germany (AfD) party.

Kazuo Ueda: Tight labor market expected to continue putting upward pressure on wages

Kazuo Ueda, Bank of Japan Governor, stated that he expects the tight labor market to continue putting upward pressure on wages, reflecting his view that stable inflation is nearing establishment. Speaking at the Federal Reserve's annual Jackson Hole symposium in Wyoming on Saturday, Ueda said wage growth is spreading from large companies to small and medium-sized enterprises. Unless there is a significant negative demand shock, the labor market is expected to remain tight and continue exerting upward pressure on wages. Ueda's remarks may fuel market speculation about another interest rate hike this year, although he did not directly address monetary policy in his speech. The Bank of Japan has identified the country's labor shortage as a key factor in driving inflation through wage growth.

Ukraine: Zelenskyy will only discuss territorial issues with Putin

According to a report by the Russian satellite news agency on August 23rd, Ukrainian Deputy Foreign Minister Sergiy Kyslytsya said in an interview with NBC News that Ukrainian President Volodymyr Zelenskyy is prepared to discuss territorial issues only in a meeting with Russian President Vladimir Putin. "He (Zelensky — ed.) is ready to sit down with President Putin and discuss them, and the beginning of the talks on the territorial issue is the line of contact that is currently running there," he said.

The report noted that on August 18th, U.S. President Donald Trump hosted Zelenskyy and leaders from several European countries at the White House. After the talks, Zelenskyy stated that Russia and Ukraine would decide territorial issues, but no specific date for a bilateral meeting has been set. On August 22nd, Russian Foreign Minister Sergei Lavrov said there are currently no plans for a meeting between Putin and Zelenskyy, but the Russian president is willing to meet once the meeting agenda is prepared.

Powell turns Dovish: Employment market risks become key trigger for rate cuts

Federal Reserve Chair Jerome Powell made a speech at the annual economic symposium in Jackson Hole, Wyoming, on August 22nd. He stated that while inflation risks in the U.S. remain tilted to the upside in the near term, downside risks to the labor market are rising. Based on changes in the economic outlook and the balance of risks, the Fed may need to adjust its monetary policy stance. This signals that, despite current upside risks to inflation, the Fed could still cut interest rates in the coming months.

Powell's speech focused on employment market risks and adjustments to the policy framework, delivering a clear dovish signal and opening the door for a potential rate cut by the Fed in September.

"Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising." He pointed out that nonfarm payrolls (new jobs added in non-agricultural sectors) in July were just 73,000, far below the expected 115,000, and the previous month’s figure was revised downward by a substantial 258,000. Such anomalies could quickly evolve into widespread layoffs and a sharp rise in the unemployment rate. This emphasis on the insidious, the "boiling frog"-style risk in the labor market marks a stark contrast to Powell's tone at the 2024 Jackson Hole meeting, when he was more concerned about inflation persistence. Therefore, the sudden increase in downside risks to the labor market has led to what Powell described as "the balance of risks appears to be shifting," meaning the Fed will now pay closer attention to labor market risks and is prepared to implement rate cuts in response.

Powell's remarks suggest that the recent unexpected cooling in employment data has accelerated consensus within the Fed on the need for policy adjustment, making a September rate cut almost a certainty. Regarding the magnitude of the cut, a 25-basis-point reduction appears to be the only viable option, one that signals easing without stoking fears of policy disorder.

Bailey: Britain faces an "acute challenge" over its weak underlying economic growth and reduced labour force participation

Bank of England Governor Andrew Bailey stated at the Jackson Hole meeting that the issue in the UK labor market is no longer unemployment, but participation. "Going back to this question about potential growth rates, that puts even more emphasis on raising productivity growth," he mentioned. Low productivity and weak labor force participation pose "acute challenges" to raising the UK's potential growth rate. This contributes to the ongoing risk of persistent inflation, which must be addressed, and is one of the key reasons why restrictive policy must be maintained. Bailey warned that the labour demand is declining currently.

The Bank of England has revised its forecast for potential GDP growth (the pre-inflation "speed limit" of economic activity) down to just over 1%. Low potential output makes a country more susceptible to inflation. Alongside its decision this month to cut interest rates to 4%, the Bank of England also warned that price growth remains a threat.

Kazaks: ECB in a 'Good Place' to observe the economy

Governing Council member Martins Kazaks said that the ECB has entered a new monetary-policy phase where officials can focus on monitoring the economy rather than actively intervening to change its course. Inflation is at 2%, and Kazaks sees no need for more rate cuts as recent data shows no significant change in the outlook since the June quarterly projections. "We've seen good news, we've seen bad news, but not sufficiently big news to lead to a rethink of what we would need to do," he said, "I think we are still in a good place."

[Today's Focus]

UTC+8 22:00 U.S. July New Home Sales Annualized Total (Seasonally Adjusted)

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Economic

Stocks

Wall Street Optimism Propels Asian Equities Upward

Asian stock markets opened the week on a strong note, following a rally on Wall Street that was sparked by U.S. Federal Reserve Chair Jerome Powell’s dovish comments at the Jackson Hole Symposium. Powell acknowledged emerging risks in the U.S. labor market, fueling speculation that the Fed may begin cutting interest rates as early as September.

His comments came after a weaker-than-expected U.S. job report, adding weight to expectations that the central bank could ease monetary conditions to support the labor market and sustain growth. This shift toward a more accommodative policy stance provided a strong tailwind for Asian equities.

Broad-Based Gains Across the Region

Hong Kong’s Hang Seng Index jumped 2.1% to 25,866.49, with investor sentiment improving despite ongoing concerns about tariffs on exports to the U.S. The Shanghai Composite climbed 0.9% to 3,858.59, reaching its highest point in a decade, bolstered by positive sentiment around potential global liquidity easing.

Taiwan’s Taiex outperformed with a 2.5% rise, driven by a 3.1% gain in TSMC shares. The company continues to be a market darling due to its central role in global semiconductor supply chains and artificial intelligence.

Japan’s Nikkei 225 added 0.3% to 42,767.41, led by gains in chip-related sectors. Meanwhile, South Korea’s Kospi rose 1.1% to 3,204.48, supported by optimism in tech and export-linked industries. Australia’s ASX 200 edged 0.2% higher, while Thailand’s SET Index increased by 1%.

Lower Rates, AI Optimism, and U.S. Momentum

The risk rally has been fueled in part by Powell’s statement that the labor market is in a "curious kind of balance" fewer workers are chasing fewer jobs. Although he stopped short of explicitly promising rate cuts, the tone has been enough to shift market sentiment decisively.

In the U.S., the S&P 500 surged 1.5% to 6,466.91, the Dow Jones gained 846 points to reach a record 45,631.74, and the Nasdaq climbed 1.9% to 21,496.53. Smaller-cap stocks rallied even harder, with the Russell 2000 jumping 3.9% its best day since April as these companies are typically more sensitive to changes in interest rates.

Investor optimism is also building ahead of Nvidia’s earnings release later this week. As a bellwether for the AI sector, its performance could either reinforce or temper the current rally.

Bond Market Reacts: Yields Fall Sharply

The yield on the 10-year U.S. Treasury dropped to 4.25% from 4.33%, while the two-year yield, more closely tied to Fed policy expectations, fell notably to 3.69% from 3.79%. These declines reflect growing confidence that rate cuts are on the horizon, further supporting equity valuations.

In currency markets, the dollar strengthened slightly to 147.22 yen, while the euro eased to $1.1707. Oil prices were relatively steady, with U.S. crude up $0.08 to $63.74 and Brent crude gaining $0.04 to $67.26 per barrel.

The global markets appear to be shifting into a new phase where fears of inflation are being replaced by concerns about growth and employment. The Fed’s pivot or even the suggestion of one has lit a fire under equities, especially in Asia, where exporters and tech companies stand to benefit the most from improved liquidity conditions and renewed global demand. While uncertainties remain, the path to lower rates is now being priced in aggressively, and Asian investors are responding accordingly.

Source: AP

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Singapore's Cooling Inflation Signals Global and Domestic Headwinds

Singapore’s consumer price index rose just 0.6% in July 2025, falling below economists’ expectations of 0.7% and marking the slowest increase in over four years. This continued deceleration highlights a broader narrative: inflation in the city-state is being tamed not only by lower imported energy costs but also by domestic economic softness.

The sharpest drag on overall inflation came from energy prices. Electricity and gas prices plunged 5.6% year-on-year, the largest decline in the consumer price index basket. Simultaneously, prices for retail and other discretionary goods dropped, reflecting subdued consumer spending. Core inflation which excludes private transport and accommodation also softened to 0.5%, below the 0.6% Reuters consensus.

Although private transport prices rose 2.1%, driven by rising car costs, this uptick was insufficient to offset broader disinflationary forces.

Monetary Authority of Singapore (MAS): Dovish Tone Continues

The MAS continues to signal that inflationary pressures will remain mild. In its latest statement, the central bank attributed the disinflation to easing global crude oil prices and subdued food commodity price growth. Domestically, MAS noted slower nominal wage increases and soft productivity gains factors that are keeping unit labor costs in check.

The central bank, which has already eased monetary policy twice this year (in January and April), is leaning further toward accommodative stances. With global trade softening and external demand cooling, policymakers have acknowledged that Singapore’s economy will likely expand at a slower pace in the second half of 2025.

Inflation in 2025 to Average Well Below 2024 Levels

According to MAS projections, core inflation will average between 0.5% and 1.5% in 2025, significantly down from 2.8% in 2024. This marks a critical shift from the post-pandemic price surges seen globally.

Several factors underpin this outlook: weakening global trade (partly due to rising protectionism), moderate wage growth, and the absence of major supply shocks. Additionally, slower consumption, alongside falling imported inflation, especially from major trade partners like China, is reinforcing this cooling trend.

Tariffs and Trade Frictions Add to Growth Risk

Singapore’s challenges are not just monetary. The economy is increasingly exposed to geopolitical friction. In July, it was confirmed that Singapore continues to face a baseline 10% “reciprocal” tariff on exports to the U.S., introduced by the Trump administration. Despite its long-standing Free Trade Agreement with the U.S. since 2004 and its trade deficit with America, Singapore has yet to receive a formal exemption or renegotiation deal.

This tariff complication, layered atop a sluggish global trade backdrop, threatens to further suppress Singapore’s export-driven growth model. The MAS has already warned that these external challenges are contributing to both weaker economic momentum and limited inflationary risk.

With price pressures subsiding and economic momentum losing steam, Singapore faces a new policy dilemma. While inflation is under control, the causes slowing growth, weak demand, and external shocks are far from benign. Policymakers may need to consider additional targeted support measures if growth deteriorates further. For now, the disinflation trend provides temporary relief for households but signals caution for investors, exporters, and employers navigating a fragile recovery.

Source: CNBC

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IC Markets

Commodity

Forex

Economic

What happened in the Asia session?

Asian equities, especially technology shares, were most impacted by Powell’s dovish surprise, followed by moves in currencies (USD, JPY), US Treasury yields, and commodities like gold. The positive sentiment hinges on anticipated US monetary easing, but markets remain vigilant for macro data releases and US earnings as the week progresses. The dollar index is slightly up after several weeks of losses, and two-year Treasury yields are up 1bp to 3.71%

What does it mean for the Europe & US sessions?

Markets are set to open with a cautiously risk-on tone as Asian equities firmed overnight on growing expectations of imminent Fed rate cuts, while European futures are mixed ahead of Germany’s key ifo survey; in the U.S., focus will be on housing and regional activity data later today and durable goods, GDP, and PCE this week. Traders should watch European sentiment prints (Germany ifo) and U.S. housing/PMI proxies today, and remain positioned for a week culminating in U.S. GDP (2nd estimate) and July Core PCE on Friday.

The Dollar Index (DXY)

The U.S. dollar is struggling to recover from its lowest level in four weeks versus the euro, following a sharp selloff triggered last Friday by Fed Chair Powell’s dovish comments at Jackson Hole, which raised expectations for imminent interest rate cuts. Into Monday’s European session, the dollar edged up very slightly but remains well below key levels against major peers, with traders now pricing an 80% probability of a quarter-point rate cut at the September 17 FOMC meeting and a total of nearly 50 basis points by year-end.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 BiasMedium Bullish

Gold (XAU)

Gold is trading lower today amid a rebound in the dollar, but sustained expectations of US rate cuts and geopolitical uncertainty continue to underpin the precious metal’s strong performance for 2025. Gold prices on Monday, August 25, 2025, have slipped slightly from recent highs due to a modest strengthening of the US dollar. However, ongoing expectations of US interest rate cuts following Federal Reserve Chair Jerome Powell’s dovish remarks have provided support for the metal. Gold dipped to $3,366.10 USD/t.oz, down 0.21% from the previous day, but remains up 1.55% for the month and 33.82% year-on-year, having hit historic highs above $3,500 earlier in 2025.Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

The Euro is holding much of its 2025 rally despite a recent dip, supported by internal economic strength, while US dollar weakness is boosting short-term sentiment. Watch for further volatility due to ECB policy, US political developments, and ongoing trade disputes. The EUR/USD exchange rate fell to 1.1704, a drop of 0.09% from the previous session.Central Bank Notes:

● The Governing Council kept the three key ECB interest rates unchanged at its July 24 meeting, maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.40%, and the deposit facility at 2.00%, following eight consecutive cuts preceding this decision.

● The decision to hold rates steady was driven by evidence that inflation is stabilizing near the Governing Council’s medium-term target of 2%. Policymakers communicated that further rate moves would be data-dependent, explicitly refraining from pre-committing to any future path amid persistent global and domestic uncertainties.

● According to the latest Eurosystem staff projections, headline inflation is expected to remain around 2.0% for 2025, with projections indicating 1.6% for 2026 and a rebound to 2.0% in 2027. Downward revisions from previous forecasts primarily reflect lower energy price assumptions and a stronger euro. Inflation excluding energy and food is seen averaging 2.4% in 2025 and 1.9% in 2026–2027, little changed from prior projections.

● Real GDP growth for the Eurozone is forecast at 0.9% in 2025, 1.1% in 2026, and 1.3% in 2027. The projections note that a strong first quarter offsets a weaker outlook for the rest of 2025. While business investment and exports are dampened by ongoing trade policy uncertainties—including recent U.S. tariff measures—rising government investment, particularly in defense and infrastructure, is expected to progressively underpin growth.

● Household spending should be supported by firm real income gains and a still-solid labour market. More favorable financing conditions are expected to help strengthen the economy’s resilience to further global shocks. Wage growth, although still elevated, continues to moderate, with profit margins partially absorbing cost pressures.

● Amid significant geopolitical and economic uncertainty, the Governing Council underscored its commitment to ensuring inflation stabilises sustainably at the 2% target. The ECB reiterated it would pursue a meeting-by-meeting, data-dependent approach to its monetary policy stance.

● Future rate decisions will be guided by the assessment of incoming economic and financial data, the outlook for inflation and underlying inflation dynamics, and the effectiveness of monetary policy transmission. The Council continues to stress that it is not pre-committed to any specific rate trajectory.

● The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are continuing to decline in an orderly and predictable way, as the Eurosystem has ceased reinvesting principal payments from maturing securities.

● The next meeting is on 11 September 2025

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

The Swiss Franc is stable to slightly stronger today, underpinned by falling domestic inflation and continued appeal for defensive FX exposure among investors. Exchange rates, policy commentary, and technical markers are generally positive, but caution remains regarding export competitiveness and longer-term monetary decisions. The Swiss Franc is up 0.04% over the past month and 5.22% over the past year versus the US Dollar, demonstrating modest appreciation over the ongoing 12-month period. The CHF/USD rate for the day has fluctuated in the range of 1.23396 to 1.2493 during the past week, suggesting sustained stability with minor volatility.Central Bank Notes:

● The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.25% to 0% on 19 June 2025, marking the sixth consecutive reduction.

● Inflationary pressure has decreased further as compared to the previous quarter, decreasing from 0.3% in February to -0.1% in May, mainly attributable to lower prices in tourism and oil products.

● Compared to March, the new conditional inflation forecast is lower in the short term. In the medium term, there is hardly any change from March, putting the average annual inflation at 0.2% for 2025, 0.5% for 2026, and 0.7% for 2027.

● The global economy continued to grow at a moderate pace in the first quarter of 2025, but the global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions.

● Swiss GDP growth was strong in the first quarter of 2025, but this development was largely because, as in other countries, exports to the U.S. were brought forward.

● Following the strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year; the SNB expects GDP growth of 1% to 1.5% for 2025 as a whole, while also anticipating GDP growth of 1% to 1.5% for 2026.

● The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.

● The next meeting is on 25 September 2025.

Next 24 Hours Bias

Medium Bearish

The Pound (GBP)

The Pound remains robust on August 25, 2025, supported by improved domestic growth and business confidence, but faces inflation and policy headwinds. The broader forecast points to mild volatility but relative resilience versus major peers. The pound’s performance was recently boosted by positive UK GDP numbers and business confidence, but tempered by higher inflation, especially airfares and food prices, with inflation running above expectations. The GBP/USD rate fell by 0.08% from the previous session, now at 1.3510.Central Bank Notes:

● The Bank of England’s Monetary Policy Committee (MPC) voted on 7 August 2025 by a majority (exact split likely 5–3–1 or similar, based on expectations) to cut the Bank Rate by 25 basis points to 4.00%. Multiple members supported the move, citing fragile economic growth and signs of disinflation, while others preferred a larger reduction, and at least one member voted to hold the rate steady due to concerns about persistent inflation.

● The Committee unanimously decided to continue reducing the stock of UK government bond purchases held for monetary policy purposes by £100 billion over the next 12 months, targeting a balance of £558 billion by October 2025. As of 7 August, the gilt stock stands at £590 billion.

● Disinflation has been substantial since 2023 owing to policy tightening and the fading of external shocks. However, an unexpected uptick in headline CPI inflation—to 3.6% in June—reflects pass-through from regulated prices and earlier energy price rises, as well as signs of sticky core inflation.

● Headline CPI inflation is now 3.6%, above the Bank’s 2% target, reflecting regulated and energy price effects. The Committee expects inflation to remain around this level through Q3 before resuming its downward trend into 2026.

● UK GDP growth remains weak. Business and consumer surveys point to lacklustre activity, and the labour market continues to loosen, with increasing evidence of slack. Wage growth has softened but remains above pre-pandemic norms.

● Pay growth and employment indicators have moderated further, and the Committee expects a significant slowing in pay settlements over the rest of 2025.

● Global uncertainty remains elevated, especially with rising energy prices and supply disruptions linked to conflict in the Middle East and renewed trade tensions. These factors prompt the MPC to remain vigilant in monitoring cost and wage shocks.

● The risks to inflation are considered two-sided. With the outlook for growth subdued and inflation persistence less clear, the Committee argues that a gradual and careful approach to further easing is warranted, with future policy decisions highly data-dependent.

● The Committee’s bias is still towards maintaining monetary policy at a restrictive stance until there is firmer evidence that inflation will return sustainably to the 2% target over the medium term. Further adjustments to policy will be decided on a meeting-by-meeting basis, with scrutiny of developments in demand, costs, and inflation expectations.

● The next meeting is on 18 September 2025.

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

The Canadian Dollar is trading with a mild bearish bias today, responding to shifting central bank signals and slow domestic economic recovery, while the market awaits concrete monetary easing and trade outcomes.US dollar weakness following Powell’s dovish pivot at Jackson Hole provides tailwinds for the CAD, but domestic Canadian data remains lackluster, especially with retail sales projected to have fallen by 0.8% in July and a surprise July job loss. Core inflation (Trimmed-Mean) remains elevated at 3.0%, keeping central bank policy in focus as both the Bank of Canada and the Fed are expected to lean dovish for the remainder of the year.Central Bank Notes:

● The Bank of Canada maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% as of July 30, marking the third consecutive meeting with rates on hold.

● The Council cited ongoing U.S. tariff adjustments and unresolved trade negotiations as driving factors for elevated economic uncertainty. The persistence of tariffs well above early-2025 levels continues to present downside risks for growth and keeps inflation expectations elevated, supporting a cautious approach to monetary easing.

● The lack of a clear U.S. policy path, plus frequent threats of additional tariffs, led the Bank to highlight risks to Canadian exports and broader demand, amplifying uncertainty about future growth.

● Canada’s economic growth in the first quarter came in at 2.2%, slightly stronger than the original forecast, while the composition of GDP growth was largely as expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence.

● Canadian GDP growth is expected to be near 0% in Q2 2025, closely aligned with the more optimistic scenario outlined earlier in the year. Weakness in manufacturing activity—driven by both U.S. trade disruptions and sector-specific challenges like wildfires—contributed to softer output. A partial recovery is anticipated in Q3 due to rebuilding efforts and stronger retail sales in June.

● Consumer spending slowed, especially as households front-loaded durable goods purchases ahead of tariffs. Housing activity remains subdued, with resales and construction still soft despite some government tax relief measures.

● Headline CPI inflation continued to ease, holding close to 1.7% in June, aided by declines in energy prices following the removal of the fuel charge. However, the Bank’s measures of core inflation and underlying price pressures moved up further due to higher import costs from tariffs and lingering supply disruptions.

● The Governing Council reiterated that it will carefully weigh ongoing upward inflation pressure from tariffs and cost shocks against the gradual downward pull from economic weakness. While additional rate cuts remain possible, timing and scale will depend on trade policy developments and inflation’s path.

● The next meeting is on 17 September 2025.

Next 24 Hours Bias

Medium Bearish

Oil

Today’s oil market is influenced by direct supply threats from Ukraine-Russia hostilities, monetary policy optimism, and technical price trends, with potential for volatility depending on both geopolitical and economic developments. Despite a slight recent decline after resistance near $63.75, crude oil remains technically strong overall, with the potential for renewed bullish momentum if current levels hold.OPEC maintains global oil demand growth forecasts for 2025 at 1.3 million barrels per day and has slightly raised its outlook for 2026, indicating stable fundamentals ahead.Next 24 Hours BiasWeak Bullish

Source: IC Markets

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Economic

Labor Market 2025: Navigating the Era of Strategic Stagnation

In the aftermath of the COVID-19 pandemic, the global labor market witnessed a historical wave of job resignations. The so-called “Great Resignation” saw over 50 million Americans quit their jobs in 2022, as workers sought better pay, flexible work arrangements, and more fulfilling careers. Fast forward to 2025, and the pendulum has swung in the opposite direction. Welcome to the “Great Stay.”

Coined by economists such as ADP’s chief economist Nela Richardson, the “Great Stay” captures a growing sentiment: workers are increasingly staying put, and companies are cautious about hiring or letting employees go. What’s emerging is a “no-hire, no-fire” labor environment, driven by macroeconomic uncertainty, high labor costs, and shifting organizational priorities.

The Psychology Behind the Freeze

Richardson explains that many workers today have secured roles that match their preferences, particularly those that offer remote flexibility and competitive salaries. In sectors like IT and software development, which typically see high turnover, job mobility is now strikingly low. This suggests not just satisfaction but also a hesitancy to risk change in an uncertain economic climate.

On the employer side, there is a clear trend of pausing hiring plans not necessarily to cut costs, but to avoid overcommitting in the face of unclear economic signals. Although U.S. jobless claims remain near historic lows, indicating a reluctance to lay off, hiring momentum is slowing significantly.

Signs of a Cooling Market

The labor market’s deceleration is becoming more visible in key economic data. The latest U.S. nonfarm payrolls report showed a mere 73,000 jobs added in July well below expectations while the unemployment rate ticked up to 4.2%. These figures suggest that job creation is not keeping pace with population growth, further supporting the case for a cautious Federal Reserve. Many economists now speculate that weak labor data could be enough to prompt an interest rate cut in September.

The U.K. Mirrors the U.S. Shift

This labor market inertia isn’t confined to the U.S. The United Kingdom is seeing similar patterns. Job vacancies in the U.K. peaked in 2022 at nearly 1.3 million but have since fallen to 718,000 as of mid-2025 a decline spanning 16 of 18 industry sectors. The Office for National Statistics reports that many businesses are no longer replacing departed workers or initiating new recruitment cycles.

Several factors contribute to this trend in the U.K. Rising labor costs due to increased taxes and minimum wage hikes have discouraged firms from expanding their workforce. Meanwhile, economic uncertainty continues to cloud business confidence. According to Neil Carberry, head of the Recruitment and Employment Confederation, companies are hesitant to press the “hire” button until the macroeconomic outlook becomes clearer.

Balancing Labor Supply and Demand

While job creation slows, the supply side of the labor market is quietly changing. In the U.K., economic inactivity (the proportion of people not working and not seeking work) remains high at 21% among working-age adults. However, some of that inactivity is being offset by rising unemployment and falling job vacancies, which could boost labor supply if business sentiment turns positive.

This disconnect between available labor and employer confidence underscores a fundamental issue: the job market’s stagnation is less about skill mismatches and more about risk aversion. Both employers and employees are treading water, waiting for someone or something to move first.

The labor market of 2025 is a far cry from the high-churn, high-demand environment of the early 2020s. What we are seeing now is a workforce and corporate landscape defined by caution, not chaos. The “Great Stay” is not just a pause it is a structural response to macroeconomic ambiguity. As long as confidence remains fragile and uncertainty looms, labor markets may continue to drift in this state of strategic freeze, with hiring and firing both on indefinite hold.

Source: CNBC

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Powell’s Subtle Signal Sparks Market Frenzy as Fed Shifts Focus

At the Jackson Hole Economic Symposium, Federal Reserve Chair Jerome Powell delivered a message that rocked markets: the Federal Reserve may soon pivot from its inflation-fighting stance to supporting a softening labor market. In doing so, Powell once again reminded the world why all economic roads still lead to him.

Since inflation hit a 40-year high of 9.1% in June 2022, the Fed has focused on raising interest rates to curb price growth. For months, the central bank appeared to be steering the U.S. economy toward a “soft landing” cooling inflation without triggering a recession. However, rising tariffs, global economic uncertainty, and weakening employment data are beginning to tarnish that achievement.

Powell acknowledged that the risks between inflation and unemployment are “shifting,” suggesting that the Fed might need to “adjust its policy stance.” This remark was interpreted by markets as a soft indication of potential rate cuts, possibly as early as September.

Markets React Swiftly to Powell’s Subtle Pivot

Financial markets wasted no time responding. The Dow Jones Industrial Average surged by over 846 points, the S&P 500 rose 1.52%, and Treasury yields fell clear signals that investors now expect a looser monetary policy ahead. The rally underscores the enormous influence the Fed and Powell personally continues to wield over the global financial system. As CNBC wryly put it, “All roads lead to Jerome.”

Powell’s remarks come as the U.S. labor market begins to show signs of fatigue after years of resilience. A potential pivot toward employment protection signals that the Fed is watching not just the consumer price index but also the real economy’s human impact particularly as political and trade tensions heat up.

Policy Uncertainty Amid Political and Economic Shocks

Complicating matters further are recent political and economic developments that introduce volatility into the Fed’s finely balanced equation. President Donald Trump announced that furniture imports would face new tariffs later this year, part of his broader goal to repatriate U.S. manufacturing jobs. The White House also made a surprise move by purchasing a 10% stake in Intel amounting to $8.9 billion highlighting Washington’s increasingly hands-on role in shaping domestic industrial policy.

Meanwhile, Canada dropped several retaliatory tariffs against the U.S., though those on cars and steel remain in place, keeping trade tensions alive. These shifting dynamics create new challenges for monetary policy, as central banks must now navigate not only inflation and employment but also the consequences of political and economic nationalism.

Eyes on Nvidia and Inflation Data This Week

As August draws to a close, market sentiment remains sensitive to both economic data and corporate earnings. Tech giant Nvidia is set to report earnings mid-week, while Friday will bring the release of the Personal Consumption Expenditures (PCE) price index a key inflation gauge watched by the Fed. A hot PCE reading could muddy Powell’s soft-landing narrative, while a cooler figure may give the Fed further cover to initiate rate cuts.Outside the financial world, U.S. corporations are also facing their own storms. American Eagle’s denim campaign featuring actress Sydney Sweeney drew backlash for a controversial play on the words “jeans” and “genes,” which some critics said echoed eugenics-era rhetoric. This misstep is just the latest in a string of brand blunders in 2025, with marketing experts noting that many companies are still applying outdated corporate thinking to today’s culturally complex environment.

Jerome Powell remains the eye of the economic storm his words dissected by investors, his independence questioned by political forces, and his policy decisions carrying global consequences. As the balance between inflation and unemployment shifts, and geopolitical forces mount, Powell’s next move could chart not just the U.S. economy’s direction, but set the tone for global central banking in the months ahead.

Source: CNBC

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Trump’s Pressure on the Fed Sparks Global Alarm Over Central Bank Independence

At the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, central bankers from around the world voiced growing concern over what they perceive as an existential threat to monetary policy independence. The political firestorm surrounding the U.S. Federal Reserve driven by President Donald Trump’s relentless pressure to cut interest rates and his public campaign to replace Fed Chair Jerome Powell has created ripples far beyond American borders.

The concern isn't just about one central bank. As Trump pushes to force out not only Powell but also Governor Lisa Cook, global central bankers worry that if the Fed yields to such political demands, a dangerous precedent will be set. That could embolden leaders in other countries particularly those with populist leanings to manipulate their own central banks for short-term political gain.

Olli Rehn, a European Central Bank (ECB) policymaker from Finland, warned that these U.S. developments have a “spiritual spillover” effect in Europe. If the world’s most influential central bank falls to political pressure, it may weaken the global framework that has long upheld central bank independence as a cornerstone of macroeconomic stability.

Independence Is “Not to Be Taken for Granted”

Since former Fed Chair Paul Volcker’s battle against inflation in the 1980s, the Fed has served as the model for modern central banking: politically insulated, inflation-focused, and guided by long-term stability over short-term political cycles. ECB Governing Council member and Bundesbank President Joachim Nagel reminded attendees that “independence is the conditio sine qua non for price stability,” emphasizing that institutions must defend this principle vigorously.

Central banks worldwide now fear that once that model is compromised in the U.S., institutional norms in countries with weaker legal protections could crumble faster. These concerns come amid real-world examples of political interference, from Japan's strategic reshuffling of the Bank of Japan leadership under Prime Minister Shinzo Abe to prolonged political gridlock in countries like Slovenia and Latvia over central bank appointments.

Financial Market Calm Masks Institutional Risk

Despite these warnings, markets have remained relatively calm. U.S. equities are buoyant, and Treasury yields have not yet shown signs of alarm over institutional risk. However, many central bankers see this as a potentially misleading signal. If investors begin to perceive that the Fed is no longer acting independently, it could prompt a sharp repricing of risk leading to higher yields, weakened demand for U.S. Treasuries, and volatility in foreign exchange markets.

Some central banks have already begun cautioning domestic lenders about overexposure to the U.S. dollar, anticipating possible shocks if institutional credibility erodes. Should confidence in U.S. monetary governance break down, it could affect the dollar’s status as the world’s reserve currency and unravel decades of trust in global financial structures.

A “Bad Example” for the World

Maury Obstfeld, former IMF chief economist and now a senior fellow at the Peterson Institute, summed up the broader implications starkly. “Taking over the Fed is one development that would set a very bad example for other governments,” he said. The danger is not just institutional degradation in the U.S., but the cascading effect it may unleash across fragile democracies or authoritarian regimes, where the temptation to politicize monetary policy is already high.

Trump’s comments that Powell’s term “cannot end fast enough” and his very public search for a successor have drawn comparisons to Japan’s Abe-era central bank overhaul only now replicated in a country long considered a bastion of legal and institutional integrity.

The Global Stakes: Credibility, Inflation, and Stability

Ultimately, what’s at stake is the credibility of global monetary governance. Should the Fed fall under overt political control, the risks extend far beyond Washington: from Europe’s inflation battles to Asia’s financial market stability. The fear among Jackson Hole attendees is that if political capture can happen in the United States, nowhere is safe.

The world’s central bankers left Wyoming this weekend united not just in monetary concerns, but in a deeper institutional anxiety hoping that the Fed will hold its ground, because if it doesn’t, the shockwaves may reach every corner of the global economy.

Source: Reuters

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Powell's Dovish Tone Boosts Rate Cut Expectations; BoJ and BoE Focus on Labor Tightness

[Quick Facts]

[News Details]

[Today's Focus]

Asian Markets Rally as Powell Hints at Rate Cuts and Wall Street Surges

Wall Street Optimism Propels Asian Equities Upward

Broad-Based Gains Across the Region

Lower Rates, AI Optimism, and U.S. Momentum

Bond Market Reacts: Yields Fall Sharply

Source: AP

Singapore Inflation Drops to Lowest in Over Four Years Amid Global Weakness

Singapore's Cooling Inflation Signals Global and Domestic Headwinds

Monetary Authority of Singapore (MAS): Dovish Tone Continues

Inflation in 2025 to Average Well Below 2024 Levels

Tariffs and Trade Frictions Add to Growth Risk

Source: CNBC

IC Markets Europe Fundamental Forecast | 25 August 2025

What happened in the Asia session?

What does it mean for the Europe & US sessions?

The Dollar Index (DXY)

Gold (XAU)

The Euro (EUR)

The Swiss Franc (CHF)

The Pound (GBP)

The Canadian Dollar (CAD)

Oil

Source: IC Markets

From Great Resignation to Great Hesitation: Labor Markets Enter a “No-Hire, No-Fire” Freeze

Labor Market 2025: Navigating the Era of Strategic Stagnation

The Psychology Behind the Freeze

Signs of a Cooling Market

The U.K. Mirrors the U.S. Shift

Balancing Labor Supply and Demand

Source: CNBC

All Roads Lead to Jerome Powell: Fed Hints at Rate Cuts as Economic Priorities Shift

Powell’s Subtle Signal Sparks Market Frenzy as Fed Shifts Focus

Markets React Swiftly to Powell’s Subtle Pivot

Policy Uncertainty Amid Political and Economic Shocks

Eyes on Nvidia and Inflation Data This Week

Source: CNBC

Global Central Bankers Alarmed by Political Threats to Fed Independence

Trump’s Pressure on the Fed Sparks Global Alarm Over Central Bank Independence

Independence Is “Not to Be Taken for Granted”

Financial Market Calm Masks Institutional Risk

A “Bad Example” for the World

The Global Stakes: Credibility, Inflation, and Stability

Source: Reuters

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