With mostly positive U.S. economic data on Thursday, including strong growth, lower jobless claims, and manageable inflation, market fears eased. However, concerns over the Federal Reserve’s independence, the Russia-Ukraine war, and mixed U.S. corporate earnings tempered investor optimism.
The second estimate of the United States Gross Domestic Product (GDP) for Q2 beat both initial forecasts and the previous reading. Weekly Initial Jobless Claims also declined, signaling labor market resilience. However, the Personal Consumption Expenditures (PCE) Price Index and Core PCE (excluding food and energy) for Q2 eased slightly, creating uncertainty about Federal Reserve rate cuts beyond September. The U.S. Dollar remained weak as Federal Reserve Governor Christopher Waller reaffirmed his support for rate cuts despite the data.
U.S. Treasury Secretary William Bessent credited former President Donald Trump with boosting equity markets. A senior Trump administration official also announced temporary tariffs on package imports to the U.S., with flat duties of $80–$200 for six months before switching to specific tariff rates.
Meanwhile, U.S. Vice President James David “J.D.” Vance suggested the end of the Federal Reserve’s independence in an interview with USA Today, stating elected officials—not unelected bureaucrats—should influence monetary policy. Separately, Federal Reserve Governor Lisa Cook filed a lawsuit against President Donald Trump over his attempt to remove her from office without legal cause. Her lawyer said a clerical error may have caused the mortgage dispute. The first court hearing is scheduled for Friday, August 29, 2025, at 10:00 AM U.S. time.
Russia launched one of its most intense attacks on Ukraine this year, deploying 598 drones and 31 missiles overnight, according to the Ukrainian Air Force. Targets included the European Union (EU) Mission and British Council offices in Kyiv. No casualties were reported among EU or UK personnel. European Commission President Ursula von der Leyen called on Russian President Vladimir Putin to enter negotiations, while German Chancellor Friedrich Merz ruled out a meeting between Putin and Ukrainian President Volodymyr Zelenskyy.
Iran’s Foreign Minister Hossein Amir-Abdollahian sent a letter to the High Representative of the European Union for Foreign Affairs and Security Policy, arguing that France, Germany, and the United Kingdom lack the legal basis to trigger automatic sanctions on Iran.
In China, a spokesperson for the National Development and Reform Commission (NDRC) acknowledged weak household consumption and confidence. The agency said it may increase central government support to reduce financial pressure on local governments and fund livelihood-focused projects.
In the United Kingdom, the Institute for Public Policy Research (IPPR) advised Chancellor of the Exchequer Rachel Reeves to introduce a windfall tax on commercial banks, targeting profits from taxpayer-backed Bank of England (BoE) deposits. It also recommended the BoE pause gilt sales, projecting over £10 billion in annual savings and a £1.1 billion reduction in 2029–2030 interest costs.
Japan reported a drop in unemployment to 2.3%, below expectations. Tokyo inflation exceeded the Bank of Japan’s (BoJ) 2.0% target, with Core CPI (excluding fresh food and energy) reaching its highest level since January 2024. However, retail sales rose just 0.3% year-over-year, well below forecasts, and industrial production fell 1.6% month-over-month. Finance Minister Katsunobu Kato said he is monitoring rising interest rates and will continue engaging with bond market participants to manage debt responsibly.
In Australia, July 2025 Private Sector Credit rose 0.7% month-over-month, beating expectations across housing, personal, and business credit. In contrast, ANZ’s August Consumer Confidence Index for New Zealand fell to 92.0, down from 94.7 in July, marking a ten-month low.
According to the Financial Times, Canada does not expect Donald Trump to remove all tariffs on Canadian goods even if he is re-elected.
On the corporate front, Dell Technologies Inc. exceeded estimates on revenue and adjusted earnings and raised its full-year forecast. However, disappointing third-quarter profit guidance caused a 4% after-hours drop in its stock. Caterpillar Inc. raised its expected full-year tariff impact to $1.5–1.8 billion, including $500–600 million in Q3 alone, though it kept its overall sales forecast unchanged. Despite mixed earnings, both the S&P 500 Index and the NASDAQ Composite Index closed at record highs.
In cryptocurrency markets, Bitcoin and Ethereum ended Thursday with gains, though both saw late pullbacks. Early Friday, they traded lower, consolidating monthly gains while facing a weekly decline.
Against this backdrop, the U.S. Dollar remains under pressure, even after breaking a three-day losing streak with modest intraday gains early Friday. The EURUSD and GBPUSD pairs have not responded positively to the softer U.S. Dollar over the past three days, while USDJPY is on track for weekly gains. Similarly, AUDUSD, NZDUSD, and USDCAD appear to be ignoring the firmer Dollar, likely due to China's stimulus news and general market caution. Meanwhile, Gold is holding onto a two-week uptrend despite pulling back from a 10-week resistance level. Crude oil has paused its two-day winning streak but remains on course for a second consecutive weekly gain. Equities are edging higher, while cryptocurrencies are drifting lower despite Thursday’s rally.
EURUSD is posting mild losses and is set for a weekly decline as concerns over the Russia-Ukraine war and the European Union’s geopolitical role weigh on the Euro. The pair also feels pressure from weak Eurozone sentiment data for August. Despite a softer U.S. Dollar ahead of today’s Federal Reserve inflation release and other key events, the Euro continues to struggle.
GBPUSD is also under pressure as mixed economic data from the United Kingdom raises concerns that the UK government may need to hike taxes and implement further measures to protect economic stability. This adds to the challenges facing the Bank of England (BoE), which is already battling high inflation and employment issues amid growing pressure to cut interest rates.
In Japan, Friday’s employment data came in stronger than expected, and inflation figures exceeded the Bank of Japan’s (BoJ) 2.0% target, increasing the likelihood of a rate hike. However, weaker retail sales and industrial production, along with trade and political tensions around Tokyo, are weighing on the Japanese Yen (JPY). As a result, USDJPY is on track for a weekly gain, despite a pullback early Friday.
Even though the U.S. Dollar is on track for a weekly gain amid ongoing trade and political tensions, both AUDUSD and NZDUSD are also poised for weekly gains, while USDCAD is set for its biggest weekly loss since late June, ending a two-week uptrend. This divergence may be driven by China’s stimulus signals, progress on the U.S.-China trade deal, and slightly firmer crude oil prices. Notably, recent economic data from Australia, New Zealand, and Canada support the case for further interest rate cuts by their respective central banks. Meanwhile, the U.S.-Canada trade deal appears to be in jeopardy, adding further pressure on the Canadian Dollar.
Although market uncertainty over the Federal Reserve’s next move, trade and political tensions, and a key technical resistance are challenging Gold buyers after a three-day rally, the precious metal remains on track for a second straight weekly gain and a monthly advance. This strength likely stems from Gold’s traditional safe-haven appeal, recent signals from China indicating increased stimulus and higher metal demand for Treasuries, and the near-certain expectation of a Fed rate cut in September. However, continued uncertainty about the Federal Reserve’s policy direction beyond September is keeping traders cautious.
The U.S. Dollar’s strength has not curbed crude oil’s gains, supported by ongoing inventory draws and expectations of a prolonged Russia-Ukraine conflict keeping Russian supply off the market. Recent concerns from Iran may have also boosted oil prices, despite demand worries and OPEC+ production challenges weighing on bulls.
Meanwhile, cryptocurrencies are struggling to rally despite institutional demand and U.S. government support for pro-crypto policies. This weakness likely reflects month-end consolidation, a technical breakout, and a recent drop in ETF inflows.
Looking ahead, all eyes are on the U.S. Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, as traders seek clarity on potential rate cuts beyond September. The August figures are expected to rise slightly, but any softer-than-expected data could weaken the U.S. Dollar amid rate cut speculation, especially given pressure from the Trump administration and its supporters on the Federal Reserve board.
Additionally, the upcoming hearing in the Lisa Cook–Donald Trump legal case will attract attention, as will Trump’s ongoing efforts to exert control over the U.S. Federal Reserve. Meanwhile, the European Union’s refusal to engage in peace talks with Russia and continued support for Ukraine could heighten market fears, potentially helping the U.S. Dollar limit losses if inflation data disappoints.
Furthermore, Alibaba Group Holdings Limited will release its quarterly results, while China’s official Purchasing Managers’ Index (PMI) is due over the weekend. Market activity could remain heightened ahead of the long U.S. Labor Day weekend on Monday.
Against this backdrop, the Gold and equities are likely to edge higher amid the market’s rush for higher returns and safety, while cryptocurrencies may drift lower.
May the trading luck be with you!
