Trade policy remained fluid throughout the week. Trump reduced Indonesian tariffs to 19% from 32% and signaled progress with Vietnam, suggesting the administration may pursue bilateral agreements before implementing broader measures. June Consumer Price Index data already showed tariff-related inflation lifting costs of core goods including audio equipment and furnishings, raising questions about Federal Reserve policy response.
Federal Reserve Independence Under Fire as Policy Outlook Changes
Markets experienced sharp volatility when rumors emerged that Trump planned to remove Fed Chair Jerome Powell. While Trump later clarified “We’re not planning on doing it,” the episode highlighted ongoing tensions over central bank independence and policy direction.
Fed Governor Chris Waller struck a notably dovish tone, backing rate cuts and citing weakening private-sector labor data. However, inflation data complicated the outlook. Headline CPI rose 0.3% monthly to 2.7% annually, while core CPI matched estimates at 2.9% yearly. Producer Price Index remained flat, creating mixed signals for policymakers weighing tariff-driven price pressures against broader disinflationary trends.
Strong Economic Data Reduces Rate Cut Urgency
Robust U.S. economic indicators undermined aggressive easing expectations throughout the week. June retail sales surprised to the upside while initial jobless claims declined to three-month lows, reinforcing economic resilience. The data prompted markets to pare back rate cut expectations from 50 basis points to 45 basis points by year-end.
Dollar strength from solid fundamentals pressured gold as an alternative store of value. The Dollar Index gained 0.61% for the week, making bullion more expensive for international buyers while reducing the urgency for monetary accommodation.
Gold Outlook: Policy Uncertainty Supports Defensive Positioning
Fundamental crosscurrents suggest continued volatility ahead. Trade tensions provide ongoing safe-haven support while strong economic data reduces Fed dovishness. UBS commodity analyst Giovanni Staunovo noted that policy uncertainty and geopolitical risks continue underpinning gold’s defensive appeal.