Global markets opened cautiously on Wednesday as U.S. traders returned after a long weekend, facing a mix of economic data and geopolitical developments. Sentiment was pressured by renewed concerns about the independence of the Federal Reserve (Fed), former U.S. President Donald Trump’s legal and political actions, and broader trade tensions. This cautious mood supported the U.S. Dollar, which extended its gains. Gold refreshed a new record high before easing, cryptocurrencies edged higher, while equities drifted lower.
Among major headlines, Donald Trump accused Chinese President Xi Jinping of aligning with Russia and North Korea during a joint military parade, calling it a conspiracy against the United States. Trump also confirmed plans to take his tariff-related dispute to the Supreme Court, after a challenge to his use of national emergency powers to impose tariffs. He dismissed health concerns and criticized China, India, and Brazil for harming U.S. trade with excessive tariffs.
Legal tensions resurfaced as the D.C. Circuit Court of Appeals reinstated Rebecca Slaughter to the Federal Trade Commission (FTC) after her removal by Trump without cause. This raised doubts over Trump’s authority to dismiss federal officials, including Federal Reserve Chair Jerome Powell, and added friction amid his legal clash with Federal Reserve Governor Lisa Cook. Meanwhile, the Wall Street Journal reported that U.S. Treasury Secretary Bessent will begin interviewing candidates to potentially replace Powell starting Friday.
U.S. economic data showed mixed results. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) for August printed at 48.7, below the 49.0 forecast but above July’s 48.0. The S&P Global final Manufacturing PMI rose to 53.0 from July’s 49.8, though slightly below the preliminary 53.3, marking a three-year high. The Federal Reserve Bank of Atlanta’s GDPNow model revised its U.S. Q3 growth estimate to 3.0% from 3.5%.
Despite this, analysts from Rabobank and Mizuho advised caution against further bearish bets on the U.S. Dollar, noting that much of the policy outlook is already priced in.
In a broader warning, Financial Times quoted Ray Dalio, founder of Bridgewater Associates, who said the U.S. is heading toward a “debt-induced heart attack” within the next few years due to excessive federal spending. He estimated the tipping point could occur within three years, give or take one or two.
In China, economic data sent mixed signals. The S&P Global Services PMI (formerly Caixin Services PMI) for August came in at 53.0, above the expected 52.5 and prior 52.6. The composite PMI rose to 51.9 from 50.8. However, official Manufacturing PMI printed at 49.4, contracting for the fifth consecutive month, while the S&P Global Manufacturing PMI surprisingly rose to 50.5 from 49.5.
In Japan, Bank of Japan (BoJ) Governor Kazuo Ueda met with Prime Minister Shigeru Ishiba in their scheduled bi-annual meeting, stating there is “no change” to the BoJ’s stance on rate hikes. Japan’s services sector held firm, with the S&P Global Services PMI easing to 53.1 from 53.6, lifting the composite PMI to 52.0, the strongest since February. Politically, former Prime Minister Aso Taro is expected to publicly call for an early Liberal Democratic Party (LDP) leadership election, adding pressure on PM Ishiba after the party lost its majority in the upper house election.
Australia’s economy showed stronger-than-expected growth in Q2 2025, with Gross Domestic Product (GDP) rising 0.6% quarter-over-quarter and 1.8% year-over-year — the fastest in two years, though still below pre-pandemic averages. The GDP Chain Price Index fell by 0.5% after a 0.5% rise previously, offering some relief on inflation. Household consumption surged 0.9%, supported by a decline in the savings rate from 5.2% to 4.2%, while business investment and government spending made minimal contributions. The August S&P Global PMIs showed strong momentum: Services PMI rose to 55.8 (fastest in over three years), Composite PMI climbed to 55.5, and Manufacturing PMI increased to 53.0, its highest since September 2022.
In New Zealand, the August 2025 Commodity Price Index rose 0.7% month-over-month and 9.3% year-over-year. In New Zealand Dollar (NZD) terms, the index jumped 2.1%, boosted by a weaker currency. Analysts at ANZ noted that falling dairy prices had dragged the index down since May, but that trend reversed in August.
On the corporate front, a U.S. court ruled that Alphabet Inc. (Google) must share certain search data with competitors but does not need to sell its Chrome browser. This outcome, seen as favorable to the company, helped Alphabet shares rally and lifted broader tech sentiment in after-hours trading, despite a weak Wall Street close earlier.
In financial markets, the U.S. Dollar Index (DXY) held firm, defending Tuesday’s rebound. USDJPY hovered near a one-month high during its four-day uptrend, though buyers faced resistance at the 200-day Simple Moving Average (SMA). EURUSD, GBPUSD, and NZDUSD remained under pressure, while AUDUSD seesaws after Tuesday’s steep fall. USDCAD extended its three-day uptrend. Equity markets in the Asia-Pacific region mostly followed Wall Street’s lead lower. Meanwhile, Bitcoin (BTC) and Ethereum (ETH) traded sideways, lacking clear direction after Tuesday’s gains.
The U.S. Dollar’s ongoing strength and broader market caution continue to pressure both the EURUSD and GBPUSD. EURUSD is trading near a one-week low with mild losses, while GBPUSD hovers at a four-week low after posting its steepest drop in five months.
On Tuesday, preliminary Eurozone inflation data for August came in stronger than expected, prompting European Central Bank (ECB) policymaker Madis Müller to say it makes sense to hold interest rates and monitor the economy. In contrast, there were no significant updates from the United Kingdom.
Market caution also prevails ahead of today’s final Purchasing Managers’ Index (PMI) data for August from the European Union and the UK, along with key U.S. releases such as Factory Orders and the Job Openings and Labor Turnover Survey (JOLTS), all of which could weigh further on these major currency pairs.
A joint statement from Bank of Japan (BoJ) Governor Kazuo Ueda and Japanese Prime Minister Shigeru Ishiba reaffirmed support for the current monetary policy stance, downplaying the likelihood of an immediate interest rate hike. This contrasted with mostly upbeat Japanese economic data and growing political pressure on Prime Minister Ishiba to resign, which added to volatility. Combined with a stronger U.S. Dollar, these factors pushed USDJPY higher. Additionally, fading expectations of Federal Reserve (Fed) rate cuts beyond September—supported by recent U.S. data and legal obstacles to former President Donald Trump’s efforts to dismiss federal officials—also contributed to the upward momentum in USDJPY. Markets appeared to largely overlook the Japanese Yen’s traditional safe-haven appeal in the current environment.
AUDUSD stalls after upbeat Australian data challenges dovish Reserve Bank of Australia (RBA) expectations, posting mild gains after ending a five-day rally. NZDUSD also saw positive data, as noted earlier, but failed to hold gains amid broad U.S. Dollar strength. Meanwhile, USDCAD extends its three-day uptrend despite Tuesday’s strong U.S. crude oil prices, which eased slightly on Wednesday. The pair’s strength likely reflects ongoing U.S.-Canada tensions and a dovish Bank of Canada (BoC) outlook.
Crude Oil surged to a one-month high on Tuesday, marking its biggest gain in five weeks, as geopolitical tensions around Russia and Gaza overshadowed a stronger U.S. Dollar. However, prices eased early Wednesday amid caution ahead of the American Petroleum Institute’s (API) weekly crude oil inventory report.
Meanwhile, Gold hit a new all-time high near $3,548 but has since stalled, trading sideways as markets await fresh catalysts to support its seven-day rally. The precious metal’s safe-haven appeal, along with a technical breakout above the $3,490 resistance level, fueled the previous day’s record high.
Cryptocurrencies stayed upbeat on Tuesday, defying the stronger U.S. Dollar, but lost momentum on Wednesday. Bitcoin (BTC) halted its two-day uptrend with mild losses, while Ethereum (ETH) remained range-bound for a third straight session, despite modest gains the day before.
Meanwhile, Wall Street benchmarks extended Friday’s losses, despite positive news around Alphabet Inc. (Google). Economic concerns, overall market uncertainty, and investor caution ahead of Salesforce Inc.’s quarterly earnings today and Broadcom Inc.’s report tomorrow likely weighed on sentiment.
Wednesday’s economic calendar features the final August Purchasing Managers’ Index (PMI) readings for the European Union and the United Kingdom, speeches from European Central Bank (ECB) President Christine Lagarde and several mid-tier Fed officials, as well as U.S. Factory Orders and the JOLTS Job Openings. However, market focus is likely to remain on broader risk headlines ahead of Thursday’s U.S. ISM Services PMI and Friday’s key employment reports from the United States and Canada.
Among the geopolitical and legal drivers, former U.S. President Donald Trump’s legal battle with Federal Reserve Governor Lisa Cook, his challenge against a court ruling declaring his tariffs illegal, and ongoing chatter involving Russia, India, and the Federal Reserve will be closely watched. These developments could sour sentiment and help the U.S. Dollar stay firm—especially if upcoming U.S. data surprises to the upside.
That said, USDJPY may retreat as the Japanese Yen regains strength through its traditional safe-haven appeal, especially with the 200-day Simple Moving Average (SMA) acting as resistance. Gold, after a seven-day rally and a record high, may also face a pullback. Other major currency pairs could trade mixed, while cryptocurrencies may ease further. Equities could start the day on a positive note—helped by upbeat news around Alphabet Inc. (Google)—but may turn lower amid economic uncertainty and pre-earnings caution.
May the trading luck be with you!
