Reflecting mounting tension in the Fed’s dual mandate (full employment vs. stable prices), Thursday’s hotter than expected CPI print (+0.4% m/m vs. est. +0.3%) was overshadowed by the unexpected surge in weekly initial jobless claims to 263,000 (vs. 235k est.), the highest since Oct. ’21. Fed funds futures are now firmly pricing in 25bps rate cuts at the Fed’s three remaining ’25 FOMC meetings.
Commerce Secretary Lutnick shared the administration’s assessment of how markets are absorbing burdens of the Trump tariff regime. Lutnick stated, 1.) 10% tariffs or less are being paid by the manufacturers, the distributors, the businesses (“the consumer doesn’t pay”), 2.) duties between 10% and 15% are being born in a 60-40 split between manufacturers and consumers (resulting in a 2% consumer price increase at the 15% tariff rate), and 3.) tariffs above 15% (especially China’s 52% tariff rate) are being born largely by foreign governments who are stepping in to keep domestic businesses afloat while negotiating better terms.
Switzerland is proposing that its gold industry build a refinery in the United States (or increase its processing capacity there) as a component of plans to reduce the blanket 39% U.S. tariff rate imposed August 7. The U.S. goods trade deficit with Switzerland is composed largely of Swiss exports of chemicals, pharmaceuticals and gold products, so establishing gold refining capacity in the U.S. would help level bilateral trade flows.
DXY dollar index +0.15%, spot gold +0.35% and spot silver +1.5% (gold/silver ratio at 86.4).
