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Hello everyone, today XM Forex will bring you "[XM Forex]: The US dollar fluctuates before the US retail sales and the Federal Reserve meeting." Hope it will be helpful to you! The original content is as follows:
On the Asian session on Tuesday, the US dollar index fluctuated slightly, the US dollar weakened across the board on Monday, investors were waiting for the Federal Reserve to resume interest rate cuts at this week's meeting, and US President Trump once again called for accelerating the easing of monetary policy.
U.S. USD: As of press time, the US dollar index hovers around 97.36, and the immediate pressure in the US bond market is reshaping the US dollar path through policy expectations and external risks. Although the double squeeze between tax period and auction is a short-term phenomenon, coupled with the long closing of positions before the FOMC meeting on Wednesday, the overnight funds have been pushed to the corridor ceiling. This liquidity tightening is similar to the "pre-support" effect, supporting the strengthening of the US dollar in the short term, but it is also anchored by interest rate cuts and pricing. Technically, the US dollar index may continue the volatile pattern of 97.2409 to 97.6109. The buffering effect of short-term interest rate upward will limit the deep pullback, but the lock-in of the expected interest rate cut by FOMC will suppress the momentum of breaking through the upper track. If the US bond capital market stabilizes after RP operation, the price may bottom around 97.3388 of the lower track of the Bollinger Band. If the short momentum under the MACD zero axis does not show a golden cross, the test of support of 97.2409 will intensify. On the contrary, the fading of the tax period effect and the moderate implementation of the auction results may help the price to return to the middle track of 97.5459, forming a repaired rebound.
On Monday, a US appeal court rejected US President Trump's request to fire Fed Director Lisa Cook, which is the first time the president has tried to take such action since the establishment of the Federal Reserve in 1913. The ruling of the District of Columbia Circuit Court of Appeals means that Cook can temporarily stay with the Federal Reserve during the Federal Reserve's political interest meeting Tuesday and Wednesday local time. The Trump administration is expected to appeal to the U.S. Supreme Court. In addition, on Monday local time, Trump's nominated Federal Reserve Board candidate Milan received enough votes to confirm his appointment in the U.S. Senate, which will allow him to participate in the Federal Reserve's interest rate decision this week with 11 other voters.
The U.S. Bureau of Labor Statistics is recruiting price data collectors to collect data for a key inflation indicator. Due to the loss of staff, the indicator is increasingly relying on a statistical calculation method to fill the data gap. The agency has released recruitment www.vifu.netrmation for 25 part-time economic assistants across the United States, and is responsible for collecting price data for the Consumer Price Index (CPI). Its work locations cover major metropolis such as New York, Los Angeles, Atlanta, and Chicago. These positions are essential for obtaining price www.vifu.netrmation from local businesses. "If these positions can be filled quickly, the proportion of estimated prices in CPI is likely to drop significantly in the www.vifu.neting months, which will significantly reduce the error range of current estimates," said O'Mer Sharif, president of Inflation Insights LLC, an inflation research firm. BLS said in June this year that it has begun suspending price collection efforts in three metropolitan areas because the agency lacks sufficient resources in these areas.
The Bank of France lowered its economic growth expectations for the next two years and warned that budget uncertainty brought downside risks after another government collapse. www.vifu.netpared with June's forecast, the Bank of France lowered its growth forecast for 2026 and 2027 by 0.1 percentage point each. The French central bank said that due to "the domestic situation is more uncertain" and the global environment is unfavorable, its forecasts confirm that the French economy will lag behind the overall level of the eurozone in the next few years. The French central bank pointed out: "After 2025, the risks we predict are facing are downward. Fiscal policy uncertainty in 2026 may intensify wait-and-see sentiment among businesses and families." The adjustment highlights the impact of long-term political instability and fiscal policy differences - just last week, France's second prime minister stepped down in a year.
The Bank of England is expected to significantly slow down its balance sheet shrinking. Some investors even called for "shocking" measures- A www.vifu.netplete suspension of all active bond sales to alleviate pressure on the UK Treasury market. The Bank of England's Monetary Policy www.vifu.netmittee will announce whether it will slow down the speed of reducing Treasury bond holdings as it releases the latest interest rate resolution this Thursday. This cut is part of its quantitative austerity plan. Currently, the Bank of England has reduced its holdings by 100 billion pounds every year by actively selling and letting bonds mature, and has now dropped to 558 billion pounds. According to a recent official survey, UK Treasury investors expect this rate to slow to about £72 billion a year.
Deutsche Bank's analysis of ETFs shows that overseas investors hedging currency when purchasing US stocks and bonds is significantly reducing dollar exposure at an "unprecedented rate." George Salavelos, the bank's global head of foreign exchange research, quoted data from more than 500 funds, pointing out that this is the first time in this decade that the scale of funds inflows of US dollar hedging ETFs that purchase US assets exceeds that of non-held funds. In Salavelos's view, this hedging behavior explains why the dollar remains weak even as international investors once again poured their money into U.S. assets after Trump's tariffs disrupted the market earlier this year. At the time, the market had speculated that the risk of the trade war could weaken investors' interest in U.S. stocks, bonds, and the dollar itself. Saravelos wrote: "The meaning of the foreign exchange level is clear: foreign investors may have returned to the U.S. asset market (although the speed has slowed down), but they do not want to bear the subsequent dollar exposure. For every asset hedging the risk of the dollar, an equal amount of currency will be sold to eliminate foreign exchange risks."
The market generally expects the Federal Reserve to announce a rate cut on Wednesday. HSBC Paul Mackel said the dollar may briefly rise after the rate cut statement was released unless the Fed sends a signal that "more interest rate cuts in the future." He pointed out that the Fed needs to meet extremely high conditions to further push up the already high interest rate cut expectations. Data from the London Stock Exchange Group shows that the market currently expects that the Fed's cumulative interest rate cut will be about 140 basis points by the end of 2026. Based on this background, after the announcement of Wednesday's statement, there may be a short-term surge in the US dollar. But Mackel believes that any gains in the US dollar may be temporary given the prospect of faster rate cuts in the future, especially if employment data continues to be weak.
Reuters market analysts believe that the euro-dollar higher on Monday, driven by investors' expectations that the Fed will turn to a dovish stance. However, if the Fed fails to meet these expectations, downside risks will arise. The latest U.S. www.vifu.netmodity Futures Trading www.vifu.netmission (CFTC) data shows that the euro's www.vifu.net long position has risen to its highest level since early July, showing thatShow bullish sentiment. However, this optimism may be short-lived. If the Fed stance is less modest than expected, U.S. Treasury yields could rise, weakening the euro's attractiveness as investors readjust their interest rates. This could lead to widening spreads, strengthening the dollar's yield advantage and putting downward pressure on the euro against the dollar. Furthermore, if Powell’s launch conference lacks dovish hints, euro long positions may be cleared, thereby increasing selling pressure. Conversely, if the Fed stands more modestly than expected, U.S. Treasury yields and the U.S. dollar may fall sharply, which could allow the euro to re-enter the broader uptrend and target levels above 1.20.
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