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Wall Street indices closed lower yesterday, with the S&P 500 shedding 0.50% and the Nasdaq down 0.5%. The retreat was driven by strong US economic data and subsequent hawkish commentary from central bankers, which collectively diminished the probability of Fed rate cuts.
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Strong US data included an upward revision to Q2 GDP growth, which ultimately printed at 3.8% (up from a preliminary 3.3%). This was complemented by low initial jobless claims and solid figures for durable goods orders.
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Gold displayed considerable resilience against the dollar's strengthening and reduced rate-cut expectations, managing a 0.3% gain during the session.
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EUR/USD slipped below the pivotal 1.17 level, likely marking its first weekly decline after three consecutive weeks of gains.
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President Trump announced a 100% tariff on branded and patented medicines, causing a sharp sell-off in pharmaceutical companies and raising global health sector concerns. Trump also escalated tariffs on trucks and furniture.
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Market uncertainty is exacerbated by the return of trade tensions, the looming risk of a US government shutdown (Congress has until September 30 to pass a budget), the start of earnings season, and ambiguity regarding the Fed's future path.
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The White House has instructed government agencies to prepare for furloughs amid the high probability of a government work stoppage.
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Conflicting Fed views: Stephen Miran advocates for faster rate cuts; Michelle Bowman supports further reductions due to a weakening labour market; while Austan Goolsbee warns against tariff-induced inflation and does not support a series of rapid cuts.
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Crude oil gained during the session, driven by continued uncertainty over potential sanctions on Russia and domestic Russian fuel market restrictions. After initial dips, WTI crude rose above $65 per barrel, though a slight retreat is observed today.
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Attention today turns to the release of key US labour market data set for 14:30 CET.
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