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Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange】: 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 initial value of the US Markit manufacturing PMI rose to 52.3 in May, a three-month high, and the initial value of the service industry PMI was 52.3, which also exceeded expectations, indicating that economic activities expanded simultaneously. The growth rate of new orders has reached the fastest in more than a year, and the price indicator has risen to the highest in the past three years, indicating that inflationary pressure remains. In addition, the number of initial unemployment claims in the United States fell to 227,000 in the week ending May 17, a four-week low, and the labor market resilience increased. These data reinforce market expectations that the Fed will slow down interest rate cuts and support the dollar in the short term.
Japan's national core CPI annual rate in April was 3.2%, higher than the expected 3.1%, and the core-core CPI annual rate was 2.9%, indicating that inflation pressure continued. Although Japan's GDP shrank by 0.2% in the first quarter, inflation data supported the market's expectations for the Bank of Japan to maintain loose policies, and the yen's safe-haven attributes were highlighted. However, the crisis in the Japanese government bond market (the 20-year government bond auction result has been the worst since 2012) still puts potential pressure on the yen.
Eurozone's comprehensive PMI fell to 49.5 in May, with the service industry performing the worst in 16 months, and French economic activity shrank for nine consecutive months. European Central Bank Deputy Governor De Kindos hinted that interest rates may be cut again in June to cope with downward pressure on inflation and economic uncertainty, with the euro being limited in upward space.
Minutes of the Federal Reserve's May Meeting show that officials believe that policy interest rates are in a reasonable position and if inflation reboundsPolicy tightening may be further tightened. The market expects the Federal Reserve to cut interest rates by only 75 basis points in 2025, which is lower than previous expectations, and the US dollar will receive support in the short term. But in the long run, Morgan Asset Management believes that the US dollar may enter a multi-year downward cycle, with the euro and the yen going to benefit.
The People's Bank of China has carried out MLF operations of 500 billion yuan, with a net injection of 375 billion yuan, and has increased the volume for the third consecutive month, indicating the policy level to support the real economy. This move may alleviate the pressure on RMB depreciation, but we need to pay attention to the impact of interest rate spreads between China and the United States on capital flows.
European Central Bank Deputy Governor De Kindos said that euro zone inflation is close to the target of 2%, and price stability is expected in the next few months, and the market generally expects interest rate cuts in June. The euro-dollar exchange rate rose 0.3% to 1.1279 on May 22, but expectations of a rate cut could limit its gains.
Tensions between Israel and Iran continue to ferment. US intelligence shows that Israel may attack Iran's nuclear facilities, triggering crude oil prices to jump by 3%. The warming of geopolitical risks boosts safe-haven currencies such as the yen and Swiss francs, and may at the same time intensify fluctuations in the global energy market and affect commodity currencies such as the Canadian dollar and ruble.
The U.S. House of Representatives passed the 10-year tax cut of $4 trillion bill proposed by Trump, which may intensify concerns about fiscal deficits and lead to rising U.S. bond yields. In addition, the United States has imposed an admissions ban on Harvard and suspended Venezuelan oil licenses, which has exacerbated tensions in relations between China and the United States and the United States, and the market risk appetite has declined.
OPEC+ discusses a sharp increase in production in July, Saudi Arabia has taken punitive measures against "quota traitors", and the market's concerns about oversupply of crude oil have intensified. The decline in oil prices may drag down commodity currencies such as the Canadian dollar and ruble, but geopolitical risk premiums provide part of the support.
The US dollar index technology sends a sell signal, with the 55-day moving average and the 100-day moving average forming a dead cross, and it is expected to test the 98.5 support level. Morgan Asset Management believes that the US dollar is at the beginning of a multi-year downward cycle, with the euro and the yen going to benefit.
The euro broke through 1.1279 on May 22, and the technical side formed a golden cross (the 55-day moving average crossed the 200-day moving average). If it stabilizes at the 1.1300 mark, it may further rise. But the ECB expects a rate cut and geopolitical risks limit the gains.
The dollar-to-Japanese yen exchange rate was dragged down by the sell-off of US bonds, and the 10-year US bond yield rose by more than 10 basis points in the day, the US dollar index fell to a two-week low, and the yen strengthened against the trend. Technical display of beautyThe short positions in the Yuan-JPY have the advantage and may fall below the 143.00 support level in the short term.
Politics changes: The ECB's June interest rate cut resolution and the Bank of Japan's intervention measures in the Treasury market (such as adjusting the YCC policy) will be key variables.
Geopolitics: The situation in the Middle East, the Russian-Ukrainian conflict, Sino-US trade frictions, etc. may trigger sudden changes in risk aversion.
Economic data: The final value of the US PMI in May, Japan's April trade data, etc. will affect the market's expectations for the economic outlook of Europe, the United States and Japan.
In general, the US dollar is supported by economic data in the short term, but the long-term downward trend has not changed; the euro is suppressed by the European Central Bank's expectation of interest rate cuts, and technical breakthroughs need to pay attention to geopolitical risks; the demand for safe-haven by the Japanese yen is strong, and the treasury debt crisis is still a potential hidden danger. Investors need to pay close attention to the Federal Reserve policy statement, the progress of the situation in the Middle East and global risk events, and flexibly adjust their positions. It is recommended to adopt the strategy of "short the US dollar when it is high, operate the euro range, and go long when it is low" to strictly control risks.
The above content is all about "【XM Forex】: Collection of positive and negative news that affects the foreign exchange market". It was carefully compiled and edited by the XM Forex editor. I hope it will be helpful to your trading! Thanks for the support!
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