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The US dollar index fluctuates downward, European and American PMI data is coming

Post time: 2025-05-22 views

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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: The US dollar index fluctuates and goes down, and European and American PMI data is coming heavily." Hope it will be helpful to you! The original content is as follows:

On Thursday, the US dollar index fell slightly, and the US dollar index performed weakly recently, falling 0.6% on Wednesday, losing the 100 integer mark, and the intraday low hit a new low of 99.33 in the past two weeks. Current market sentiment shows obvious characteristics of caution. On the one hand, geopolitical risks continue to ferment, especially the uncertainty of the situation in the Middle East has exacerbated the market's risk aversion; on the other hand, the domestic political deadlock in the United States and the uncertainty of the tax reform bill have further increased market volatility. This trading day will be released on PMI data in European and American countries in May, changes in the number of initial unemployment claims in the United States, and the total annualized number of existing home sales in April. Investors need to pay attention to it. In addition, we will continue to pay attention to the international trade situation, geopolitical situation and news related to the G7 meeting, and pay attention to the speeches of Federal Reserve officials.

Analysis of major currencies

United States dollar: As of press time, the US dollar index hovered around 99.48, down 0.11% during the day. Since the beginning of this week, the dollar has paid the price for the volatility of Trump's administration's policies, which is currently facing difficulties in many aspects. Hawkish rhetoric by Fed officials has significantly lowered market expectations for a recent rate cut, which provides support from the dollar to some extent. However, the ongoing political uncertainty and geopolitical risks put pressure on the US dollar, forming a delicate balance. It can be observed from the daily chart of the US dollar index that the price is in a key technical position. After experiencing a sharp decline in the previous period, DXY has now gained some support near the 99.20 area. Previously, the index hit a low of 97.9229 and then launched a rebound, but recently fell back under pressure. In terms of MACD indicators, the DIFF line is -0.2228, the DEA line is -0.3051, the MACD value is 0.1644, the bar chart is red, but the height of the cylinder is shrinking, which may indicate that the kinetic energy is weakening.

The US dollar index fluctuates downward, European and American PMI data is coming(图1)

Euro: As of press time, the euro/dollar hovered around 1.1340, up 0.11% during the day. In recent trading days, the dollar bulls have been on the defensive position, and the dollar against the yen seems to have driven this trend to a large extent. Last night, the dollar suffered another push against the yen after a sharp rise in bond yields due to poor long-term bond auctions, and the dollar suffered another decline against the yen.

The US dollar index fluctuates downward, European and American PMI data is coming(图2)

GBP: As of press time, GBP/USD hovered around 1.3428, up 0.04% during the day. Although the rise in the UK's April inflation data exceeded expectations triggered concerns about the Bank of England's policy turn, the US dollar continued to be under pressure due to a downgrade of the sovereign rating, providing support for the pound. The market is currently reevaluating the differentiation of policy paths between Britain and the United States. With the interweaving of long and short factors, the pound may maintain a high fluctuation in the short term. Technically, momentum remains bullish, as shown by the Relative Strength Index (RSI), which breaks through the latest high of 60 and has plenty of room to go from overbought. That is, the first key resistance level for GBP/USD will be 1.3468, followed by 1.35. If broken, the next target will be the high of 1.3642 on February 18, 2022. Conversely, if GBP/USD falls below 1.340, the next support will be 1.3350, followed by 1.3300. The key support is below the latter, at 1.3250, 1.3200, and the 50-day simple moving average (SMA) at 1.3141.

The US dollar index fluctuates downward, European and American PMI data is coming(图3)

Summary of news in the foreign exchange market

1. The weak 20-year U.S. bonds and foreign exchange fell, and the value of US bonds and foreign exchange fell. After the results of weak demand for US 20-year U.S. Treasury bonds and foreign exchange fell one after another. Deutsche Bank analyst George Saravelos sees the market's reaction as a clear signal of "foreign buyers collectively avoiding U.S. bond assets." He noted that foreign investors "are no longer willing to fund the U.S. government at current prices." The rise in financing costs is putting pressure on the stock market. Unless there is a major adjustment in the fiscal settlement bill proposed by the Republican Party, the value of U.S. bonds will have to be "Only a sharp decline could attract foreign investors to return. Affected by this, the S&P 500 index's intraday decline expanded to 1.5%, and the 10-year U.S. Treasury yield rose to 4.607%, the highest level since February 13, and the U.S. dollar index fell 0.5%.

2. Sources: The EU prepares a trade proposal for the United States to promote negotiations

According to foreign media reports, the EU is expected to share a revised trade proposal with the United States, which is aimed at The Trump administration’s negotiations have injected momentum, and the outside world remains skeptical of whether a transatlantic agreement can be reached. The new document contains proposals to consider U.S. interests, including international labor rights, environmental standards, economic security, and gradually lower tariffs on non-sensitive agricultural and industrial products to zero, according to people familiar with the matter. The document, submitted to officials in Washington earlier this week, also outlines mutual investment and strategic procurement in the fields of energy, artificial intelligence and digital connectivity. The EU's goal is to cooperate with the United States and seek a balanced and mutually beneficial agreement. One of the people familiar with the matter said that the two sides are still studying each other and that the European Commission may need to be authorized by member states to start formal negotiations.

3. The U.S. House Speaker said that an agreement has been reached on a $40,000 state and local tax deduction cap

According to foreign media reports, U.S. House Speaker Johnson said that Republicans have reached an agreement to reduce state and local taxes (SALT) The exemption raises to $40,000, which means addressing one of the last few questions that hinder Trump’s economic bill. Johnson said Wednesday in response to a question about raising the deduction cap from $10,000 to $40,000 over 10 years: “This is the deal we reached, and I think the SALT caucus, as they claim, isn’t everything they want, but I think they know it’s a huge improvement for their constituents, which gives them a lot to go home and talk about. "According to a person familiar with the matter, the $40,000 SALT limit will be gradually lifted for those with annual income of more than $500,000.

4. ECB warns that US asset concerns trigger a ripple effect

The ECB warns that investors have intensified concerns about U.S. asset risks after Trump’s tariffs, which could further impact the global financial system. The ECB said in its Financial Stability Assessment that after the April trade statement was released, investors took advantage of traditional shelter from the US dollar and US bonds. The “unconventional shift” in Hong Kong may herald “fundamental institutional changes”, which increases the risk of “wide shifts in global capital flows” and “may have a profound impact on the global financial system.” The bank said that the unpredictability of U.S. policy seems to lead investors to higher risk premiums for U.S. assets, and may also shake people’s confidence in the US dollar as a global reserve currency and U.S. sovereign bonds as a safe-haven asset. Policymakers also pointed out that asset valuations are still at high levels, especially as Trump’s policy pullback triggers the marketAfter the rebound. In addition, concentrated investment in US technology stocks means that the market is still susceptible to sudden volatility. The ECB said: "Investors may underestimate the possibility and impact of the adverse scenario, especially because the surge in uncertainty makes tail risks more prone to manifest."

5. Former Bank of Japan member: The window for hikes on the Bank of Japan is narrowing

Former member of the Bank of Japan's committee, Yuri Shirai said that if the bank hopes to raise further rates, it may need to take action within this year, otherwise the window period will be closed. Japan's weak domestic demand has made interest rate hikes insufficient reasons. If inflation falls below the central bank's 2% target, interest rate hikes will be more difficult to advance. She said: "The Bank of Japan may want to promote policy normalization in time as much as possible, even if it can only slightly correct the excessive depreciation of the yen. However, Japan's economy is too weak and fragile domestic demand is incompatible with the path of interest rate hikes." Although Japan's wage growth shows positive signals, continuous inflation suppresses household spending. The latest government data shows that private consumption remained unchanged from January to March. The central bank expects consumption inflation to slow below 2% in the next fiscal year and in the following year starting from April 2026, which Shirai believes will complicate further interest rate hike decisions. Growth headwinds are also intensifying. Japan faces the risk of a technical recession after its economic contraction in the first quarter. Exports to the United States fell for the first time in four months in April, highlighting the impact of high tariffs.

Institutional View

1. Dutch International: As soon as the UK inflation data came out, the focus turned to central bank's August interest rate decision

Dutch International Group economist James Smith said in a report that the UK's April inflation data completely wiped out the Bank of England's hope of interest rate cuts in June, but the survey shows that pricing power is weakening and interest rate cuts are still possible in August. April CPI rose 3.5% year-on-year, up from 2.6% in March. Crucially, service inflation — part of the inflation basket that the Bank of England cares most — soared from 4.7% to 5.4%. "This is a much bigger rebound than we or the central bank expects," Smith said. However, part of the rise is based on road taxes and Easter times, which the Bank of England may ignore. He said the service sector inflation rate should fall back to 4.5% in the summer, which is enough to cut interest rates in August.

2. Deutsche Bank: Investors are worried about fiscal balance in countries outside the United States

Deutsche Bank analyst Jim Reid wrote that the United States is not the only country that has caused fiscal concerns. He said demand for 20-year bond auctions in Japan yesterday fell to its lowest level in 10 years. Reid pointed out that the current debt-to-GDP ratio of the United States and the United Kingdom is 100%, while Japan is 250%, while the proportion of these countries was 41%, 42% and 113% respectively when Japan issued 30-year sovereign bonds in 1999. “We have never experienced a bond market with a maturity of more than 30 years against the backdrop of such high global debt levels. This is an unknown area,” Reid said. He said bond supply will increase in the next few years, “so the long-term market is urgently needed.”Inflation is controlled. ”

3. Morgan Stanley: Despite high inflation in April, the Bank of England is expected to stick to a loose policy

Morgan Stanley analyst Bruna Skarica said in a report that although the UK's inflation rate in April was higher than expected, the Bank of England may stick to its loose policy route. She said the 3.5% annual CPI increase was not a particularly big hit because it was driven by one-time administrative and tourism spending. However, even if inflation may be more moderate in May and the June job market report will show a significant decline in wage growth, it seems unlikely that the Bank of England's interest rate cut in June. Skarica said: "Before August, a lot of things can happen." "Including a decline in inflation expectations. "We still expect interest rates to be lowered and will be cut continuously to 3.25% by the end of the year," she said. ”

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