This outlook contains information correct as at 1400hr on 05 Aug 2025
The US economy started August on a sour note. Figures released by the Bureau of Labour Statistics (BLS) last week showed July Non-Farm Payrolls rose by 73,000 (Bloomberg median estimate of 104,000). The shocker was when Non-Farm Payrolls increases in May and June were revised downwards by 258,000 jobs, bringing the three-month average gain down from 150,000 jobs to just 35,000. The unemployment rate ticked up to 4.2% from 4.1%.
President Trump’s reactionary move to fire the Bureau Labour Statistic commissioner, the top US economic statistician, may sow distrust in US economic data in the future. “If this holds, and I assume it will, it would be a very big deal. We would not be able to have great confidence in the integrity of the data going forward,” said Julia Coronado, founder of the research firm MacroPolicy Perspectives. Trump also renewed his attacks on Federal Reserve Chair Jerome Powell, indicating that he should be put “out to pasture.”
On 1 Aug, President Trump signed an executive order for “reciprocal” tariffs on 69 countries, effective 7 Aug, with rates ranging from 10% to 41%. ASEAN countries had their tariffs adjusted slightly lower, with Singapore enjoying the lowest 10% baseline rate. Much uncertainty in global trade remains as supply chains work through these tariffs. The table below shows percentages of US imports from various countries.
At its latest 29 - 30 Jul 2025 FOMC meeting and in line with market expectations, the Federal Reserve kept its Funds rate unchanged in a range of 4.25% - 4.50%. However, with the latest poor jobs report, markets are now pricing an 84% chance of Fed easing 0.25% next month at the Sept FOMC meeting.
This may be followed by two more 0.25% cuts in Oct and Dec, bringing the Fed Funds Rate to 3.50% - 3.75% by the end of 2025. The unexpected resignation of Fed Governor Adriana Kugler might accelerate future easing as Trump might replace her with a more dovish candidate.
Market Outlook: Growth Drivers vs Near-Term Risks
The long-term outlook for equities remains positive, supported by AI adoption, solid earnings from mega-cap technology companies, potential Fed rate cuts and resilient growth. However, near-term volatility driven by tariff uncertainties could prompt a market correction within the 5% – 15% range.
Some of Wall Street’s biggest firms are warning clients to prepare for a major market pullback as sky-high equity valuations combine with slowing US economic data.
On Sunday, 3 August, the eight countries that make up OPEC Plus announced they would boost oil production by 547,000 barrels per day beginning in September. The production increase comes amid forecasts that supply will soon exceed demand and will likely keep oil prices soft going forward. President Trump said he would be “substantially raising” the tariff on Indian goods over India’s purchases of Russian oil. This might put further pressure on oil prices as Russia may be forced to discount its oil price further. WTI trades around USD65.60 (1 Jul USD64.20)
The DXY USD index dropped last Friday (1 Aug) after data showed US employers added fewer jobs in July. However, a look at the Big Mac Index may give us a better idea of how much more the USD may weaken against various currencies.
For almost four decades, The Economist has been producing the Big Mac index, which uses the prices of this eponymous delicacy around the world to construct a quick and dirty guide to exchange rate distortions. The theory is that currencies should have “purchasing-power parity”, meaning their exchange rates should adjust to ensure equivalent currency units can buy the same thing. A look at the Index shows that European currencies have to strengthen appreciably against the USD, whilst the non-European, especially Asian currencies, have some way to go.
Overnight US 10-Year Treasuries closed unchanged at 4.19% (1 Jul 4.22%), Australian 10-Year Govt Bonds closed down 0.11% at 4.2% (1 Jul 4.12%), and Euro 10-Year Bonds closed down 0.05% at 2.62% (1 Jul 2.60%).
Sources: Bloomberg, MSNBC, Reuters, Morningstar, Business Times, 05 Aug 2025
AUDUSD could not advance, although at its July MPC meeting, the RBA kept its cash rate steady at 3.85%. This is because markets expected the Central Bank to deliver three more interest rate cuts by early 2026, bringing its cash rate to 3.10% in the first quarter of 2026 from the current 3.85%. Furthermore, hanging over everything else is how tariffs will affect Australia’s single largest trade partner, China.
AUDUSD has still been unable to break above the 61.8% Fibonacci Resistance Zone at 0.6460 – 0.6600 despite several attempts over the last two months. AUDUSD has now dropped to test the bottom Support of the Zone around 0.6460. We maintain a bearish view for the next move to be down to the 0.6200 – 0.6300 Support Zone
Image Source: Bloomberg 05 Aug 2025
The Euro took a hit last week after the EU was forced to accept 15% tariffs on most of its exports to the US. Several EU leaders criticised the trade agreement with German Chancellor Friedrich Merz, saying his country would suffer significant damage due to the agreed tariffs. However, EURUSD may receive some support as the Euro area economy is showing surprising resilience and the ECB kept interest rates unchanged at its 24 Jul meeting. This comes after cutting interest rates at each of its last four meetings this year, taking its key deposit facility from 3% in Jan to 2% in Jun.
EURUSD move up was stopped at strong Resistance around 1.1820 forcing it to drop through 50% Fibonacci Support at 1.1490. EURUSD is trying to consolidate around this level, but it appears the expected correction has started for a move lower to around 1.1150 Support.
Image Source: Bloomberg 05 Aug 2025
Weak British economic data is supporting expectations of more Bank of England rate cuts, and together with rising Eurozone bond yields, is supporting the EUR against the GBP and weighing on GBPUSD. However, USD weakness after disappointing Non-Farm Payrolls and Manufacturing PMI data may provide a modicum of support.
GBPUSD ran out of momentum and was unable to hold above Resistance at 1.3650. The expected consolidation around 1.3650 did not happen, and GBPUSD moved down into the Support Zone at 1.3200 – 1.3400 earlier than expected. There will likely be a consolidation in the Zone before another push down to the 1.3000 area.
Image Source: Bloomberg 05 Aug 2025
The JPY has been weakening against the USD as BoJ kept its overnight call rate at 0.5% and on political uncertainty over PM Ishiba’s future as the country’s leader. Further pressure came as Japanese stocks fell, led by Banks and Exporters as well as concerns on how US tariffs will affect the economy.
USDJPY moved up to challenge the psychological Round Figure Target at 150.00 but was unable to hold gains and has since suffered a sharp pullback. For August, we might see range trading within 145.00 – 150.00 in the wider 140.00 – 150.00 range.
In its July Monetary Policy Statement, the Monetary Authority of Singapore (MAS) announced it will be maintaining the prevailing rate of appreciation of the SGD Nominal Economic Exchange Rate policy band (estimated at 0.5% p.a.), with no changes to its width and the level at which it is centred. The move was aligned with Bloomberg consensus, and we can expect gradual SGD appreciation.
Singapore’s Q2 GDP grew 4.3% YoY (Q1 4.1% YoY), however MAS projects Singapore’s economy to be “relatively subdued” for the rest of the year.
Our view of a further drop in USDSGD did not happen, instead it broke out of the Downtrend Channel and moved up to challenge Resistance at 1.3000. However, upward momentum has diminished, and USDSGD has dropped and may move lower towards Support at 1.2800. In the next few weeks, we might see range trading between 1.2750 – 1.3000.
AUDSGD has been unable to hold gains in the Resistance Zone at 0.8400 – 0.8500 and keeps falling back. We maintain a bearish view for a drop down to the 0.8100 – 0.8200 area.
Image Source: Bloomberg 05 Aug 2025
Over the last four months and to date, Gold has been unable to break above strong Resistance at USD3,440, and the bottom has been supported above the USD3,250 area. Fundamentally, all the “good/bad” news supporting Gold is known, i.e. Central Bank buying, geopolitical events and conflicts, tariffs, Fed rate cuts, etc. Technically, Gold is vacillating around the 50 Days Moving Average (yellow line on chart) and has made four Tops, which is a bearish indicator.
One can conclude from this late stage that the Bulls might hold up that Gold. The next move may be down to test Support at USD3,200.
Note: In Candlesticks Chart, Green bars mean the Close is higher than the Open price, and Brown bars mean the Close is lower than the Open price
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