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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: good and bad are intertwined, and CPI becomes the key referee
Positive factors
The demand for hedging is heating up: the United States and Russia canceled the Budapest talks, the Russian military launched strategic nuclear force exercises, and the United States imposed xmaccount.comprehensive sanctions on Rosneft and Lukoil. Geographical risks drove the inflow of hedging funds into the U.S. dollar. The U.S. dollar index has rebounded from a low of 96.21 to the 99 line, maintaining a neutral to strong pattern in the short term.
Inflation expectation support: The market expects the U.S. CPI to rise to 3.1% year-on-year in September (previously 2.9%), with a monthly rate of 0.4%, and the annual core inflation rate to remain stable at 3.1%. If the data exceeds expectations, it may weaken expectations for an aggressive interest rate cut by the Federal Reserve and provide momentum for the dollar.
Buffer for lagging economic data: The U.S. government shutdown led to the delay in the release of key non-agricultural data, covering up signs of economic weakness in the short term, giving the dollar temporary breathing space.
Negative factors
Expectations for interest rate cuts are deeply rooted: CME Fed observation shows that the probability of a 25 basis point interest rate cut in October is still 97.3%, and the probability of a cumulative 50 basis point interest rate cut in December is 95.5%. The market's pricing of the easing cycle has not been fundamentally reversed, suppressing the dollar's upward trajectory.
Signal divergence from U.S. bond yields: U.S. bond yields continue to fall, reflecting investors’ bets that a cooling labor market will dominate monetary policy. This conflicts with the short-term rebound of the U.S. dollar, suggesting that bull momentum may fade.
2. European currencies: The euro is under pressure, the pound is struggling, and the negative outlook is dominant
Euro (EUR/USD)
The negative outlook: the euro zone economy remains weak.Continuing, the market priced in the probability of the European Central Bank cutting interest rates in December to rise to 65%, and policy differences put pressure on the euro. Technically, the euro has fallen below the key mark of 1.16, and the support level of 1.1537 is facing a test.
Weakly positive: the euro zone’s core inflation has declined marginally, and the October low of 1.1542 has formed technical support, and systematic stop-loss orders have not yet been triggered.
Pound Sterling (GBP/USD)
Concentrated bad news: UK CPI data was lower than expected, and overall and core inflation were lower than market expectations, exacerbating expectations of an interest rate cut by the Bank of England. The OIS priced the probability of an interest rate cut in the first quarter of next year rising to 58%. The strengthening of the US dollar coupled with the uncertainty of follow-up Brexit negotiations, the pound fell to around 1.3340 for five consecutive days.
Lack of positive news: There is currently no bright spot data support for the British economy, the weak labor market has further weakened the attractiveness of the pound, and there is no short-term rebound catalyst.
3. xmaccount.commodity currencies: The Australian dollar is under pressure, and the Canadian dollar is boosted by oil prices
Australian dollar (AUD/USD)
The negative news is highlighted: the Reserve Bank of Australia kept interest rates unchanged at 3.60%, but the unemployment rate rose to 4.5% in September, consumer confidence fell to a 12-month low in October, and the market expects that the interest rate cut window may open in 2026. The Australian dollar is defending below 0.65, with the 0.6440 support level under pressure.
Limited benefits: China's central bank has released net liquidity for two consecutive days. In October, it has released 400 billion yuan in buyout reverse repurchases. Moderate easing expectations have provided weak support to the Australian dollar, but it is difficult to offset internal economic pressure.
Canadian Dollar (USD/CAD)
Positive drivers: U.S. sanctions on Russian oil triggered a violent rebound in oil prices. WTI crude oil rose 5.62% to US$61.79 per barrel, and Brent crude oil exceeded US$65, boosting the Canadian dollar's energy currency attributes.
Bad hedging: The Bank of Canada’s expectations for interest rate cuts and the logic of narrowing interest rate differentials between the United States and Canada are still there, limiting the rebound of the Canadian dollar, and the exchange rate maintains a range of 1.39-1.40.
4. The Japanese Yen: Expectations of policy easing dominate, and the bad news is difficult to reverse
The core of the bad news: Japan’s new Prime Minister plans to launch a 13.9 trillion yen economic stimulus plan, and the market expects a “double easing” xmaccount.combination of fiscal and monetary easing, and the Japanese yen continues to weaken. USD/JPY has rebounded from 150 to 152.50, approaching the previous high of 153.30.
Potential benefits: The risk of Bank of Japan intervention increases near the 153 mark. If there is verbal or actual intervention, it may trigger a short-term correction of the yen, but it will be difficult to change the long-term weakness.
5. Tomorrow’s key data and event warnings
U.S. September CPI data (20:30): The focus of market focus. If it exceeds 3.1% year-on-year, the U.S. dollar may test the resistance of 99.56; if it is lower than expected, rising interest rate cut expectations will suppress the U.S. dollar and benefit non-U.S. currencies.
China-U.S.-Malaysia Economic and Trade Consultations: If a signal of trade easing is released, it may boost demand for xmaccount.commodities and currencies; if friction escalates, will intensify risk aversion and strengthen the attractiveness of the US dollar and the Japanese yen.
Initial Eurozone PMI value for October: If the data weakens further, the euro may fall below the 1.15 support; if it exceeds expectations, it may trigger a short-term repair 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 xmaccount.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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