U.S. Commerce Department considers imposing tariffs on more imported auto parts, waiting for the Fed to cut interest rates

On Wednesday, on September 17, spot gold trading was around $3,693.70/oz, and gold prices hit a historical high of $3,702.93/oz on Tuesday, as the market bets that the Federal Reserve cut interest rates this week, driving gold prices to continue to rise under the help of safe-haven demand, buying from central banks and weakening of the US dollar. U.S. crude oil trading was around $64.61/oz, and oil prices rose on Tuesday. Traders weighed the possibility that Ukrainian drone attacks Russian ports and refineries could lead to a disruption in Russia's supply, and were waiting for the Federal Reserve's decision on interest rates.

The dollar fell across the board on Tuesday, hitting a four-year low against the euro, and investors firmed their bets on the Fed's interest rate cut this week.

The dollar has stabilized in recent months after a sharp decline earlier this year, but the dollar has once again faced selling pressure as market expectations for the Fed to resume rate cuts heat up and U.S. President Trump once again called for radical easing policies.

The market expects the Federal Reserve to cut interest rates by 25 basis points on Wednesday, with the rapid softening of labor market data being the main driving factor for the increase in interest rate cut bets in recent weeks.

Karl Schamotta, chief market strategist at Corpay, said: "The dollar fell sharply across the board, investors are ready to welcome Wednesday's voting records, economic forecast summary 'dot chart' and the dovish www.vifu.netrmation in the press conference."

The Federal Reserve will issue a policy statement at 2 p.m. on Wednesday, with Chairman Powell subsequently hosting the newsPress conference. "Powell and his colleagues are expected to downplay inflation risks and express clear tendencies to support the labor market, which could create conditions for consecutive interest rate cuts in the www.vifu.neting months - traders are adjusting positions to prepare for asymmetric trends in most major currency pairs," Schamotta said. "The data showed that U.S. retail sales increased more than expected in August, but hardly gave the dollar a breather." Investors remain concerned about U.S. economic growth amid weak labor market and rising www.vifu.netmodity prices due to import tariffs.

National Office of Statistics shows that the number of business employment fell for the seventh consecutive month in August, with the private sector, which the Bank of England closely watched, slowing to 4.7% for the three months to July, and a 4.8% increase in June. Following the August rate cut, the Bank of England is expected to remain silent this week.

Asian market

Japan's trade deficit narrowed to -242.5B yen in August, less than expected -513.6B yen, as exports performed better than expected. Overall exports fell only 0.1% year-on-year to 8425B yen, exceeding expectations of 1.9% year-on-year. However, imports fell -5.2% year-on-year to 8668B yen, a decrease greater than expected by -4.2% year-on-year.

Details highlight the obvious differences. Exports to the United States fell by -13.8% year-on-year, the largest decline since February 2021, with automobiles falling by -28.3% year-on-year and chip manufacturing equipment falling by -38.9% year-on-year. In contrast, shipments to Asia increased by 1.7% year-on-year, while exports to Western Europe increased by 7.7% year-on-year. Exports to mainland China fell by 0.5% year-on-year, but shipments to Hong Kong increased by 14.4% year-on-year.

Australia's Westpac Leading Index saw growth rate drop to negative territory in August, falling from 0.11% to -0.16%. This is the first below-trend reading since September 2024, a sharp slowdown from the 0.86% peak in February.

WestPacific noted that the weakness was “not overly worrying” but stressed the “significant weakness” earlier this year, consistent with the economy’s slowdown after a relatively strong June quarter. It expects growth of 1.9% in 2025, better than the 1.3% growth in 2024, but is still below the trend and will only resume the trend speed in 2026.

The RBA will meet from September 29 to 30, and policymakers will almost certainly stabilize the cash rate at 3.6%. Westpac believes that the upcoming data should ultimately verify benign inflation and weak demand, paving the way for a 25 basis point rate cut in November, and then cut two more rates in 2026. Currently, the RBA will act cautiously and observe the confirmation of potential trends before relaxing again.

European market

Germany's ZEW economic prosperity index rose more than expected in September, climbing from 34.7 to 37.3, while expectationsis 25.0. This improvement highlights the growing optimism among financial market experts, especially for export-oriented industries. However, the status quo index further deteriorated from -68.6 to -76.4, lower than expected -65.0.

In the euro zone, the ZEW sentiment index also improved, rising from 25.1 to 26.1, higher than the market expectations of 20.3. The current situation indicator rose slightly by 2.4 points to -28.8.

ZEW President Achim Wambach pointed out that although sentiment indicators have stabilized, "the economic situation has deteriorated" and major risks still exist. He cites uncertainty in U.S. tariff policy and Germany's upcoming "Autumn of Reform". The outlook for automotive, chemical, pharmaceutical and metals has improved, but sentiment in these industries remains in negative areas, indicating a fragile recovery prospect.

Eurozone industrial production increased by 0.3% month-on-month in July, lower than expected by 0.5% month-on-month. Output was supported by intermediate goods (+0.5%), capital goods (+1.3%) and consumer goods, with durable and non-durable goods output increasing by 1.1% and 1.5% respectively. However, a sharp drop in energy production -2.9% limits overall growth.

In the entire EU, industrial production increased by 0.2% month-on-month. Croatia led the gains with a 2.6% gain, followed by Hungary and Slovenia, each up 2.1%, while Estonia (-5.5%), Malta (-4.7%) and Sweden (-3.9%) fell sharply.

UK labour market data for August showed signs of further tension, with employment falling by -8k this month, continuing a steady decline since its third quarter 2024 peak. The number of claims increased by 17.4k, down from the expected 20.3k. The median monthly salary increased by 6.6% year-on-year, up from 6.0% in July, highlighting the ongoing wage pressure.

In the three months to July, the unemployment rate stabilized at 4.7%, in line with expectations. The average income excluding bonus fell slightly from 5.0% to 4.8%, while the average income including bonus rose slightly from 4.6% to 4.7%. Overall, data show that job loss continues, but wage growth is still strong enough to keep the Bank of England cautious about policy.

U.S. market

U.S. retail sales unexpectedly rose in August, up 0.6% month-on-month to US$732.0B, far higher than expected 0.2% month-on-month. The core categories also achieved strong results, with sales excluding automobiles up 0.7% month-on-month to USD592.3B, and sales excluding gasoline up 0.6% month-on-month to USD680.3B. Sales, excluding cars and gasoline, rose 0.7% month-on-month to $540.1B, indicating strong strength of a wide range of consumers.

The latest data confirms that household spending is flexible despite high borrowing costs and slowing labor market conditions. From June to August, the total retail sales are the sameThe 4.5% increase in proportion continued stable growth and highlighted the role of consumers as a key driver of US activities.

Canada's overall CPI rose to 1.9% year-on-year in August, up from 1.7% in July, but slightly below market expectations of 2.0%. This increase was mainly due to a small year-on-year decline in gasoline prices, which fell by -12.7% year-on-year in August, while in July, down by -16.1% year-on-year. Excluding gasoline, inflation rose 2.4% year-on-year, slightly slowing from the year-on-year rate of 2.5% that has continued in recent months.

Potential price pressure shows signs of further cooling. The median CPI stabilized at 3.1% year-on-year, while the CPI fell from 3.1% to 3.0% year-on-year, both in line with expectations. The CPI www.vifu.netmon indicator slowed to 2.5% year-on-year, below the 2.6% forecast, marking widespread weakness in inflation.

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