In the first quarter, the U.S. economy contracted by 0.6% due to the implementation of Donald Trump's tariffs. In the second quarter, it showed one of its strongest growth rates in recent years, mainly due to the same trade war. While the first reading came as no surprise, the second certainly did. Still, both can be easily explained. In Q1, companies expected the worst, drastically cut imports, and many consumers chose to hold off on non-essential purchases amidst complete economic uncertainty. In Q2, the U.S. budget experienced a surge in import-related revenue, while actual import volumes continued to decline. However, the most interesting aspect is this: if tariffs increase government income—income that can be reinvested in production—then logically, we should expect further economic growth. So why, then, are so many economists talking about stagnation, stagflation, or even recession?

The problem is that nearly every key economic indicator has been deteriorating in recent months. Additional fiscal inflows are fueling U.S. economic growth, but business activity is shrinking, unemployment is rising, and the labor market is experiencing its most difficult period since the pandemic. Inflation is accelerating due to tariffs, and prices are rising while demand is declining. There's no finalized tariff structure in place either because President Trump continues to surprise markets with new levies. Recently, the White House announced new tariffs: 100% on pharmaceuticals, 50% on trucks, and 30% on furniture. This generates uncertainty and concern throughout the business community, where expectations of weaker demand are rising, even as prices continue to increase.

In light of this, I believe the Fed's rate decisions in October and December are shrouded in mystery. No one knows when the government shutdown will end, when the next inflation and labor market reports will be released, or what other tariffs President Trump plans to implement. If the situation clears up even slightly before October 29—with key statistics published—then it will be possible to make some educated predictions about the Fed's actions. However, the futures market's 96% confidence in an October rate cut seems like reading tea leaves. In my view, the probability of a rate cut at either meeting by the end of the year is 50/50.

Wave Structure for EUR/USD:

Based on the analysis, EUR/USD continues to build a bullish trend segment. Wave structure still heavily depends on news flow, Trump's decisions, and geopolitical dynamics within the White House. The current trend phase may extend all the way to the 1.2500 level. At present, a corrective wave 4 appears to be forming—or already completed. The bullish wave structure remains valid, and therefore, I am looking only for buying opportunities in the near term. By year-end, I expect EUR/USD to reach 1.2245, which corresponds to the 200.0% Fibonacci.

Wave Structure for GBP/USD:

The wave pattern for GBP/USD has evolved. We are still within an impulsive upward segment, but its internal structure has become unreadable. If wave 4 turns out to be a complex, three-wave formation, it will balance the structure—but it may also be significantly larger and longer than wave 2. In my opinion, the best reference level is 1.3341, which aligns with the 127.2% Fibonacci. Two failed breakouts of this level indicated that the market was poised for new buying opportunities. Price targets are still above the 1.3800 level.

Core Principles of My Analysis:

1. Wave structures should be simple and clear. Complex structures are hard to trade and are often subject to change.
2. If there is no confidence in market direction, it's better to stay out altogether.
3. You can never be 100% sure of directional moves. Don't forget to use stop-loss orders.
4. Wave analysis can be (and should be) combined with other types of analysis and trading strategies.