Market Rumors Fuel Rate Cut Bets, Gold Sees Heightened Volatility

Market Overview

Rumors that former President Donald Trump might seek to fire Fed Chair Jerome Powell sent ripples across financial markets. U.S. equities quickly turned lower, while safe-haven assets—gold, the Japanese yen, the Swiss franc, and Bitcoin—all rallied. However, after Trump publicly denied the speculation, market sentiment quickly stabilized. By Wednesdays close, U.S. equities had not only recovered but the Nasdaq even posted a new all-time high.

The rate-cut bets surged amid the rumors, evidenced by the 2-year U.S. Treasury yield dropping more than 7 basis points intraday. However, yields pared losses following Trumps clarification. The U.S. dollar also retreated over 1.2% from its session high, while the yen and Swiss franc rebounded more than 1.4% from their intraday lows. After a volatile session, gold gave back some gains but still closed 0.6% higher.

Hot Topics to Watch

● Feds Beige Book

The Federal Reserves Beige Book reported modest improvements in economic activity between late May and early July. Five districts saw slight to moderate growth, five remained flat, and two—New York and Philadelphia—experienced slight declines. This marks a mild improvement compared to the previous report, which had shown at least half the districts facing slowdowns. Still, the Fed noted elevated uncertainty, and overall business sentiment remained cautious.

● UK June CPI Unexpectedly Hits Highest in Over a Year

Data released by the Office for National Statistics on Wednesday showed UK CPI rose to 3.6% YoY in June, up from 3.4% in May and beating economist forecasts. This marked the highest reading since January 2024. Core CPI, which excludes volatile food and energy prices, also climbed to 3.7% from 3.5%. Analysts noted the surprise uptick in inflation could complicate the Bank of Englands policy decisions in August. Following the data, traders scaled back their rate cut expectations, now pricing in 49 basis points of easing this year.

Key Events to Watch (GMT+8)

• 20:30 US Initial Jobless Claims (week ending July 12)

• 20:30 US June Retail Sales MoM

• 20:30 US July Philadelphia Fed Manufacturing Index

• 22:00 US July NAHB Housing Market Index

• 22:00 US May Business Inventories MoM

• 22:00 Fed Governor Lisa Cook speaks on housing market and U.S. economic outlook