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Hello everyone, today XM Forex will bring you "[XM Group]: Expectations for the Federal Reserve to cut interest rates in December continue to rise, and the U.S. dollar index is under pressure and falling." Hope this helps you! The original content is as follows:
The U.S. dollar index hovered around 99.81 in Asian trading on Wednesday. The U.S. dollar fell across the board on Tuesday, with the U.S. dollar index falling 0.5% to 99.746 as the latest economic data strengthened market expectations that the Federal Reserve will cut interest rates in December. At the same time, the yen rose to 155.99 yen against the US dollar, and the market remained highly vigilant about possible intervention by the Japanese authorities in the currency market. This trading day needs to pay attention to news related to the situation in Russia and Ukraine and the Federal Reserve's Beige Book. In addition, investors should pay close attention to changes in market expectations for the December Federal Reserve meeting and the dynamics of potential chairman candidates.
U.S. dollar: As of press time, the U.S. dollar index is hovering around 99.84. The U.S. dollar is currently under pressure and economic data has failed to provide effective support for bulls. Weak employment data, sluggish consumer confidence and tepid inflation all point to the possibility of another rate cut by the Federal Reserve. Until the market narrative shifts or buyers regain 100.395, the path of least resistance for the U.S. Dollar Index remains to the downside. Technically, on the downside, the next support level is the 50% retracement level of 99.693, and the support below this level is weak. If sellers continue to exert pressure, the swing low of 98.991 and the 50-day moving average near 98.878 will become key subsequent supports. If the U.S. dollar index can regain its 200-day moving average, it may mean that the current decline is more due to the liquidation of long positions rather than the large entry of new shorts; but even so, it will need to break through 100.395 to attract aggressive buying to return to the market.
British Chancellor of the Exchequer Reeves will announce the budget today. The budget needs to be announced to not only appease those MPs who have warned British Prime Minister Starmer, but also to meet the requirements of reducing the UK's debt. , Germany, Japan and other countries enjoy higher premiums for gilt bondholders. "This is like walking a tightrope," Luke Trailer, executive director of the British public welfare organization More in www.xmxmxm.cnmon, said of the challenge faced by Reeves. "She proposed that this is a responsible budget - while retaining fiscal space, adhering to Labor's core values and redistributing wealth - this may be the only way to achieve balance. "Reeves faces a fiscal hole of 20 billion pounds and must start repairing the British finances. This forces her to formulate a package of substantial tax increases - but after a tax increase of 40 billion pounds in last year's first budget and a promise not to increase taxes, it is particularly difficult to sell this plan to the public.
U.S. Treasury Secretary Bessent said on Tuesday that the Federal Reserve's interest rate management mechanism is struggling and needs to be simplified. Bessent said: "We have reached a point where monetary policy has become very www.xmxmxm.cnplex" and the Federal Reserve should "simplify it." "The Federal Reserve has brought us into a new system, which is what it means.The so-called abundant reserve system. "The mechanism appears to be loosening in terms of the adequacy of reserves," Bessent said. Bessant did not specify what he meant by "loosening." Bessant has been a critic of the Fed and has expressed particular concern about the central bank's massive balance sheet. Bessant and others, including some at the Fed, argue that the massive balance sheet distorts market pricing. There are also concerns about the Fed's www.xmxmxm.cnplex way of managing interest rates, which relies on liquidity tools and abandons the practices of nearly 20 years ago. A high-level management system used before the financial crisis.
Investors are increasing their bets that Fed policymakers are expected to cut interest rates again at next month's decision. The move dispelled concerns that there would be no interest rate cut last week and paved the way for a rise in U.S. Treasury bonds. New positions in futures contracts linked to the Federal Reserve's benchmark interest rate have surged in the past three trading days, with the January contract hitting consecutive single-day volume records last week. Current market pricing shows that the probability of a 25 basis point rate cut at the Fed's December meeting is about 80%, www.xmxmxm.cnpared with only 30% a few days ago. The change in interest rate expectations began with the delayed release of September employment data last week, which painted a mixed economic picture. New York Fed President Williams said on Friday that he foresees room for interest rate cuts in the "near term" amid a weak labor market, further strengthening this expectation. "There are serious differences within the Fed, but it appears that doves have overwhelmed the hawks," Brand said. Tracy Chen, portfolio manager of ywine Global Investment Management www.xmxmxm.cnpany, said
Former Bank of Japan. Governor Kazuo Monma pointed out in an interview on Tuesday that the recent weakening of the yen is increasing the possibility of the Bank of Japan raising its benchmark interest rate next month. He said, "As long as there is no major negative news and the yen remains at the current level, the probability of raising interest rates in December is quite high. There is really no need to wait for stronger signals from wages, prices or economic indicators. "Kazuo Kadama said, "The weak yen is the biggest enemy of the government's measures to deal with rising prices. Prime Minister Sanae Takaichi's high approval rating stems from public expectations for her to solve the cost of living issue, so the effectiveness of her measures is crucial to her governance. If the yen acts as a barrier, she may well see the need to arrest the decline. "But Kazuo Monma also said that he does not rule out the possibility that the central bank will wait until January next year to take action. At that time, more data will be available to confirm the momentum of wage growth next year and the resilience of the U.S. economy.
It is known that People familiar with the matter said that as the selection of the new Federal Reserve Chairman enters the final weeks, White House National Economic Council Director Kevin Hassett is the most popular candidate to be the next Federal Reserve Chairman in the eyes of President Trump’s advisers and allies. People familiar with the matter said that if Hassett takes over, Trump will be able to install him at the Federal Reserve.A close ally he knew and trusted. Some also say Hassett is seen as someone who can bring Trump's interest-rate cutting philosophy to the Fed, a direction Trump has long sought to steer. However, they also pointed out that Trump has always been known for making unexpected personnel and policy decisions, so it is difficult to determine anything until it is officially announced. Hassett is considered to be highly consistent with Trump on economic views, including his belief that interest rates need to be lowered. In an interview with Fox News on November 20, he said that if he were the chairman of the Federal Reserve, he "would cut interest rates now" because "the data shows that we should do that."
Carsten Brzeski, an analyst at ING, said in a report that the German economy will continue to stagnate before fiscal stimulus measures take effect. The second estimate of quarterly GDP confirmed stagnation in the third quarter, as private consumption and www.xmxmxm.cn exports weighed on the economy, while public consumption and investment supported economic activity. "Unfortunately, the short-term outlook is not optimistic," Brzeski said. "Think about tariffs, currency strength, and political tensions and uncertainty." But after the current quarter, the situation should improve. With the German parliament expected to approve the 2026 budget this week, a lack of public investment this year www.xmxmxm.cnbined with sweeping fiscal stimulus next year should be enough to push Germany out of stagnation, he said.
Strategists at Morgan Stanley said that if the Federal Reserve continues to cut interest rates amid increasing signs of a slowdown in the U.S. economy, the yen is expected to appreciate by nearly 10% against the U.S. dollar in the next few months. Strategists including Matthew Hornbach wrote that USD/JPY is now moving away from fair value and if this relationship returns, the USD/JPY pair will fall in the first quarter of 2026 as falling U.S. Treasury yields could drive down fair value. "At the same time, Japan's fiscal policy is not particularly expansionary," they noted, predicting that as the U.S. economy recovers in the second half of next year and carry trade demand picks up, the yen will again face downward pressure. Morgan Stanley expects USD/JPY to fall to around 140 in the first quarter of 2026 before recovering to around 147 by the end of the year.
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