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Hello everyone, today XM Forex will bring you "[XM Forex]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
Global hedging capital inflows form a periodic support. In September, global physical gold ETFs recorded the largest single-month inflow in history, with total inflows reaching US$26 billion in the third quarter, and asset management scale exceeding US$472 billion, reflecting that market risk aversion remains high amid the tug-of-war in the Middle East and controversies over AI technology risks. As a traditional safe-haven currency, the U.S. dollar index found support around 97.8, which was basically unchanged from the beginning of the month, indicating that early expectations for interest rate cuts have been partially digested. In addition, Tesla's Q3 financial report showed corporate-level pressures such as tariffs cutting profits and Meta layoffs to optimize costs, which intensified the market's cautious attitude towards risky assets and indirectly benefited the demand for US dollar liquidity.
The expanded consensus within the Federal Reserve to cut interest rates suppressed the trend of the US dollar. Board member Bowman clearly expects two more interest rate cuts before the end of the year, and board member Milan stressed the need to ease trade tensions as soon as possible. Even if Chairman Powell maintains a "one meeting, one meeting" stance, the market has priced in a cumulative interest rate cut of more than 100 basis points by the end of 2026. Concerns about economic fundamentals have further weakened the U.S. dollar's confidence: the U.S. government shutdown has entered its 24th day, and key data such as retail sales and PPI continue to be missing. Director Waller warned that AI technology may lead to an increase in layoffs, and job market risks are heating up, weakening the U.S. dollar's economic fundamental support.
Negative: European Central Bank President Lagarde made it clear at the IMF annual meeting that ""The direction of interest rate cuts has been determined", internal differences between hawks and doves have narrowed, and the market is betting on a 32 basis point interest rate cut in December. Superimposed on the Eurozone manufacturing PMI shrinking for eight consecutive months, the energy transition has caused the growth rate of crude oil demand to fall below 700,000 barrels per day. The euro/dollar fell after encountering resistance at 1.1645, and the short-term pressure is obvious.
Positive: The continued decline in international oil prices eases energy costs. Under this pressure, Brent crude oil prices have fallen by more than 15% from the September high, and the trade deficit of the Eurozone, which is highly dependent on energy imports, is expected to narrow, providing marginal support for the euro.
Positive: After Japan’s Liberal Democratic Party and the Reform Party reached a coalition agreement, the market responded to "fiscal easing + currency." Expectations for a "normalization" policy mix have increased. Although the probability of an interest rate hike in October is only 24%, 96% of economists expect interest rates to rise to 0.75% before the end of March next year. The expectation of narrowing interest rate differentials will push the U.S. dollar against the yen to fluctuate at the 151.20 support level.
Negative: The multilateral talks between the United States and Iran on October 26 are approaching. If a sanctions relaxation agreement is reached, Iranian crude oil Exports may increase by 500,000 barrels per day, exacerbating oversupply and possibly lowering safe-haven premiums, weakening the Japanese yen's safe-haven demand support.
Bad news: JPMorgan Chase and Goldman Sachs have lowered their crude oil price forecasts, and Brent crude oil may test US$52 in 2026. The Australian dollar, as a www.stofoco.commodity currency, has been affected. Affected by the weakening www.stofoco.commodity prices, the Australian dollar failed to break through the key resistance of 0.6535 and remained in a downward channel.
Positive: China’s total foreign-related receipts and payments in the first three quarters reached US$11.6 trillion, a record high for the same period in history. In September, cross-border receipts and payments of the non-bank sector increased by 7% month-on-month, indicating that China-Australia trade capital flows are active. Market expectations for China to cut reserve requirements and interest rates before the end of the year have increased. The 500 billion yuan in policy financial instruments will boost domestic demand and indirectly benefit the export-related demand for the Australian dollar.
Foreign exchange reserves and cross-border receipts and payments form dual support. At the end of September, my country's foreign exchange reserves reached 3.3387 billion U.S. dollars, continuing to remain fully charged. The surplus scale will provide a "ballast stone" for exchange rate stability. In the first three quarters, the www.stofoco.com inflow of funds under trade in goods remained high, and the flow of service trade and investment income was stable. Even if there was a www.stofoco.com outflow under the capital account, the overall foreign-related revenue and expenditure structure still showed resilience. Zou Lan, deputy governor of the central bank, emphasized the construction of a financial system adapted to technological innovation. The expansion of direct financing is expected to attract long-term foreign capital inflows and enhance the attractiveness of RMB assets.
Interest rate cuts by small and medium-sized banks triggered expectations of easing. Since October, more than 10 small and medium-sized banks have intensively lowered deposit interest rates, with the largest reduction reaching 80 basis points. Although the aim is to stabilize interest rate spreads, the market is worried that subsequent systemic easing may lead to slight pressure on the RMB exchange rate. The overall weakness of non-U.S. currencies also has a passive impact.In September, the Japanese yen and the British pound fell by 1.1% and 0.5% respectively against the US dollar. The fluctuations in major currency pairs were transmitted to the RMB exchange rate, which fluctuated within a narrow range around 8.95 in the short term.
Key data: Pay attention to the US initial jobless claims data for the week in the evening. If it is higher than the expected 320,000, it will strengthen the Fed's expectation of interest rate cuts, and the US dollar index may fall to 97.5 support.
Key points: The EURUSD needs to be wary of falling support at 1.1560, the USD/JPY should focus on a breakthrough in the 151.20-152.0 range, and the AUD/USD can test long positions before the 0.6440 support is broken.
Risk warning: The multilateral talks between the United States and Iran on October 26 and the OPEC+ technical www.stofoco.committee meeting at the end of October may cause geopolitical and www.stofoco.commodity price fluctuations, and stop losses need to be set in advance.
The above content is all about "[XM Foreign Exchange]: Collection of good and bad news affecting the foreign exchange market". It is carefully www.stofoco.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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