In Germany, producer prices in August fell from –1.5% to –2.2% y/y versus a forecast of –1.8%, and from –0.1% to –0.5% m/m. Meanwhile, support for the dollar still comes from the results of the U.S. Federal Reserve’s meeting, where, for the first time since December, the interest rate was cut by 25 basis points to 4.25%. The outcome had already been priced in, so traders mainly focused on Fed Chair Jerome Powell’s updated forecasts.
Specifically, GDP expectations were revised upward: for 2025 from 1.4% to 1.6%, for 2026 from 1.6% to 1.8%, and for 2027 from 1.8% to 1.9%. Unemployment projections remained at 4.5% this year, but were adjusted down to 4.4% in 2026 and 4.3% in 2027. A negative factor for the euro remains France’s political instability, which coincided with nationwide protests. On September 8, Prime Minister François Bayrou resigned after failing to win enough votes in a confidence motion. Defense Minister Sébastien Lecornu was appointed as the new head of government. Analysts expect him to attempt a different budget strategy for 2026, but unpopular cuts to social programs are likely. Polls show over 65% of French citizens do not support his appointment. France already ranks among the highest in Europe in public debt, and the problem is expected to worsen.
GBP/USD
The pound is weakening in the GBP/USD pair during the morning session, testing 1.3540 on a downward breakout, with attention on UK data. Retail sales slowed from 0.8% to 0.7% y/y (forecast 0.6%) and came in at 0.5% m/m versus 0.4% expected. Investors are also analyzing the Bank of England’s meeting yesterday, where, as expected, the regulator kept monetary policy unchanged, leaving rates at 4.00%. Seven members voted for no change, while two supported a 25-basis-point cut. In the statement, officials highlighted persistent inflation, with annual CPI at 3.8% in August, unchanged from July. While they did not rule out faster inflation in coming months, they still expect a reversal later, which may justify looser policy. On risks, particularly U.S. tariffs, the BoE cited uncertainty. Meanwhile, U.S. data yesterday boosted the dollar: the Philadelphia Fed manufacturing index jumped from –0.3 to 23.2 points (forecast 2.3). Initial jobless claims fell from 264,000 to 231,000, versus expectations of 240,000, while continuing claims dropped slightly from 1.927M to 1.920M (forecast 1.950M).
NZD/USD
The New Zealand dollar is weakening in the NZD/USD pair during the Asian session, extending a strong bearish move. The pair is testing 0.5870, hitting its lowest since September 5. The main driver is New Zealand’s trade data: exports fell from $6.56B to $5.94B in August, while imports slipped from $7.27B to $7.12B, widening the trade deficit from –$716M to –$1.18B. Yesterday’s Q2 GDP also pressured the kiwi: annual GDP shrank by 0.6%, the same as in Q1, versus forecasts of 0.0%. Quarterly GDP fell 0.9% versus a –0.3% forecast, weighed by weak manufacturing and U.S. tariff impacts. This raises the likelihood that the RBNZ will further ease monetary policy. Since late 2024, the regulator has already cut rates by 250 basis points. The U.S. dollar remains firm despite Wednesday’s Fed cut of 25 bps, as Powell’s GDP and unemployment outlooks exceeded analysts’ expectations.
USD/JPY
The U.S. dollar is weakening against the yen in USD/JPY during Asian trading, pulling back from local highs reached September 8. Investors are focused on the Bank of Japan’s meeting, which, as expected, left rates unchanged at 0.50%. Seven committee members voted for no change, while two — Hajime Takada and Naoki Tamura — favored a 25-bp hike. Inflation data also drew attention: national CPI slowed from 3.1% to 2.7%, core CPI (ex food & energy) eased from 3.4% to 3.3%, while food-excluded CPI dropped from 3.1% to 2.7% in line with forecasts. The Fed’s 25-bp rate cut to 4.25% also weighed on sentiment, though GDP forecasts were revised higher: 1.6% in 2025 (previous 1.4%) and 1.8% in 2027 (previous 1.6%). Rate outlooks were adjusted: by end-2025, the Fed Funds Rate is expected at 3.60% (down 75 bps), 3.40% in 2026, and 3.10% in 2027, with the long-term forecast unchanged at 3.00%. In Japan, July machinery orders fell 4.6% after rising 3.0% (forecast –1.7%). Annually, orders slowed from 7.6% to 4.9% (forecast 5.4%).
XAU/USD
Gold (XAU/USD) is holding near weekly opening levels after Fed’s decision on Wednesday. As expected, the Fed cut rates by 25 bps to 4.25%, citing labor market cooling and inflation risks linked to tariffs and geopolitical uncertainty. Powell emphasized data dependency and hinted at a continued dovish bias. The Fed also raised its GDP outlook: 1.6% for 2025 (vs. 1.4% prior), 1.8% for 2026 (vs. 1.6%), and 1.9% for 2027 (vs. 1.8%). Unemployment expectations were revised lower to 4.4% in 2026 and 4.3% in 2027. Meanwhile, the Bank of England and Bank of Japan left policies unchanged, with little direct effect on gold. Rising inflation risks and global uncertainties remain supportive for safe-haven demand.