Israel-Iran may re-emerge war! Trump considers undermining Powell

On Thursday, during the Asian session, spot gold trading around $3,337/ounce, gold prices remained stable on Wednesday, market participants remained cautious before the release of key U.S. economic data, and the ceasefire between Iran and Israel affected safe-haven demand, Trump considered appointing the next Federal Reserve chairman in advance; U.S. crude oil trading around $65.20/barrel, oil prices rose nearly 1% on Wednesday, rebounding from a sharp decline at the beginning of this week, as data showed that U.S. demand was relatively strong, and investors assessed the stability of the ceasefire situation between Iran and Israel.

Steve Englander, head of global G10 foreign exchange research and North American macro strategy at Standard Chartered Bank, said: "The market is waiting for the next topic." The market is increasingly expecting that the Fed will cut interest rates this year and also weaken the dollar.

Federal Chairman Powell reiterated on Wednesday the day after testifying in the U.S. Congress that he expected the Trump administration's tariffs to push up inflation and that the Fed should keep interest rates unchanged. Powell said Tuesday that the Fed might continue to cut interest rates if it weren't for the tariffs. "The market is concerned about this," Englander said, a more dovish statement than Powell's speech at the end of the Fed's policy meeting a week ago. "We see an increase in the possibility of interest rate cuts digested by the market."

Feder Vice Chairman Bowman and Director Waller recently said that the Fed should cut interest rates as soon as possible to push more interest rate cuts.

Federal funds futures traders are expected to cut interest rates by 62 basis points by the end of the year, with Waller's expectations being about 46 basis points before his speech last Friday. Traders have fully digested expectations of the first rate cut in September.

Investors are also turning their attention to trade negotiations aimed at avoiding reciprocal tariffs, with a July 9 deadline set by the Trump administration approaching.

Asian market

Tokyo apartment rentals are rising at the fastest pace in thirty years, providing the Bank of Japan with the latest signal that Japan's inflation trend is continuing to deepen in the economic sector. Data from Japan's Ministry of Internal Affairs and Affairs shows that rents in the capital area of ​​Japan rose by 1.3% year-on-year from April to May this year, the largest increase since 1994. Although this increase seems moderate avaforexcn.compared to Tokyo's 3.6% core inflation rate and global rent soaring trend, it means that the inflation cycle has finally penetrated into the Japanese rental market. The general pattern of rent and prices has provided a basis for the Bank of Japan to further raise interest rates. Hiroshi Kawata, chief Asian economist at Mizuho Research and Technology, pointed out: "Risks confirm the so-called 'normal shift' of the central bank, which is indeed one of the signs of rising basic prices and may promote the normalization of monetary policy." In its semi-annual financial system report, the Bank of Japan has listed the real estate market as a key issue that needs to be closely monitored.

European Market

European Automobile Manufacturers Association: Tesla's EU new car registration volume fell by 40.5% in May.

NATO allies agree to increase their defense spending target to 5% of GDP by 2035.

U.S. Market

Federal Chairman Jerome Powell defended the central bank's cautious stance on interest rates the day after Congress testified, saying there was significant uncertainty about the impact of tariffs on inflation. While Powell acknowledged that tariff-driven price increases could eventually be temporary, he said the Fed must be prepared for the possibility that inflation will prove to be more durable. “As someone who should keep prices stable, we need to manage this risk,” Powell stressed.

Powell stressed that the Fed's functioning is largely unknown, warning that the scale of potential new tariffs dwarfed the tariffs imposed during Trump's first term, and these early measures were taken when inflation was curbed. “There is no modern precedent,” he said, warning not to adjust policies prematurely without a clearer understanding of the economic impact.

"If it avaforexcn.comes quickly and is over, then yes, it's likely to be one-off," he said of tariff inflation. But if the Fed misjudged the situation, "people will pay a long time of price."

Boston Fed Chairman Susan Collins said she prefers what she calls a “positive and patient” approach to monetary policy and said that this approach is still appropriate in the case of rising uncertainty. Collins said in his speech todayThe liquidity of tariff developments and broader government policy shifts, she said that "verifies the cautious approach the Fed has taken so far in 2025." While she still expects policies to gradually return to normalization later this year, she warned that her views “can change significantly as things develop.”

Collins stressed that this depends largely on the nature of the tariff-driven "price shock". She said that if price pressures fade quickly without lifting inflation expectations and if the blow to actual activity remains limited, this could support easing later this year. However, if these conditions are not met, policy adjustments may be delayed.

Currently, Collins believes that current monetary policy is "moderately restrictive" and is able to deal well with a range of potential outcomes.

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