Weekly Summary: German Retail Sales Drop 1.5%, US Dollar Falls 2% on 86% Fed Rate Cut Bets

German Retail Sales Fall Sharply, Hint at Weak Consumer Demand

Germany's retail sales fell by -1.5% MoM in July, a steep drop from expectations of -0.4%, reflecting weaker household spending. This miss suggests a slowdown in domestic consumption, which is a critical component of Germany’s economy. The data points to deteriorating consumer confidence and possibly the impact of inflationary pressures. With the eurozone's largest economy under pressure, this reading could weigh on overall Eurozone GDP. Markets may view this as bearish for the euro (EUR). A recovery in retail performance will likely depend on wage growth and consumer sentiment stabilizing.

Dollar Drops as Fed Rate Cut Bets Climb Amid Political Heat

The US dollar is on track for a 2% loss in August as investors bet on a September rate cut amid dovish Fed signals. Political tension surged as President Trump tried to oust Fed Governor Lisa Cook, raising alarms over central bank independence. Markets fear a politicized Fed may spark long-term inflation if rates are held artificially low. Short-term yields have fallen, while long-term yields are rising — steepening the curve. Despite legal noise, investors remain cautious but not panicked. Credibility concerns may reduce global demand for US debt, affecting the dollar further.

All Eyes on PCE Inflation Data as Fed’s Next Move Hangs in Balance

Investors await the PCE price index, the Fed’s preferred inflation gauge, expected at 2.6–2.9% YoY. A reading above 3% could challenge rate cut bets, while a soft print will likely cement a September rate cut. The market is currently pricing in an 86% chance of a cut. This follows a dovish tone from Fed Governor Waller, who expects multiple cuts ahead. However, with economic growth still resilient, the Fed must carefully balance easing with inflation control. Next week's non-farm payrolls will also be critical for confirming policy direction.

Oil, Stock Futures Dip Ahead of Key Inflation Report

US stock-index futures slipped and oil prices dropped 0.5%, reflecting caution before the PCE inflation data release. Markets are digesting stronger-than-expected Q2 GDP growth at 3.3%, which complicates the inflation outlook. The S&P 500 recently hit a record high, raising fears of overheated valuations. Oil’s pullback was also driven by fading hopes for a Russia-Ukraine peace deal, which would have increased global supply. If inflation runs hot, it could derail expectations of a near-term rate cut. Investors are repositioning for volatility in the coming sessions.

Gold Steady Near Highs, Breakout to $3,800 in Sight

Gold remains well-supported as it trades just below the $3,500 resistance level. Buyers continue to emerge on dips, forming a reliable ascending triangle pattern over the summer. A breakout above $3,500 would target $3,800, based on technical projections. The 50-day EMA acts as strong dynamic support, while broader macro uncertainty fuels safe-haven demand. Thin volumes due to the holiday season may exaggerate moves. Unless gold breaks below $3,200, sentiment remains firmly bullish.

China Stocks Soar as Goldman Raises Target, Momentum Builds

China's CSI 300 index gained up to 1.2% as Goldman Sachs raised its 12-month target to 4,900, citing earnings strength and economic resilience. Investor optimism is running high, with record turnover showing strong retail participation. However, Morgan Stanley warned of signs the market may be overheating. A flood of earnings reports and central bank support continue to attract inflows. Despite ongoing property sector issues and US tariffs, the rally remains intact. The rally reflects both domestic liquidity and global capital rotation.