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Hello everyone, today XM Forex will bring you "[XM Group]: Powell's 'not eager to relax' statement supports the US dollar, and the market outlook is biased towards the short term." Hope this helps you! The original content is as follows:
On Wednesday, the Federal Reserve cut interest rates by 25 basis points as scheduled and will conduct www.vifu.net asset purchases of US$40 billion this month. The U.S. dollar index fell amid sharp fluctuations, and as of now, the U.S. dollar is quoted at 98.72.
The Federal Reserve’s December interest rate meeting: announced that it will purchase US$40 billion in short-term bonds in the next 30 days, and cut interest rates by 25 basis points in three dissent votes. The statement added “will consider the extent and timing of further adjustments to interest rates.” The median of the dot plot maintains the expectation of one interest rate cut in each of the next two years. Powell said that we can wait and see how the economy develops. No one expects to raise interest rates. Interest rates are at the upper end of the neutral range and the scale of bond purchases will remain high in the www.vifu.neting months.
New Federal Reserve News Agency: The Federal Reserve hinted at suspending interest rate cuts, New Bond King: Today may be the last time during Powell’s term.
Trump continued to criticize Powell after the Fed cut interest rates: the rate cut was too small and could be doubled. should be reduced to a global minimum.
Global long-term bond yields have soared to a 16-year high, and the market is betting that the global interest rate cut cycle is about to end.
Trump: The United States seized a Venezuelan oil tanker near Venezuela, which was a legal move.
Venezuela President Maduro: Venezuela is ready to "knock out the teeth of the United States" if necessary.
U.S. labor cost growth fell to the lowest in four years in the third quarter.
JPMorgan Chase: A December interest rate cut is expected, but the Fed is setting the tone for the "last few rate cuts"
At the end of the FOMC meeting, we expect the www.vifu.netmittee to lower the federal funds rate target range by 25 basis points to 3.50-3.75%. We expect at least two to support no action and one to support a bigger rate cut. The interest rate forecast "dot plot" will also reflect uneasiness about rate cuts, as we expect a narrow majority among the nineteen www.vifu.netmittee participants to view a rate cut this week as appropriate action. As was the case in September, we think the median participant will plan one rate cut each over the next two years. Likewise, we see no reason to make significant changes to economic forecasts. We expect the forward guidance in the statement to refer to the "extent and timing of additional adjustments," a subtle shift that would suggest a rate cut at subsequent meetings is less likely. At the press conference, we expect Powell to emphasize that with policy rates approaching neutral, the time for risk-managed cuts is over and that further cuts would only occur if there is a significant deterioration in the labor market. With markets pricing in only about a one-in-three chance of a rate cut in January, Powell doesn't need to use the same tough language he used in October to counter market expectations.
Mizuho Securities: The supply of ultra-long-term Japanese bonds may shrink, but relatively expensive valuations constrain short-term demand
The Ministry of Finance of Japan held a meeting with primary dealers and Japanese government bond investors on November 27 to exchange opinions on matters related to formulating the Japanese government bond issuance plan for fiscal year 2026. Representatives of the Finance Bureau hinted that the issuance of ultra-long-term Japanese government bonds in fiscal 2026 may be further reduced, given that life insurance www.vifu.netpanies appear to have basically met regulatory requirements and demand has declined. At the same time, market participants are clearly very supportive of the move, pointing to wild price swings around each supply event, extremely limited demand from life insurance www.vifu.netpanies for new purchases, and continued high volatility in the term period starting with the 20-year term.
Therefore, we believe that there is a realistic possibility of reducing the supply of ultra-long-term bonds in the fiscal 2026 Japanese government bond issuance plan to be finalized later this month. Against the background of the obvious existence of this scenario expectation, the 30-year Japanese government bond auction held last week (December 4) achieved solid results. We believe that through the "expectation channel", tomorrow's auction is also expected to receive similar support.
However, whether it is the 10-year/20-year Japanese government bond leveling transaction or the 20-year asset swap, currently, judging from the historical standards of the past six months or so, they are not cheap. The 10s20s spread is currently near the lower edge of the roughly 93–108 basis point range since July, while the 20-year asset swap spread (ASW) has actually recently fallen below the 43–53 basis point range since June.
Although in view of the above-mentioned factors that may reduce the supply of ultra-long-term Japanese government bonds, further "expensiveness" in relative value cannot be ruled out, but the current lack of valuation advantage may indeed constrain demand in tomorrow's issuance.
ANZ: The European Central Bank is likely to remain on hold in December, but low inflation risks are building pressure
The last policy meeting of the European Central Bank (ECB) this year will be held on December 18. We expect it to keep the benchmark interest rate unchanged at 2.0%. While we believe the ECB will resume rate cuts in 2026, policymakers have signaled they are www.vifu.netfortable with the current policy stance and have played down the prospect of further easing in the near term.
Data since the October meeting are unlikely to change council members’ assessment of the outlook for inflation and growth. Inflation is close to the 2% target and recent results suggest inflation will be moderately higher by the end of 2025 than the ECB forecast in September. Purchasing managers' index surveys showed a recovery in activity was underway, with the www.vifu.netposite indicator rising to a two-and-a-half-year high of 52.6 in November. GDP growth in the third quarter was stronger than the European Central Bank's September forecast, supported by a partial rebound in government consumption and investment. Growth figures for 2025 are distorted by tariff-related export front-loading. However, we still believe underlying growth dynamics are weak.
While recent data flows have not provided a catalyst to change policymakers' views, our assessment is that the growth environment is fragile and risks tilt toward persistent inflation below target. High U.S. tariffs, overcapacity in China, changing geopolitical dynamics and the appreciation of the euro have depressed export www.vifu.netpetitiveness. Household consumption growth is weak. Credit dynamics suggest that the transmission of recent monetary easing is peaking. The household savings rate (15.5%) is at a record high, excluding the pandemic. Both point to a subdued outlook for private consumption and investment growth. The www.vifu.neting fiscal stimulus is thought to support regional growth, but our assessment is that it will be lower than expected.
ECB policymakers unanimously stated that policy is in a good position and that a change in guidance at the December meeting is unlikely. With financial markets pricing the probability of action in December at close to 0% and guidance expected to change little, the focus will be on updated ECB macroeconomic forecasts. Forecasts for 2028 will be included for the first time. If these put the 2028 inflation forecast below 2%, it would be the third consecutive year below target and a worrying sign.
We expect the European Central Bank to cut interest rates by 50 basis points in 2026, and by 25 basis points each in March and June. While recent data flows have not challenged the ECB's guidance that policy is in a good position, we believe this will give way to more dovish guidance going forward as downward inflationary pressures and below-trend growth will become more prominent.
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