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29/08/2025 - 07:00 UTCThe USDX is advancing on Friday, showing a recovery after its move down by 0.31% on Thursday, and is now trading around 98.00. The dollar is receiving support from a strong US economy, which expanded at a faster-than-expected annual rate of 3.3% in the second quarter. Traders are now looking to the upcoming July Personal Consumption Expenditures (PCE) data, the last key inflation report before the Federal Reserve's September meeting, with core PCE forecast to rise 2.9% year-over-year. In recent comments, Fed Governor Christopher Waller stated he would support a rate cut in September to prevent a collapse in the labor market. However, concerns about the Fed's independence have deepened after US Vice President JD Vance confirmed in an interview that the central bank's autonomy has ended.
Chinese stocks continued to perform well on Friday, leading regional markets after a stellar August. In contrast, Japanese shares fell on a series of disappointing economic data. The China SSE advanced 0.49% near a three-year high, while the China SZSE climbed 1.24%, nearing a 10-year peak as of 06:00 AM GMT. At the same time Hong Kong 50 rose 0.45%, close to a recent four-year high. These markets were boosted by Beijing's efforts to promote domestic chip production and signs of a soft economy, which fueled expectations for more stimulus measures. Mainland Chinese indices significantly outperformed other markets in August, with the China SSE and China SZSE gaining over 8% and 15% respectively for the month.
A major rally in Chinese chipmaking stocks cooled on Friday while a number of major Hong Kong-listed Chinese companies, including Alibaba Group, BYD Co Ltd, and banks like Industrial and Commercial Bank of China Ltd, and Bank of China HK, are expected to report earnings later in the day.
Japanese markets barely moved following negative economic readings, as industrial production shrank more than anticipated in July, and retail sales data also underwhelmed. While Tokyo consumer inflation eased as expected, core inflation remained elevated, keeping alive expectations for more rate hikes from the Bank of Japan.
The main US equity indices advanced on Thursday, with the US 500 reaching a new record high. This was driven by an upward revision in second-quarter GDP data and growing speculation that the Federal Reserve will cut interest rates in September. This market support is largely based on the high probability of a rate cut, even though some officials, including Fed Chair Jerome Powell, remain non-committal due to uncertainties surrounding the inflation impact of trade tariffs.
In corporate news, Dell Technologies' second-quarter performance was boosted by strong enterprise spending on AI servers, with the company reporting adjusted EPS of $2.32 on revenue of $29.78 billion, surpassing analyst expectations. The client solutions group also saw a 1% year-on-year rise. However, the company's stock notably moved 1.34% up Thursday, before its soft guidance for the current quarter which overshadowed the positive results. For the full year, Dell raised its adjusted EPS and revenue forecasts, now expecting adjusted EPS of $9.55 on revenue of $105B to $109B, a significant increase from its previous guidance. The company also raised its full-year AI server sales forecast to $20B.
On the cryptos front, Bitcoin slipped to around $111,000 on Friday after a 1.18% increase on Thursday, with the cryptocurrency now down 1.38% as of 06:28 AM GMT on Friday. Despite a slight rebound, Bitcoin has fallen more than 10% from its record high in August and is poised for its first monthly drop since April.
The EUR/USD pair, after a 0.27% move up on Thursday, is now losing ground, trading around 1.1660 as traders exercise caution ahead of key economic data from Germany. Focus will also turn to the upcoming US Personal Consumption Expenditures (PCE) Price Index data for July, the last major inflation report before the Federal Reserve's September meeting. The pair's recent depreciation is linked to a recovering US Dollar, which has been buoyed by the US economy's stronger-than-expected 3.3% annualized GDP growth in the second quarter.
However, the USD may face renewed challenges from dovish sentiment as Fed Governor Christopher Waller has voiced support for a September rate cut, and political concerns over the Fed's independence have grown following comments from US Vice President JD Vance confirming the end of the central bank's autonomy.
The European Central Bank's (ECB) July meeting minutes also indicated a cautious outlook, with policymakers citing downside risks to growth over the next two years.
Gold prices are edging lower during the early European session on Friday, retreating from a five-week high of $3423.3 reached on Thursday. The decline was mainly attributed to profit-taking and a firmer dollar index (USDX), which is supported by positive US economic data such as strong GDP growth and an optimistic initial jobless claims report.
These dynamics are occurring in a context where market participants are considering the potential for a Federal Reserve interest rate cut in September, a factor that could impact on the opportunity cost of holding the precious metal. New York Fed President John Williams's recent dovish comments have also contributed to this sentiment. The market's attention is currently focused on the July US Personal Consumption Expenditures (PCE) report, which is expected to show headline inflation rising by 2.6% year-over-year and core inflation by 2.9%.
On Thursday, the two primary crude benchmarks, WTI and Brent, moved up by 0.63% and down by 0.25% respectively. Earlier in the week, prices were supported by Ukrainian attacks on Russian oil terminals and a statement from the German Chancellor that no meeting would be held between Russian and Ukrainian leaders.
However, several factors are now weighing on prices, including the approaching end of the US summer driving season and an increase in supply as major producers conclude voluntary output cuts. Analysts from Commonwealth Bank of Australia anticipate that rising OPEC+ supply and a seasonal drop in refining activity will lead to a buildup in global oil stockpiles, forecasting Brent crude to fall to $63 per barrel in the fourth quarter of 2025.
Investors are currently monitoring the US and European response to recent Russian attacks on Kyiv. Also under watch is India's reaction to US pressure to stop buying Russian oil, following the recent imposition of tariffs. Additional supply-side factors include Saudi Arabia potentially lowering its October crude prices for Asian buyers and the recent resumption of Russian crude supplies to Hungary and Slovakia via the Druzhba pipeline after a recent outage.
The US 500 index surpassed 6,500 on Thursday, with its trajectory toward new record highs dependent on further evidence that a September interest rate cut is forthcoming. The broader US economy continues to show strength, with Gross Domestic Product (GDP) growth accelerating to an annualized 3.3% in the second quarter, exceeding expectations. However, the market's reaction to the GDP data has been limited as traders are bracing for the upcoming Personal Consumption Expenditures (PCE) inflation report. The data will be a significant factor influencing the Federal Reserve's rate-cut decisions, as inflation remains a concern, with July's core PCE inflation expected to rise to 2.9% year-over-year.
A major focus for the market was on Nvidia, which posted strong quarterly revenue after the closing bell on Wednesday. Despite posting a 56% revenue growth in the second quarter, the stock saw overnight declines after investors noticed the chipmaker’s forward guidance did not include additional chip sales to China. Other global chipmakers also fell in tandem with Nvidia before a recovery pared away some of the losses.
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