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A violent rebound in the US dollar? Trading opportunities under the "encirclement and suppression" of central banks in many countries
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The moon has phases, people have joys and sorrows, whether life has changes, the year has four seasons, after the long night, you can see dawn, suffer pain, you can have happiness, endure the cold winter, you don’t need to lie down, and after all the cold plums, you can look forward to the New Year.
Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market xn--xm-6d1dw86k.comment]: The violent rebound of the US dollar? Trading opportunities under the "encirclement and suppression" of central banks in many countries." Hope it will be helpful to you! The original content is as follows:
Powell's hawkish press conference speech gave the dollar support after the Federal Reserve announced a rate cut in the early hours of Thursday morning. There is little economic data on Friday (September 19), but there will be many macro events in the next week, which may influence the prediction of the US dollar trend.
After the implementation of the Federal Reserve's policy, the US dollar's continuous rebound is currently slightly over. Considering the Fed's policy shift, traders can wait for the US dollar to decline slightly, and it is expected that the US dollar may experience a certain degree of correction in the next few trading periods. In the longer term, since the Fed has entered a loose cycle, only by continuing to release strong economic data that exceeds expectations can it be possible to substantially reverse the situation and give the US dollar an advantage again. This article provides the following outlook for the trend of the US dollar index in the medium term and in the next week:
Unemployment benefits data provide support, but the outlook is still weak
The number of initial unemployment benefits requested fell sharply last week, causing the US dollar to strengthen unexpectedly on Thursday (September 18), and retail sales data had just shown a weak trend. The number of people applying for unemployment benefits for the first time fell to 231,000, reversing the trend of soaring to 264,000 in the previous week, and the number of people continuing to claim unemployment benefits also fell unexpectedly. This is rare good news for the U.S. job market and is enough to continue to support the dollar after the Federal Reserve announced its policy resolution on Wednesday.
However, I don't think this resilience of the dollar will last too long. The Fed's dot chart clearly shows that interest rate cuts will be cut twice this year. In fact, the trend of employment also indicates that the labor market is gradually losing momentum. Therefore, just a brilliant unemployment benefit data is far from enough to change the current situation.
Multiple central banks and the United StatesThe Fed's monetary policy divergence suppresses the US dollar
The currency worth paying attention to is the first dollar against the Japanese yen. The Bank of Japan generally expects to keep interest rates unchanged, but this resolution is not dull.
Two xn--xm-6d1dw86k.committee members broke the convention and voted for a rate hike, which was a rare hawkish turn. In addition, the central bank announced that it would gradually reduce its ETF positions and start selling its exchange-traded funds and real estate investment trust funds. This signal has been clear: the Bank of Japan is gradually moving toward withdrawing from ultra-loose policies. If the yen strengthens in the next few days, it may also have a negative impact on the dollar outlook through the US dollar index.
At the same time, the European Central Bank kept interest rates unchanged for the second consecutive meeting, and its chairman said that economic risks have become more balanced. The market generally believes that the ECB's interest rate cut cycle is xn--xm-6d1dw86k.coming to an end, and it is expected that the rate cut will be about 12 basis points by July next year, which means that the time will be delayed if the interest rate cut is to be cut by 25 basis points.
The Bank of England kept interest rates unchanged on Thursday, with the market expecting it to cut interest rates by the end of the year at about 40%.
The RBA has cut interest rates by 75 basis points since February, but strong second-quarter GDP data have weakened expectations for its further easing.
The recent monetary policy tendencies of these countries that represent major economies in the world are not conducive to the long development of the US dollar.
Outlook for the US dollar in the next week
There will be multiple macroeconomic events in the next week that may affect the US dollar trend, including the global PMI data released on Tuesday, the Swiss National Bank (SNB) interest rate resolution on Thursday, and more importantly, the Fed's preferred inflation indicator - the core personal consumption expenditure (PCE) price index, which will be released on Friday.
Global PMI Data (Tuesday, September 23): PMI and other survey-based indicators are regarded as forward-looking data, and sometimes their influence even exceeds hard economic data. Focus on the "payment price" sub-index in the UK data, the employment sub-index in the US data, and the overall PMIheadline data in the euro zone, which is consistent with the current focus of central banks in various economies.
In the UK, concerns about inflation still hinder the Bank of England's further rate cuts, so any improvement in this area will be negative for the pound and a moderate positive for the dollar outlook.
If the German PMI shows signs of improvement, the euro may rebound against the dollar; and if the US PMI shows further weakening of the job market, the US dollar index may restart its decline.
Swiss National Bank interest rate resolution (Thursday, September 25): Although Swiss interest rates have fallen back to zero, the Swiss franc has appreciated significantly recently. Previously, due to concerns about the impact of US tariffs, the market had rumored that the Swiss National Bank might lower interest rates below zero for the first time in three years. However, as inflation rebounded slightly and remained within the target range for three consecutive months, the market is currently predicting that the Swiss National Bank will keep interest rates unchanged.
Core PCE data (Friday, September 26): The Federal Reserve cut interest rates as expected this week and hintsThere will be two more interest rate cuts before the end of the year, but Powell warned that "there is no risk-free policy path", and this statement highlights that the Fed is in a dilemma. The tariff issue remains a big concern as it may push up inflation again. Therefore, although the current market focus has shifted to signs of weak labor markets, inflation may become a core issue again if inflation data starts to exceed expectations in the future. In addition to the inflation indicator that the Fed is most concerned about, data on the University of Michigan (UoM) consumer inflation expectations survey will be released next Friday.
The above content is all about "[XM Foreign Exchange Market Review]: The violent rebound of the US dollar? Trading opportunities under the "encirclement and suppression" of central banks in many countries". It was carefully xn--xm-6d1dw86k.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
Due to the author's limited ability and time constraints, some content in the article still needs to be discussed and studied in depth. Therefore, in the future, the author will conduct extended research and discussion on the following issues:
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