Going Nowhere

August 27, 2025

Elias Haddad

USD is broadly firmer within this month’s narrow range. There are no policy-relevant economic data releases today.

French bonds and stocks continue to underperform peers. But drag to EUR is limited.

Australia’s July inflation ran hot and argues for a gradual RBA easing path.

USD is firmer across the board, though it continues to trade within this month’s narrow range. Nevertheless, political interference with the Fed’s independence and a dovish Fed will continue to undermine USD.

Fed Governor Lisa Cook's exit from the Fed could ultimately give President Donald Trump greater opportunity to tighten his grip on the central bank by appointing a replacement aligned with his dovish monetary policy agenda. In the meantime, Cook is seeking court approval for her continued right to carry on in her role at the Fed. If it succeeds, she could return to work while legal proceedings are ongoing.

US consumers are more pessimistic about future job availability. The Conference Board Consumer Confidence labor differential index (jobs plentiful minus jobs hard to get) dropped 1.3 points to 9.7 in August, the lowest since February 2021 and indicative of a rapid rise in the unemployment rate. Indeed, Fed Chair Jay Powell warned last week that “downside risks to employment are rising.”

Risk is the Fed delivers deeper rate cuts than the markets expect. Fed funds futures price-in nearly 90% odds of a 25bps cut at the next September 17 meeting and a total of 50bps of easing by year-end.

FRANCE

EUR/USD is heavy near the lower end of this month’s 1.1550-1.1740 range. French political uncertainty may further widen French OAT- German Bund yield spreads but it’s unlikely to weigh meaningfully on EUR as the situation remains country-specific and not systemic.

AUSTRALIA

AUD/USD is down but remains within its multi-month 0.6400-0.6600 range. Australia’s July inflation ran hot and argues for a gradual RBA easing path. Headline CPI increased to a one year high at 2.8% y/y (consensus: 2.3%) vs. 1.9% in June driven by increases in electricity prices in NSW and ACT. The trimmed mean CPI, which excludes the impact of irregular or temporary price changes like the rise in electricity prices, rose to a three-month high at 2.7% y/y vs. 2.1% in June, and tracking a little above the RBA’s 2.6% forecast.

It’s worth noting, the Australian Bureau of Statistics (ABS) will be transitioning from the quarterly CPI to a complete Monthly measure of the CPI in November 2025. The Monthly CPI will become Australia’s primary measure of headline inflation, replacing the quarterly CPI.

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