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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 Foreign Exchange Market Analysis]: A collection of good and bad news affecting the foreign exchange market." Hope this helps you! The original content is as follows:
Core Overview: On April 8, the foreign exchange market ushered in multiple drivers including the easing of geopolitical risks, the differentiation of central bank policies, and the influx of intensive data. The United States and Iran reached a two-week temporary ceasefire and some navigation in the Strait of Hormuz resumed. The rebound in risk appetite suppressed the US dollar and boosted Africa and the United States. However, concerns about energy inflation still exist, the hawkish stance of European and American central banks continues, and the Federal Reserve minutes and data from many countries are released, creating a fierce long-short game. The U.S. dollar index fell back from its highs, the euro, pound, and xmaccount.commodity currencies rebounded, and the yen's weakness paused. The overall situation showed a parallel pattern of risk restoration and policy games.
1. Good news: risk appetite restored, non-U.S. currencies collectively rebounded
The ceasefire between the United States and Iran was implemented, and the geopolitical hedging premium subsided. The United States, Iran, and Israel accepted Pakistan's mediation. A two-week temporary ceasefire came into effect on April 8. Iran opened part of the Strait of Hormuz to navigation (15 ships per day, still at a low level), and negotiations will start on April 10. The conflict in the Middle East was downgraded, oil prices plummeted (WTI fell by more than 10% in a single day), global risk appetite rebounded rapidly, and funds flowed out of U.S. dollar safe-haven assets, which benefited risky currencies such as the euro, pound, Australian dollar, and Canadian dollar. The U.S. dollar index fell back to 99.65 under pressure, and non-U.S. currencies generally closed higher. The euro rose 0.48% against the U.S. dollar to 1.1598, and the Australian dollar rose 0.84% against the U.S. dollar.
European and American economies show resilience, and market sentiment picks up. US durable goods orders and services PMI exceeded expectations in February, and solid economic fundamentals support risky assets. The final value of the Eurozone's services PMI in March stood firmly on the line of prosperity and contraction, and marginal improvements in German and French industrial data eased concerns about recession in the Eurozone. The British house price index stabilized in March, consumption resilience has not been lost, and the pound has received fundamental support. Global stock markets generally rose and U.S. bond yields fell, further benefiting the rebound of non-U.S. currencies.
xmaccount.commodity currencies have received dual support from energy and risks. Oil prices have fallen back from highs but the center is still high. The export earnings of resource countries such as Canada and Australia are stable; the rebound in risk appetite coupled with expectations of a moderate economic recovery in China, the Australian dollar, Canadian dollar, and New Zealand dollar have a rebound window. The Reserve Bank of New Zealand kept interest rates unchanged today, in line with market expectations. The New Zealand dollar's short-term fluctuations have converged, and in the medium term, it will rise in line with risk sentiment.
2. Bad news: Inflation concerns still exist, and the central bank’s policy is hawkish
Energy inflation has become long-term, and the central bank’s hawkish side has pressured the IEA to warn that the current energy crisis will exceed 1973. The EIA raised its Brent oil price forecast in 2026 to US$96/barrel. Although the conflict in the Middle East has eased, it will take several months to restore supply and imported inflationary pressure continues. Federal Reserve Vice Chairman Jefferson and New York Fed President Williams reiterated that high interest rates will last longer, and the probability of a rate cut in June is only 3.9%; the European Central Bank Governing Council was hawkish, saying that a long-term crisis requires "a series of interest rate hikes"; the Bank of England and the Reserve Bank of Australia simultaneously turned hawkish, and global interest rate cut expectations have significantly cooled down, limiting the upside space for non-US currencies.
The yen continues to be under pressure and Japan’s policy is in dilemma. USD/JPY is temporarily stable at 159.6, but the policy gap between Japan and the United States is still widening. A former member of the Bank of Japan said it would raise interest rates in July at the latest, but the government is worried about the economic drag and the policy shift is lagging behind. Japan's household expenditure fell by 1.8% year-on-year in February. Consumption is weak, energy import costs are soaring, the yen's safe-haven attribute has failed, and medium-term depreciation pressure has not disappeared.
Emerging market currencies are under pressure. Imported inflation has hit India, Türkiye and other energy importing countries, and their foreign exchange reserves have been rapidly depleted, and currency depreciation pressure has intensified. China's foreign exchange reserves fell by US$85.7 billion to US$3.34 trillion in March. Affected by the strength of the US dollar and falling asset prices, short-term fluctuations in the RMB increased. Global stagflation expectations are rising, and the risk of capital outflows from emerging markets still exists, dragging down the trend of xmaccount.commodity currencies and risk currencies.
3. Today’s key events and data (trading focus)
10:00: New Zealand Federal Reserve interest rate decision (maintained at 2.25%)
17:00: Euro zone PPI and retail sales in February (inflation and consumption data, affecting the European Central Bank’s interest rate hike expectations)
22:30: US EIA crude oil inventory (Inventory changes affect oil prices and inflation expectations)
02:00 the next day: Minutes of the March meeting of the Federal Reserve (releasing interest rate path signals, leading the trend of the US dollar)
IV. Outlook and operational tips
Short-term geopolitical relaxation leads to risk repair, and non-US currencies continue to rebound; however, central bank hawks, inflation concerns, and data fluctuations will limit gains. The US dollar index focuses on the support of 99.30 and the resistance of 100.10; the euro focuses on the breakthrough of 1.1620 and the support of 1.1500; the pound focuses on the resistance of 1.3320 and the support of 1.3200; the Japanese yen is wary of the xmaccount.competition for the 160 mark.
Operation tips: Follow risk appetite for light positions, sell high and buy low; focus on the Federal Reserve minutes and Eurozone data, and strictly control positions and stop losses.
The information is for reference only and does not constitute investment advice.
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