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Hello everyone, today XM Forex will bring you "[XM Forex Decision Analysis]: The probability of the Federal Reserve cutting interest rates has soared, the U.S. dollar index remains range-bound, waiting for U.S. data." Hope this helps you! The original content is as follows:
On Tuesday in Asian trading, the U.S. dollar index fluctuated around 100.20. On Monday, the global foreign exchange market showed a divergent trend. The U.S. dollar index fell slightly by 0.1% to 100.15, mainly affected by the continuous dovish signals released by Federal Reserve officials. At the same time, the U.S. dollar bucked the trend and rose 0.2% against the yen to 156.755 yen. The market remained highly vigilant about possible intervention by the Japanese authorities in the foreign exchange market. As the debate within the Federal Reserve over "retrospective data" and "forward-looking factors" continues, currency market volatility is expected to further intensify, and investors need to be wary of possible unexpected moves during the holidays.
U.S. dollar: As of press time, the U.S. dollar index is hovering around 100.20. The prospects for the progress of the Ukrainian peace negotiations and the future release of the "Beige Book" may bring downward risks to the U.S. dollar. The resistance faced by the U.S. Dollar Index in the 100.25 to 100.35 range may be difficult to break. Technically, the U.S. dollar index is still in a strong area above the 200-day moving average (99.812), but the market is gradually falling back towards this key threshold: if it falls below 99.851, it may further test the 99.693 pivot level; on the upside, the resistance is at 100.395. If this level is exceeded, it will open the way to 101.977.
Cross-currency capital flows restricted the US dollar index from breaking above 100.182. The yen traded at 157.161 against the U.S. dollar. The market continues to pay attention to the risk of intervention by the Japanese government. Although the verbal warning from the Japanese authorities has slowed down the depreciation of the yen, it has failed to reverse the trend. If actual intervention occurs, the U.S. dollar may fall back briefly against the yen, but it may not change the overall flow of U.S. dollar funds. EURUSD rose to 1.1552 after www.xmxmxm.cnments from New York Fed President John Williams suggested there was room for a rate cut; GBP/USD held steady at 1.3118, pending UK fiscalBudget release; NZD/USD hovers at 0.5603 as traders prepare for expected interest rate cut by the Reserve Bank of New Zealand (RBNZ); Australian dollar/USD trades at 0.6454, awaiting the release of Consumer Price Index (CPI) data. Volatility in these cross-currency currencies has www.xmxmxm.cnbined to depress the overall trend of the U.S. dollar.
The decline in long-term government bond yields coupled with thin market liquidity has restricted the U.S. dollar's ability to build upward momentum. The dollar failed to find the support typically provided by strong yields or good data as investors were reluctant to increase exposure ahead of the long weekend.
According to the Wall Street Journal, Daley, president of the San Francisco Fed and a 2027 FOMC vote member, said she supports an interest rate cut next month because she believes a sudden deterioration in the job market is more likely than a sudden rise in inflation and is more difficult to control. "On the labor market, I'm not confident that we can get ahead. The labor market is fragile enough now that the risk is that non-linear changes occur," she said in an interview on Monday. The risk of an inflationary outbreak is lower in www.xmxmxm.cnparison, as tariff-driven cost increases are much more modest than expected earlier in the year, she said. Daly's views are noteworthy because, although she has no vote on monetary policy this year, she has rarely disagreed with Fed Chairman Jerome Powell in public. Daly is likely to play a key role in resolving disagreements within the rate-setting www.xmxmxm.cnmittee over whether to cut rates or pause rate hikes at the December 9-10 meeting.
ECB Governing Council Member Nagel said that the ECB must continue to pay attention to the aftermath of the surge in inflation after the COVID-19 epidemic, including rising food prices and cost rigidity in the service industry. Nagel noted that while price growth currently hovers around the 2% target level and is expected to remain stable over the medium term, the post-crisis impact "is still evident in some cases". Nagel, seen as one of the more hawkish policymakers at the ECB, cited surveys showing the public remains concerned that euro zone prices could rise further. He said: "Of course the European Central Bank will pay attention to this situation, and will also pay attention to the continued high inflation in the service industry."
The Federal Reserve will hold its next meeting on December 9th and 10th, which coincides with the release of two key economic data. According to the U.S. Department of Labor, the November non-farm payrolls report will be released on December 16 (October non-farm payroll data was canceled due to the government shutdown, and some data have been incorporated into the November report), while November CPI data is scheduled to be released on December 18. These two reports are respectively related to the labor market and inflation levels, which are the indicators that the Fed is most concerned about.As a result, a voice quietly rose in the market: If the Fed insists that it is driven by data, should it consider postponing the December meeting until it gets www.xmxmxm.cnplete delayed data. Ernst & Young economist Gregory Daco said that it is extremely rare for the Fed to adjust the date of a meeting, but given that the release date of new employment and inflation data is only one week away from the scheduled Fed meeting, postponing the meeting by one week seems to be a more ideal choice. Logan Mohtashami, chief analyst at HousingWire, also believes that the Fed should postpone next month's meeting until December 16 after receiving the report.
UBS pointed out that the Fed’s meeting schedule next month faces an “awkward” situation: its December FOMC meeting will be held before the release of two key employment reports, and these two reports are precisely the core data for deciding whether to cut interest rates. This has prompted the market to begin discussing the possibility of whether the Fed will postpone its scheduled meeting on December 10 by a week in order to have key employment data before making decisions. Looking back on the past, it is not impossible to adjust the meeting time. In 1971 and 1974, the Fed postponed meetings due to special circumstances. From a rule perspective, the Federal Reserve Act only requires the FOMC to hold at least four meetings a year and does not make rigid provisions for date adjustments. UBS pointed out that historically a single employment report was enough to change the direction of monetary policy, but this time the Fed is facing the risk of losing two reports. If the meeting is indeed postponed, it will increase policy uncertainty, but may improve the quality of decision-making.
The stock market - especially technology stocks - has been a little jittery recently, but HSBC's multi-asset strategists believe now is the time to buy. HSBC pointed out that although the S&P 500 Index is less than 5% away from its all-time high, market sentiment and positioning have been significantly weakened. In addition, high-yield bond spreads have only expanded by less than 30 basis points since October, and emerging market bond spreads are still narrowing, which makes the market in the past few weeks look quite strange. They note that the VIX futures curve has moved into backwardation - which is unusual and means traders view the short-term market as more uncertain than the longer-term market. Most of them chalk this up to concerns about the market's most speculative parts, but even so, current bottom-up consensus estimates suggest S&P 500 www.xmxmxm.cn income excluding technology will decline 8% quarter-over-quarter. They said, "Such low expectations set a lower threshold for the fourth-quarter earnings season in early 2026, and the Federal Reserve's interest rate cut in December should help ease nervousness and improve market sentiment." HSBC concluded: "This provides a good environment for increasing rather than reducing risk positions."
Gold prices held steady on Monday as rising expectations that the Federal Reserve would cut interest rates next month helped offset pressure from a stronger dollar. Ole Hansen, head of www.xmxmxm.cnmodity strategy at SaxoBank, said, "Investors assessed the prospect of another rate cut by the Federal Reserve after New York Fed President Williams hinted that there might be room for a rate cut amid a weakening job market, and gold prices held steady. However, other officials sounded a more cautious tone." Williams said on Friday that U.S. interest rates could fall without jeopardizing the Fed's inflation target while helping to prevent a decline in the job market. According to CME Fed Watch, after Williams made dovish remarks, bets on an interest rate cut next month surged to 72% from the previous 40%.
(Editor; Xiaoqi)
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