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market analysis
The US dollar index has stabilized its 50-day moving average, has the Fed rate cut been digested by the market?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: The US dollar index has stabilized its 50-day moving average, has the Fed interest rate cut been digested by the market?" Hope it will be helpful to you! The original content is as follows:
On Friday, the US dollar index hovered around 98.20, fluctuating and falling 0.08%. The dollar rose slightly on Thursday, with market trends fluctuating this week, with investors focusing on key job reports released on Friday, after data released showed that the labor market was softer, strengthening expectations for the Federal Reserve to cut interest rates this month.
Analysis of major currency trends
Dollar: As of press time, the U.S. dollar index hovered around 98.21, and market attention turned to Friday's U.S. non-farm employment report (NFP), which will be the key to determining whether the market will push expectations higher to a 25 basis point rate cut at the Federal Reserve meeting from September 16-17 that was already fully priced. Weak employment data could open the door to a larger adjustment, while strong recruitment data could provide new support for the dollar. In the UK, retail sales and fiscal dynamics remain at the heart of the pound's outlook. Technically, the US dollar index is still fluctuating between the resistance level of 98.834 and the support level of 97.536. The 50-day moving average currently at 98.000 is playing a short-term support role. If it can break through the key point of 98.370, it will show a strong signal of the US dollar index. If the closing price is above this level, sufficient momentum may be generated to test the resistance levels of 98.635 and 98.834. If the 50-day moving average support fails, you need to pay attention to the trend of the US dollar index towards the Fibonacci key point of 97.859, and the deeper support level is the recent low of 97.536.
1. White House: The United States will impose a benchmark tariff of 15% on almost all Japanese goods imported to the United States
The White House announced that Trump has signed an executive order to officially implement the US-Japan Trade Agreement: According to the agreement, the United States will impose a benchmark tariff of 15% on almost all Japanese goods imported to the United States, and at the same time implement differentiated tariff treatment for the following specific areas: automobiles and auto parts, aerospace products, generic drugs, and natural resources that cannot be naturally obtained or produced in the United States. This new tariff framework, www.xmniubi.combined with the expansion of US export scale and investment-driven production model, will help reduce the US trade deficit with Japan and promote the overall US trade.The condition returns to a higher level of balance. Meanwhile, Japan will provide breakthrough market access opportunities in key areas for U.S. manufacturing, aerospace, agriculture, food, energy, automobile and industrial finished products manufacturers. Specifically, the Japanese government is www.xmniubi.committed to accelerating the implementation of the following measures: within the framework of the "Minimum Market Access" rice program, increase the purchase of US rice by 75%; purchases of US agricultural products of US$8 billion each year (including corn, soybeans, fertilizers, bioethanol—including bioethanol for sustainable aviation fuels—and other US products). The Japanese government will also promote the sale of passenger cars made in the United States and www.xmniubi.comply with U.S. safety certification standards in the Japanese market without additional testing. In addition, Japan will purchase www.xmniubi.commercial aircraft made in the United States and US defense equipment.
2. "Federal Mickey Bucket": It is a rare arrangement for Fed director nominee Milan to consider retaining White House posts during his term of office.
"Federal Mickey Bucket" Nick Timiraos issued a statement saying that Milan, the candidate for Fed director nominated by U.S. President Trump, said that after the Fed www.xmniubi.completed his short term, he is considering returning to his original White House position next year - an arrangement that has not been precedent in decades since Congress tried to separate the executive branch from the Fed. Milan said at a Senate confirmation hearing on Thursday that lawyers suggested that he could take unpaid leave from the current position of the White House Economic Advisory www.xmniubi.committee chairperson so that he could return to office without a new round of Senate confirmation next year. Milan was nominated to replace Kugler's term of office that was left by accident last month, which will last until January 31, 2026. Democratic lawmakers questioned that such arrangements could affect their ability to perform their promised independent judgment. South Dakota Republican Senator Mike Longz then expressed surprise to reporters about the proposal, but no Republican lawmakers said they would object to Milan's nomination confirmation as a result.
3. Many German research institutions lowered their economic growth expectations for Germany in 2025
The autumn forecast reports released by many major German economic research institutions on the 4th showed that due to factors such as the US tariff policy, the German economy will only grow by 0.1% to 0.2% in 2025, lower than the summer forecast. The establishment of large-scale infrastructure funds announced by the German government in the middle of the year failed to bring expected stimulus, which was one of the reasons for the lowered expectations. The report generally believes that Germany's economy remains sluggish, mainly manifested in insufficient demand in manufacturing and service industries, continued weakness in construction industries, and slow recovery in personal consumption.
4. Fed nominee Milan: No consultation with the White House on long term.
Feder candidate Stephen Milan, nominee for US President Trump, said Thursday that he had not discussed with anyone in the White House about the possibility of a long term nomination - he had previously told the Senators that only a long term nomination would prompt him to resign from the current White House economic adviser position, rather than just taking leave. When the reporter asked about this, Milan initially raised her eyebrows and refused to respond. After the reporter asked again, "Is it true?", he briefly repliedA: "No." At the Milan nomination hearing, Democratic senator worried that his approach to resigning from the Economic Advisory Board would lead him to face pressure from Trump in interest rate votes and succumb to the president's will. Milan denied this.
5. Williams, the Federal Reserve's "three leaders": It is appropriate to cut interest rates in a timely manner
New York Fed Chairman Williams said he predicted that "over time" rate cuts will "become appropriate", but did not specify the time or pace of such actions. "Looking forward, if our dual mission goals continue to make progress according to my baseline forecast, I expect it will be appropriate to shift interest rates to a more neutral stance over time," Williams said in a speech prepared for the New York Economic Club event on Thursday. Williams said the Fed is facing a "slight balance" in terms of employment and inflation risks. He said: "On the one hand, we need to keep the labor market balance to ensure that the impact of tariffs does not spread to a longer-lasting widespread inflation. On the other hand, maintaining the stance of 'too tightening policies for too long' may pose risks to our greatest employment mission." He also said that so far, the impact of tariffs on inflation is not as severe as initially concerned, but he added, "It is still too early and the impact of tariffs will take time to fully manifest."
Institutional View
1. Dutch International Bank: Interest rate path differences support the euro/dollar higher
Francesco Pesole, foreign exchange strategist at Dutch International Bank, said that from the perspective of short-term interest rate differences between the United States and Europe, the euro should be higher. He believes that the Fed's interest rate cut may exceed current market expectations. www.xmniubi.compared with the European Central Bank, the market has much more room for expectations for the Fed's future rate cut, so the euro is expected to rise against the US dollar in the www.xmniubi.coming months. "We still believe that the euro will return to above 1.17 against the dollar." Data shows that the U.S. money market has fully digested the Fed's expectations of two 25 basis points cuts this year, while the euro zone money market expects the European Central Bank to cut interest rates by only 30% by the end of the year.
2. OCBC Bank: If the non-agricultural correction is sharply downward, it may suppress the US dollar.
OCBC Bank foreign exchange analysts Frances Cheung and Christopher Wong pointed out that the US dollar has risen, but the overall volatility range is still limited to the near-term level. The market is still waiting for the results of two key data: one is the number of non-farm employment released on Friday, and the other is the preliminary benchmark correction data released by the U.S. Bureau of Labor Statistics next Wednesday. If the initial correction data is weak, it may change the current market view of the labor market and suppress the US dollar.
3. Deutsche Bank: Powell makes this week's non-agricultural data particularly important
www.xmniubi.commerz Bank foreign exchange analyst Antje Praefcke pointed out that in his speech at Jackson Hole's annual meeting,Emphasizing the downside risks faced by the economy and employment - to balance the expectations of interest rate cuts by colleagues from the U.S. government, markets and Federal Open Market www.xmniubi.committee, with the inflation risks that may be triggered by tariffs - the current labor market data has attracted much more attention than usual, and the impact weight of this data will also increase significantly. This naturally also means that if the labor market data is lower than expected, it may further significantly boost the Federal Reserve's expectation of interest rate cuts, and may even re-induce market expectations for one or more 50 basis points rate cuts. If this happens, I expect the dollar to suffer another heavy blow. If the ADP data released tomorrow is lower than expected (the market consensus is 80,000), it may lay the foundation for this bearish sentiment in the US dollar - although the index ultimately means little to the prediction of Friday's non-farm data.
The above content is all about "[XM Foreign Exchange Market Review]: The US dollar index has stood firm in the 50-day moving average, has the Fed interest rate cut been digested by the market?", which was carefully www.xmniubi.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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