ForexLive Asia-Pacific FX news wrap: Fed's Waller laid out his case for 25bp FOMC rate cut

Waller:

1. Fed's Waller says the FOMC should cut interest rates by 25bp at the July meeting
2. More from Waller: Lots of uncertainty around long term Fed Fund rate, 3% seems right
3. Did Waller get the last word? Federal Reserve blackout ahead of July meeting begins soon.
4. Wall Street Journal on Waller comment: strongest endorsement yet for a rate cut this month

Other:

• China’s central bank injected 1.3 trillion yuan this week, the most since January
• New Zealand Credit Card Spending (June 2025) +0.9% y/y (vs. prior +2.0%)
• China's Commerce Minister: China-US economic and trade relations have gone through storms
• China threatens to block Panama Canal ports deal - want part ownership
• China’s Minister of Commerce says 2025 retail sales expected to exceed 50 trillion yuan
• Trump / Epstein cabal questions intensifying, Trump orders testimony release
• PBOC sets USD/ CNY reference rate for today at 7.1498 (vs. estimate at 7.1736)
• Wall Street Journal optimistic take: "Japan consumer inflation eases in relief for BOJ"
• Japan heads to the polls this weekend with markets watching fiscal signals
• Canada’s international trade minister says working to talk to China ASAP to address trade
• Japan June 2025 CPI remains well above the Bank of Japan target rate, still
• Wall Street Journal article on Epstein that the White House didn't want published is out
• ICYMI - US House passes three major crypto bills
• Reuters: Judge rules Trump's firing of FTC commissioner was illegal
• Fed Reserve Chair Powell says Fed board believes transparency is of the utmost importance
• Financial Times: Trump set to open US retirement market to crypto investments
• ICYMI - Trump health scare - legs swelling, minor bruising on hand. Reports are he's fine.
• Forexlive Americas FX news wrap 17 Jul: Stronger US data keeps the Fed members cautious
• Earthquake Antofagasta, Chile, Magnitude 5.4
• Major US indices close higher. NASDAQ trades new all-time high. Netflix reports earnings
• Trade ideas thread - Friday, 18 July, insightful charts, technical analysis, ideas

Early session news was crypto-positive. The Financial Times reported that Trump is expected to sign an executive order opening up 401(k) retirement plans to alternative investments beyond traditional stocks and bonds—effectively allowing access to crypto for U.S. retirement accounts.

In addition, the U.S. House passed three major crypto bills:

• The GENIUS Act, setting regulatory guidelines for stablecoins,

• The CLARITY Act, aimed at defining the broader market structure for crypto,

• And a third bill proposing a ban on central bank digital currencies (CBDCs).

Crypto markets caught a bid during the session. ETH/USD, for example, rose to its highest level since January 7, 2025.

On the Federal Reserve front, Board Governor Christopher Waller delivered a speech and Q&A in which he explicitly backed a 25bp rate cut at the upcoming July meeting. He cited growing downside risks to the economy and weakening signs in the labour market. Waller cautioned against waiting for a sharper downturn in employment, warning that delay could necessitate more aggressive cuts later.

Waller downplayed the inflationary impact of tariffs, calling them transitory, and noted that core inflation remains near the Fed’s target in the absence of trade-related pressures. He sees limited upside risks to inflation, with GDP growth hovering around 1% and private-sector hiring “near stall speed.” A July cut, he said, could give the Fed room to pause in the months ahead, bringing policy closer to a neutral stance as the economy slows.

As more than one analyst has pointed out, its difficult to see too much labour market weakness in the US. Its not clear what Waller is seeing that others are not.

The U.S. dollar broadly declined during the session. The DXY index fell around 1%, with notable gains in the EUR, AUD, NZD, GBP, and CHF. Waller’s remarks appeared to be the initial catalyst for the move. Which is curious given that, only Waller and Bowman have publicly expressed support for a 25bp cut in July. Other FOMC participants have signalled a preference for holding steady. The Fed’s pre-meeting blackout period begins Saturday and runs through July 31.

From Japan, June CPI data showed all three key measures remained above the Bank of Japan’s 2% target:

• Headline CPI: +3.3% y/y (vs. expected 3.3%, prior 3.5%)

• Core CPI (ex. fresh food): +3.3% y/y (expected 3.3%, prior 3.7%)

• Core-core CPI (ex. fresh food & energy): +3.4% y/y (expected 3.3%, prior 3.3%)

While the USD gained broadly, the stronger CPI data offered some support to the yen.

From China, the People’s Bank injected 1.3 trillion yuan into the banking system this week—its largest short-term liquidity boost since January—to ease tightening funding conditions driven by tax payments and surging government bond issuance. Daily injections peaked midweek at 444.6 billion yuan before moderating to 102.8 billion yuan on Friday, with repo rates falling for three straight days—suggesting the measures are easing market stress.

In political news, The Wall Street Journal published a bombshell report detailing close personal ties between Trump and Jeffrey Epstein and 'secrets' shared. Trump has threatened legal action against the paper and its owner, Rupert Murdoch, while ordering the release of a limited batch of documents related to the scandal.

Asia-Pacific equities mostly benefited from a strong handover after U.S. stocks hit fresh record highs:

• Australia (S&P/ASX 200): +1%

• Hong Kong (Hang Seng): +1%

• Japan (Nikkei 225): -0.3%

• Shanghai Composite: +0.5%

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Have a great weekend, join me on Monday as we transition from ForexLive to InvestingLIve!