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De-dollarization is unstoppable! CPI may be unable to recover in September
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market xmaccount.commentary]: De-dollarization is unstoppable! CPI may not be able to recover in September." Hope this helps you! The original content is as follows:
Asian Market Trends
Last Friday, Trump softened his previous tough stance on trade, and the U.S. dollar index was boosted. As of now, the U.S. dollar is quoted at 98.41.

Trump signed an executive order imposing a 25% tariff on imported medium- and heavy-duty trucks.
Trump: The United States may not provide "Tomahawk" to Ukraine; the meeting with Putin will be a "bilateral meeting."
Chairman of the Russian Direct Investment Foundation: Russia and the United States have begun discussions to jointly build the Bering Strait Tunnel.
Federal Reserve Moussalem: If there are more risks to employment and inflation is under control, I may support the path of another interest rate cut.
The U.S. Secretary of State discusses critical mineral cooperation with the Liberian Foreign Minister.
Market news: The U.S. House of Representatives will be adjourned.
Israeli-Kazakhstan conflict - ① Senior Hamas official: Unable to give a clear answer on whether Hamas will disarm. ②The Houthi armed forces warned Israel that if it violates the Gaza ceasefire agreement, it will return to the battlefield at any time. ③Mohammed Nazar, a member of the Hamas Politburo: Hamas said it planned a ceasefire for three to five years. ④The Israeli army said that Hamas opened fire three times in violation of the agreement, and the Israeli army resumed implementation of the Gaza ceasefire agreement after conducting retaliatory large-scale air strikes.
The US President puts military pressure on Venezuela, and US lawmakers emphasize that the war must be authorized by Congress.
Pakistan and Afghanistan agree to an immediate ceasefire.
S&P: FranceThe rating was downgraded from "AA-/A-1+" to "A+/A-1"; the outlook is stable.
Trump: Saudi Arabia has expressed its willingness to join the Abraham Accords.
South Koreans are rushing to buy silver bars, and Korean xmaccount.commercial Bank will suspend silver bar sales.
Terrorist attacks occurred in southeastern Iran, and many Sunni tribal leaders were killed.
U.S. Republican Senator Graham: Trump will announce major tariff measures against Colombia today or tomorrow.
British media: “Trump was cursing throughout the entire process.” He had another “White House dispute” with Zelensky last Friday, asking Zelensky to accept Russia’s conditions.
Summary of institutional views
ING: It is difficult for CPI to change the Fed's interest rate cut expectations, but future decisions are still like "blind men feeling the elephant"
Since there is no end in sight for the U.S. government shutdown and statistical agencies are still closed, we will once again have a lack of clear judgment on economic performance by the market. Even if the U.S. government reopens, it could take weeks to xmaccount.complete all necessary sampling checks. Even so, it has been confirmed that resources have been invested in releasing the September CPI report. But that's not because the Fed desperately needs to see the report before its October meeting, but because the data is needed to determine the Social Security Administration's 2026 cost-of-living adjustment. We do not deny that the overall CPI will increase by about 0.4% month-on-month, and the core CPI will increase by about 0.3%. The impact of tariffs may start to become more apparent, but given that the Fed's main concern now is a cooling job market, the data will not prevent it from cutting interest rates by 25 basis points later this month. The Fed's Beige Book remained pessimistic about the economic outlook, while private sector employment data was weak.
Mitsubishi UFJ: Changes in Japan's political landscape have suspended the yen's decline, but the key to the trend of the United States and Japan remains...
Affected by the political uncertainty caused by Takaichi Sanae's unexpected victory in the Liberal Democratic Party presidential election, the yen is continuing to recover slowly after the initial sell-off. USD/JPY has fallen 1.5% from last Friday's intraday high of 153.27, and the prospect of a high market victory no longer continues to fuel Japanese yen selling.
The collapse of the New Komeito coalition government has changed the political landscape to some extent and weakened Sanae Takaichi's position, which is likely to undermine her ability to pursue a policy agenda seen as unfavorable to the yen. The Liberal Democratic Party is continuing to push for a prime ministerial vote in parliament next Tuesday and has begun discussions with the Japan Reform Party on reaching a coalition agreement. This is crucial because if the agreement is successfully reached, it will xmaccount.completely eliminate the possibility of the Cadets, the National Democratic Party and the Japan Restoration Party forming an opposition alliance and nominating their own candidate for prime minister.
As for the Bank of Japan’s policy, the Japanese Reform Party may support leaving policy decisions to the Bank of Japan and is seen as supporting the gradual exit of monetary easing. Meanwhile, Finance Minister Katsunobu Kato said in Washington that he was paying attention to "exchange rate movements in the direction of a rapid weakening of the yen" and would be wary of "excessive and disorderly movements." dayA renewed weakening of the dollar would not be in Japan's interests and would only weaken support among Japanese households for the new government and could threaten relations with the United States.
As a result, the risk of further downside for the yen appears to be receding. However, the trend will only become clearer once the political uncertainty surrounding next week's prime ministerial vote is lifted. We still believe that U.S. economic development and Federal Reserve policy are the most critical factors affecting the trend of the United States and Japan.
UBS: France’s political risks have been temporarily alleviated but fiscal concerns have deepened. It is recommended to reduce its holdings when the debt accounts for 113% of GDP...
French Prime Minister Le Corny, who was recently re-appointed to form the government, won two no-confidence votes in the National Assembly. Previously, the government promised to suspend France's landmark 2023 pension reform until after the 2027 presidential election.
The suspension of this reform is expected to cause a total fiscal cost of more than 2 billion euros in 2026 and 2027. The government must find corresponding savings measures to avoid expanding the budget deficit. The government successfully survived a first vote of no-confidence brought by the left and a second vote of no-confidence brought by the right-wing National Alliance. At the time of writing, France's CAC 40 benchmark stock index was up 0.8%.
We believe that the suspension of pension reforms should help stabilize French assets in the short term. However, ongoing fiscal and political uncertainty may limit further upside for the asset. For bond markets, spreads between French government bonds and German and Italian government bonds tightened slightly. However, we note that France’s debt-to-GDP ratio has reached 113% and will continue to deteriorate at an annual rate of 2% to 3% in the medium term. Therefore, we recommend that investors consider reducing their exposure to long-dated French government bonds. Better value exists in short-term French government bonds and select medium-duration investment-grade corporate bonds, which offer attractive yields and lower default risk.
Barclays Bank: The battle to defend liquidity begins! The Fed's QT countdown
On Tuesday, Federal Reserve Chairman Powell hinted that the Fed may suspend its balance sheet reduction QT in the next few months to maintain liquidity stability in the overnight financing market. Barclays strategists then predicted that the Federal Open Market xmaccount.committee (FOMC) would announce the end of QT at its December meeting and implement it in January next year, which would be earlier than their previous estimate of March 2026.
If the Fed suspends QT, it may continue to allow the $2.3 trillion in mortgage-backed securities (MBS) held in its System Open Market Account (SOMA) to mature while reinvesting the proceeds in U.S. Treasury securities. The Fed has maintained that its long-term goal is for the SOMA account to hold primarily Treasury securities to minimize the impact on private sector credit allocations. While the official end of quantitative tightening may still be months away, escalating stress in overnight funding markets could accelerate that timeline. Once QT ends, the Fed is expected to primarily buy short-termFor Treasury bills, the minimum monthly purchase amount is $20 billion, which should put downward pressure on short-term Treasury yields. U.S. Treasury Secretary Bessent may also seek to reduce the issuance of long-term Treasury bonds, but such an announcement may not be made at the quarterly refinancing meeting in November.
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