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Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange Decision Analysis】: Collection of positive and negative news that affects the foreign exchange market". Hope it will be helpful to you! The original content is as follows:
The US dollar fell below the 99 mark in the early trading, reaching a low of 98.88, a new low since April 2022. As nuclear negotiations between the United States and Iran have made progress, market risk aversion sentiment has eased, and demand for safe-haven for the US dollar has declined. At the same time, since US President Trump announced the full imposition of global tariffs, the trade war has led to the continued loss of confidence in the US dollar as a safe-haven asset. The US dollar fell into a weak situation last week. Although it rebounded slightly as the weekend approached, it still showed a decline overall.
A Reuters survey shows that economists believe that the possibility of a U.S. economic recession in the next 12 months has increased, which has a negative impact on the dollar. An economic recession is expected to reduce investors' confidence in U.S. assets, leading to capital outflows, and thus suppressing the dollar exchange rate.
According to CME's FedWatch tool, traders believe that the possibility of the Federal Reserve's interest rate cut in May has dropped to around 6%, and interest rate expectations are relatively stable, which will support the US dollar to a certain extent, alleviating the decline of the US dollar. If the market's expectations for the Fed's interest rate cut are further reduced, it will be conducive to the strengthening of the US dollar.
The RMB exchange rate against the US dollar showed a short-term technical rebound, with the onshore RMB rebounding to 7.2990, and the offshore RMB at 7.3020, a significant rebound from the low of 7.42876 in early April. This is mainly affected by the easing expectations of the Fed's interest rate hike and the central bank's intervention. Regulators have suppressed the guidance of intermediate prices and market intervention.The expectation of unilateral depreciation has enhanced the market's confidence in the RMB.
China's slowdown in economic growth has formed an interest rate spread with the Federal Reserve's high interest rates, and the pressure of capital outflow continues. In the medium and long term, the RMB is still under pressure. If the interest rate gap between China and the United States does not reverse, the RMB may test the range of 7.5-7.8 in the future.
The ECB announced last week that it would cut the benchmark interest rate by 25 basis points to 2.25%, the seventh rate cut in a year and has reduced borrowing costs to its lowest level since the end of 2022. Although interest rate cuts are to some extent to cope with slowing economic growth, from another perspective, a lower interest rate environment may stimulate economic growth, enhance market confidence in the euro zone economy, and thus have a certain supporting role in the euro exchange rate.
European zone economic growth is still relatively fragile and faces many uncertainties, such as geopolitical tensions and global trade issues. These factors may suppress the euro's upward space and put the euro against the dollar to a certain extent.
Economic data show that Britain's economic growth remains stable, inflation slows down, and wage growth is strong, which provides certain support for the pound. The pound hit a new high of 1.3298 against the dollar last week to reach a new high of 1.3298 since early October last year, and market confidence in the pound has increased.
The Bank of England has different views on interest rate policy. The market expects interest rate cuts to occur in early 2025, especially as the labor market weakens, wage growth slows down and inflationary pressures lower, which may put some downward pressure on the pound exchange rate.
Japanese negotiator Ryo Akazawa is coming to clarify that the trade negotiations have not discussed the exchange rate issue, which has led the US dollar to rebound from a low of nearly 1 yen, which has played a certain stabilizing role in the Japanese yen exchange rate.
Bank of Japan Governor Kazuo Ueda said that if potential inflation accelerates to approach the 2% target as scheduled, the Bank of Japan will continue to raise interest rates. Although this remark shows to a certain extent the Bank of Japan's concern about the economy and inflation, it also triggers market concerns about the Japanese economic recovery process and may put some pressure on the yen exchange rate.
The above information is compiled from public content and does not constitute investment advice. The foreign exchange market is affected by a variety of factors. Investors need to pay close attention to the global economic situation, central bank policies, geopolitics and other trends, and make investment decisions with caution.
The above content is all about "【XM Foreign Exchange Decision Analysis】: Collection of Positive and Negative News that Influence the Foreign Exchange Market". It was carefully compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
Because the author's ability is limited,Due to the shortage of time, some of the contents in the article still need to be discussed and studied in depth. Therefore, in the future, the author will conduct extended research and discussion on the following issues: