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A collection of good and bad news affecting the foreign exchange market
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Hello everyone, today XM Forex will bring you "[XM Forex Official Website]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
1. The U.S. dollar: a mix of good news and bad news, the index fluctuates and needs to be broken through
Positive factors
Safety demand supports U.S. dollar liquidity: the U.S. federal government's "shutdown" crisis continues to simmer, and the two parties in Congress have not yet reached a consensus on the budget bill. The rising risk aversion in the market has driven the influx of funds into U.S. dollar assets. At the same time, the new U.S. sanctions on Russian energy have triggered concerns about the global supply chain, further strengthening the safe-haven nature of the U.S. dollar.
Marginal improvement in economic data: The number of initial jobless claims in the United States fell to 215,000 last week, lower than the expected 225,000, indicating that the labor market resilience still exists; the core PCE price index rose by 3.2% year-on-year in September, in line with the Federal Reserve's inflation control goals, and enhanced market confidence in policy stability.
Negative factors
Interest rate cut expectations suppress the dollar's upside: The market is betting that the probability of the Federal Reserve cutting interest rates by 25 basis points in December has risen to 65%, mainly because U.S. retail sales only increased by 0.1% month-on-month in September, lower than the expected 0.3%, and signs of slowing economic recovery momentum are emerging. If subsequent inflation data declines, interest rate cut expectations may further increase.
Gold diverts U.S. dollar demand: The international gold price breaks through the $4,100/ounce mark, and central banks continue to purchase gold coupled with concerns about inflation, attracting funds to shift from the U.S. dollar to gold. Last week, www.xmhouses.comEX gold futures net long positions increased by 12%, forming an indirect suppression of the U.S. dollar.
2. Euro: Policy and data game, exchange rate is under pressure and fluctuates
Positive factors
Energy cost pressure eased: Although Brent crude oil price rebounded to US$65.8/barrel on October 27, it fell 18% from the September high, and European natural gas inventories remained at 9The historical high of 2% has significantly reduced the euro zone’s energy import expenditures, and the trade deficit is expected to narrow.
ECB officials released a hawkish signal: ECB Governing Council member Holzmann said that if the risk of a rebound in inflation intensifies, he will not rule out restarting interest rate hikes. Market expectations for the ECB to maintain a high interest rate cycle have increased, in contrast to the Fed's expectations for interest rate cuts.
Negative factors
The risk of economic recession has intensified: the preliminary manufacturing PMI value of the Eurozone fell to 43.8 in October, below the boom-bust line for 15 consecutive months; Germany’s GDP in the third quarter fell by 0.3% month-on-month, falling into a technical recession, weakening the attractiveness of euro assets.
Geographical conflicts have dragged down the Eurozone economy: Tensions in the Middle East have boosted risk aversion, and the euro has been sold off as a risk currency. The euro fell 0.8% against the US dollar last week, retreating to the key support level of 1.1550.
3. RMB: The central bank’s operation supports the bottom line, and the exchange rate resilience is highlighted
Positive factors
The central bank’s precise drip irrigation of liquidity: The People’s Bank of China launched a 900 billion yuan one-year MLF operation on October 27, fully hedging the maturity amount of the month and achieving a net investment of 200 billion yuan. The operating interest rate remained stable at 1.40%, releasing a signal of stable growth and enhancing market confidence in the RMB.
Foreign-funded institutions are optimistic about Chinese assets: Foreign giants such as Goldman Sachs and JPMorgan Chase have made intensive statements recently, believing that China's economic fundamentals are improving and policy efforts are expected to attract more foreign capital inflows. Last week, the net inflow of northbound funds exceeded 30 billion yuan, forming support for the yuan.
Negative factors
The pressure of inversion in the interest rate differential between China and the United States still exists: the current interest rate difference between China and the United States 10-year treasury bonds still remains at -80 basis points. Although the MLF operation stabilizes market expectations, interest rate differential factors still pose a potential suppression on the RMB exchange rate.
Concerns about the slowdown in export growth: Although my country's goods trade surplus reached 572.4 billion yuan in August, export growth fell back to 2.3% year-on-year in September. If external demand continues to be weak, it may weaken the current account's support for the renminbi.
4. Japanese yen: Loosening expectations dominate, and the exchange rate continues to be weak
Positive factors
Expectations for policy adjustment by the Bank of Japan have increased: Japan's core CPI rose by 2.8% year-on-year in September, above the 2% target for 18 consecutive months. The market speculates that the Bank of Japan may further reduce the size of the YCC at the December policy meeting, and some profit-taking has occurred in short positions in the Japanese yen.
Marginal boost in safe-haven demand: The escalation of global geopolitical risks has led to some safe-haven buying of the yen. The US dollar against the yen fell back to around 146.5 last week, away from the previous high of 148.2.
Negative factors
The tone of the easing policy has not changed: Bank of Japan Governor Kazuo Ueda made it clear that the current recovery in inflation is still driven by costs, and there is no condition for exiting the easing policy. Expectations of policy easing continue to suppress the yen.
The trade deficit continues to expand: Japan’s trade deficit reached 620 billion in SeptemberYuan, with a deficit for 12 consecutive months, high energy import costs and weak exports have weakened the support for the Japanese yen exchange rate.
5. Core trading tips
Risk warning: Today we need to focus on the US September durable goods orders data (20:30) and the European Central Bank meeting minutes (19:30). If the data exceeds expectations or the minutes release a hawkish signal, it may trigger violent fluctuations in the foreign exchange market.
The above content is all about "[XM Foreign Exchange Official Website]: Collection of good and bad news affecting the foreign exchange market". It is carefully www.xmhouses.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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