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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: The bearish pressure on the US dollar index is intensifying, pay attention to the speeches of Federal Reserve officials." Hope it will be helpful to you! The original content is as follows:
On the Asian session on Wednesday, the US dollar index hovered around 98.07, and the US dollar fell across the board on Tuesday. Previous data showed that US consumer prices rose moderately in July, retaining the possibility of the Federal Reserve's interest rate cut next month. The money market has been on the sidelines of currency holding on as markets increasingly expect a moderate reading of U.S. price pressure may consolidate bets on the Fed's interest rate cut next month, which has increased after last week's weak jobs data were released.
United States dollar: After the release of data on July US consumer price index in the United States, market expectations for the Fed's next policy meeting have increased, and the US dollar weakened accordingly. The Fed had room for interest rate cuts in September, given inflation was under control and signs of weak labor markets. The narrowing of yield spread and the resilience of major foreign currencies suggest that if Powell sends signals that he is preparing for further sharp rate cuts at Jackson Hall annual meeting, the U.S. dollar index may face continued selling pressure and downward towards key support levels. From a technical perspective, after the US dollar index fell below the 50-day moving average of 98.200, it was in a weak position, and this indicator has become a new resistance level. Today's sell-off makes it possible for the market to break through the Fibonacci support level of 97.859, which could be the trigger point for downside acceleration, with the next major target being the 97.109 low set on July 24.
On Tuesday local time, US Treasury Secretary Becent said in an interview with Fox Business Channel that he is optimistic that the Senate will confirm that the current Chairman of the Economic Advisory edoyoko.committee Stephen Milan will take on the temporary vacancy position of the Federal Reserve before the Fed's interest rate meeting in September. Becente revealed that US President Trump is looking for candidates widely to fill the permanent vacancies of the Federal Reserve Board that will appear in January next year and is very open-minded. He revealed that the president has even considered nominating former Federal Reserve Chairman Janet Yellen. “It’s not an ideological question, it’s about the economy — what’s most beneficial to the American people and what’s most beneficial to economic development,” Besent stressed.
According to Fox Business Channel, E.J. Antoni, an economist who was nominated by US President Trump as director of the Bureau of Labor Statistics, suggested suspending the agency’s highly-watched monthly employment report, saying that its basic methods, economic models and statistical assumptions have fundamental flaws. Ahead of Trump’s nomination announcement Monday, Anthony criticized the data behind the monthly employment report for being unreliable and often exaggerated, warning that it misleads key economic decision makers from Washington to Wall Street. "When businesses don't know how much jobs are added or reduced in our economy, exactly how should they plan, or how the Fed should implement monetary policy? This is a serious problem that needs to be addressed immediately. Until the issue is corrected, the Bureau of Labor Statistics should suspend the release of monthly employment reports, but should continue to release more accurate, but less timely quarterly data," he said. "Major decision makers from Wall Street to Washington, D.C. rely on these data, and lack of confidence in these data can have a profound impact."
Janney Montgomeryscott chief fixed income strategist Guylebas said that the July CPI roughly met expectations and did not transmit too much tariff impact to consumers prices, which is certainly enough to lock in the possibility of a rate cut in September. There is still some way to go before the meeting next month, but at least in terms of inflation data, the situation is not worrying at the moment. As an independent and impartial economist, these data can be interpreted from two aspects: one is that since the tariff effect has not yet fully appeared, inflation may rise in the future; the other is that edoyoko.companies are digesting the impact of tariffs, so it will not be transmitted to consumer inflation. But in either case, it is enough to make the Fed's reasonable interest rate cuts in September, provided that next month's data will not accelerate significantly.
CICC research report pointed out that the core CPI in the United States rose 0.3% month-on-month in July, rebounding from 2.9% to 3.1% year-on-year, higher than market expectations; the overall CPI rose 0.2% month-on-month and maintained at 2.7% year-on-year, slightly lower than expectations. From the perspective of sub-items, inflation showed a moderate edoyoko.commodity in July and the characteristics of a rebound in services: tariff costs are still transmitting to the retail end, but some prices have also fallen. Some previously falling services prices have turned upward, increasing inflation stickiness. We maintain our previous judgment that US inflation will enter a structural upward phase. For the Fed, the core CPI has not converged towards the 2% target, but has returned to above 3%, becoming increasingly far away from the target. This could increase partial disagreement within the Fed, making it difficult for it to form a consensus on policy resolutions. The variables in the monetary policy path will be greatly increased and market volatility will intensify.
UK labor market data released on Tuesday showed that employment fell slightly in July, down 8,000. Bruna Skarica, an analyst at Morgan Stanley, said in a note that the data are unlikely to inspire confidence in the Bank of England's rapid rate cut. "The idleness of the British labor market continues to increase, but its speed will not shift the Bank of England's attention from food and overall inflation." LSEGData shows that the market expects the Bank of England to cut interest rates in December at 68%.
Dutch International analyst Francesco Pesole said in a report that if Friday's US-Russia summit fails to make any progress in resolving the conflict between Russia and Ukraine, the euro may fall. He said headlines about the upcoming meeting between U.S. President Trump and Russian President Putin continue to have a slight impact on the euro. Pesole pointed out that if the summit does not achieve anything, the euro will face the risk of falling below 1.1500.
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