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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market www.xm-bx.comment]: The U.S. government shutdown may cause data delays, and the Federal Reserve may make another "dark" decision!". Hope it will be www.xm-bx.comful to you! The original content is as follows:
On Monday, as investors rethink the Fed's interest rate cut and future plans, the US dollar index rose first and then fell. As of now, the US dollar quoted.
Federalik: There is no reason to further cut interest rates, and it is expected to only cut interest rates once this year;
Musalem: There is limited room for further interest rate cuts. If the inflation risk increases, further interest rate cuts will not be www.xm-bx.comed;
·Hamak: You should be very cautious when lifting policy restrictions. My estimate of neutral interest rates belongs to the higher ones;
·Milan: You believe that the appropriate interest rate is in the middle area of 2%. There is currently no www.xm-bx.com for adjustments to the 2% inflation target.
-U.S. Treasury Secretary Becent sent a www.xm-bx.com signal, suggesting that it may lend a financial www.xm-bx.com to Argentina, and Argentina's stock market strengthened.
France and other countries recognize the Palestinian state, while the United Nations Security Council's five permanent members are not recognized by the United States.
Nvidia plans to invest US$100 billion in OpenAI to jointly build an AI data center.
The yen trend is currently focusing onTwo leaders in the election of leader of the Japanese Liberal Democratic Party. If Koizumiro wins, it may be a good thing for the yen because he holds a reform stance, emphasizes fiscal discipline, and tends to www.xm-bx.com the Bank of Japan's policy normalization process. If Takashi Hayao wins, it may be detrimental to the yen because it advocates growth-first policies, www.xm-bx.coms large-scale fiscal stimulus and continued monetary easing. At present, the US dollar/JPY is more likely to remain in two-thirds of the lower range of 146-149.
The latest public sector borrowing data shows that the UK government's cash demand has increased, which once again highlights its difficult fiscal situation. This puts more pressure on Chancellor Reeves and sets the fall budget announced on November 26 as a major risk event in the fourth quarter. As market attention increases, one of the government's top priorities should be to ensure its fiscal stability. The pound is highly sensitive to past fiscal stress events, and we don’t think this time will be an exception. While we do not expect pounds to be as volatile as in 2022, we have noticed that the downside risk (at least temporarily) of the pound has increased. We are currently cautious about the exposure to the pound.
However, given our negative outlook for the US dollar, the pound should still deliver positive returns in spot and arbitrage, with our pound-USD target at 1.39 at the end of the year. The pound offers attractive arbitrage opportunities for investors who can withstand potential volatility around the fall budget. We postpone expectations of the Bank of England's next rate cut to 2026 and expect only two more rate cuts in the next 12 months. Although this will bring positive arbitrage opportunities, we note that from the perspective of UK interest rates, the www.xm-bx.com role of spot interest rate repricing may be limited - the market's expectations for the Bank of England are already quite strong.
In the short term, pound-US 1.33 constitutes the main www.xm-bx.com level at the current level. The UK's fiscal situation and the upcoming fall budget are the main downside risks faced by the pound, which may push the pound back to its May and July lows of around 1.32. On the upside, the recent test of 1.37 will be an important resistance level, and this level is expected to be broken later this year.
U.S. consumer confidence is in a downturn, although the degree of downturn is not entirely clear. The overall tone of economic surveys is mostly pessimistic, with the University of Michigan’s consumer confidence index at a deep down level, but the Chamber of www.xm-bx.commerce’s consumer confidence data paints a www.xm-bx.completely different picture, consistent with the long-term average. Still, retail and personal spending data have performed well in recent months, which may indicate that consumers are trying to dispel the haze with “shopping therapy.”
We expect the August personal spending data to show a similar steady demand growth trend, although its growth momentum is not as strong as retail sales data. Previously the United StatesRetail sales recorded a 0.6% increase month-on-month increase, while the control group increased by 0.7% month-on-month. Personal expenditure data will not show such strong momentum because the personal expenditure data contains much more service sub-items than retail sales data, and the actual growth of the service industry is slower. However, if the monthly rate grows above 0.5%, expenditure will once again outweigh revenue growth, just like in the past three months, while at the same time, the savings rate is very low. In other words, private consumption growth in the United States is achieved within borrowed time.
As for the inflation indicator favored by the Federal Reserve, PCE data, we expect to be as strong as CPI, with a core PCE monthly rate of 0.3%, but slightly below the overall monthly rate of 0.4%. Nevertheless, the overall inflation rate will rise by 0.2% year-on-year, and the core inflation rate will rise by 0.1% to 3.0%, the highest level since March 2024.
We believe that the Fed's interest rate cut means two things to the foreign exchange market. First, it confirms our view that the U.S. economy is no longer as good as it used to be, and therefore the dollar should not be overestimated to the same extent. If the labor market continues to be weak, the market will not be optimistic that the risks have been controlled, which is why we still think it is meaningful to hedge against the United States and Japan. Second, it will change the hedging costs and www.xm-bx.com catalyze a new round of diversified flow of funds, including foreign exchange hedging of existing US dollar assets. Apart from cost transfers, we think policy makers and long-term investors may get more signals from policy rate changes, which will encourage them to hedge.
As the election of the presidential election of the Liberal Democratic Party of Japan approaches on October 4, we continue to believe that the US dollar is at risk of tactical upward pressure against the yen. It is reported that Koizumiro Koizumi and Takaichi Saena are still leaders, and both of them officially join the election. Gaoshi Zaohai www.xm-bx.coms lowering of consumption taxes and generally tends to increase fiscal easing. If her www.xm-bx.com rate progresses, the market will once again worry about its fiscal sustainability. Therefore, we currently tend to short the US dollar in other areas, including emerging market arbitrage and other cyclical currencies (such as Swedish krone, Norwegian krone, Australian dollar). We believe that the political background is at least a resistance to the yen bulls, even if it will not be the driving factor for the overall weakening of the yen in the short term. Once the event risks pass, we will seize the opportunity to shorten our positions through options. We believe that broader macro backgrounds such as lower hedging costs and rising recession risks still www.xm-bx.com the strengthening of the yen.
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