Key Takeaways
- Strong US Producer Price Index (PPI) data has significantly impacted global markets, leading to a slide in gold prices and weakening of major currencies like the Euro and British Pound against the US Dollar, as it erodes expectations for dovish Federal Reserve policy.
- Japan's economy showed resilience with a 0.3% Quarter-on-Quarter GDP growth in Q2 2025, surpassing the 0.1% expectation, though concerns over US trade policies and persistent inflation loom.
- The People's Bank of China (PBoC) injected a net 116 billion Yuan into the market through reverse repos, while China also announced plans to issue substantial amounts of 10-year and 30-year bonds in late August.
- WTI crude oil prices rose above $63.00 a barrel amidst anticipation of a meeting between US President Trump and Russian President Putin.
A robust US Producer Price Index (PPI) report has sent ripples across financial markets, dampening hopes for an imminent dovish shift from the Federal Reserve. The hotter-than-expected inflation print led to a notable slide in gold prices, as the precious metal typically struggles in an environment of higher interest rate expectations.
The impact of the strong PPI was also keenly felt in the foreign exchange markets. The EUR/USD pair weakened as the inflation beat directly challenged previous assumptions about the Fed's policy trajectory. Similarly, the GBP/USD pair snapped its recent winning streak, reacting negatively to the hot US PPI inflation data. Even the cryptocurrency market felt the pressure, with Ethereum (ETH) experiencing a correction, partly attributed to the strong PPI reading alongside a surge in validator exits. The USD/CAD pair, however, remained largely flat above 1.3800 as traders awaited the upcoming US Retail Sales release.
In Asia, Japan's economy demonstrated stronger-than-expected growth, with its Q2 2025 GDP rising by 0.3% Quarter-on-Quarter, outperforming the anticipated 0.1% increase. Despite this positive data, Minister Akazawa cautioned that persistent inflation could dampen consumer sentiment and negatively affect Japan’s private consumption. Furthermore, US trade policies were identified as potential downside risks to Japan’s economic outlook, with "Corporate Japan" bracing for a $23 billion profit hit from potential Trump tariffs. The Japanese government also issued 4.3 trillion yen worth of Treasury discount bills.
Meanwhile, China's central bank, the People's Bank of China (PBoC), actively managed liquidity, injecting 238 billion Yuan through 7-day reverse repos at an unchanged rate of 1.40%, resulting in a net injection of 116 billion Yuan in open market operations. The PBoC also fixed the USDCNY reference rate at 7.1371. Looking ahead, China announced plans to issue ¥154 billion in 10-year bonds and ¥83 billion in 30-year bonds on August 22. In other news, Bitwise suggested that Bitcoin (BTC) and the broader crypto market could surge due to four untapped developments.
On the commodities front, West Texas Intermediate (WTI) crude oil prices climbed above $63.00 a barrel, driven by anticipation surrounding an upcoming meeting between US President Trump and Russian President Putin. In corporate news, Shein's UK revenue saw a significant jump of 32% in 2024.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.