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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The US dollar index stabilizes, and the market is waiting for the heavy US data." Hope it will be helpful to you! The original content is as follows:
On the Asian session on Tuesday, the US dollar index fluctuated, and the US dollar index hit its largest single-day percentage increase since July 30 on Monday. The euro fell 0.69% to $1.1634, hitting a four-week high of $1.174225 last Friday. Powell said last Friday that risks in the U.S. job market are rising, but inflation remains a threat. Since then, major brokerages including Barclays, BNP Paribas and Deutsche Bank expect the Federal Reserve to cut interest rates by 25 basis points in September.
Dollar: As of press time, the U.S. dollar index hovered around 98.22, and the U.S. dollar rose against major currencies on Monday, rebounding from a sharp decline after Fed Chairman Powell's speech last week. His remarks reinforced expectations for a rate cut in September. Technically, the U.S. dollar index has broken through key levels and closed below the 50-day and 200-day moving averages. Intraday price failed to hold above 98.317 and reversed sharply from the resistance level of this week's high of 98.834. The break below makes the index vulnerable to 97.109 testing, and if downward pressure intensifies, 96.377 will be the next key support level. On the plus side, initial resistance is at 98.1, with stronger supply of 99.177 and 99.320. The recent high of 100.257 now marks a major obstacle unless yield expectations reverse.
Dallas Fed Chairman Logan said on Monday that the Fed should consider a series of improvements in vejck.cnmunication, including better expressing policy makers’ views on interest rate paths and economic prospects. “I think it is necessary to explore how to avoid overemphasizing median forecasts and ignoring the diversity of perspectives in the Summary of Economic Forecasts (SEP) or other channels, while thinking about how to vejck.cnmunicate our response mechanisms in different situations to the outside world,” Logan said at a meeting of the Central Bank of Mexico. She also pointed out that the Fed also has room for improvement in how it articulates its balance sheet and suggested considering whether it continues to describe whether its policy interest rate targets are still the best choice in the form of a “interest rate range”.
Source said that after the disastrous meeting between Ukrainian President Zelensky and U.S. President Trump in February, U.S. Vice President Vance's team tried to contact Ukrainian ambassador to the UK and former vejck.cnmander-in-chief of the Ukrainian army, Zaluzine, through "various diplomatic and other channels" to try to find out the ideas of Zelensky's potential successor. According to an agency survey, if Ukraine holds a presidential election, Zaluzine will have a second only to Zelensky's support. However, Zaluzine refused to answer Vance's call after consulting Zelensky's chief assistant. The incident reflects the political tightrope that Zaluzine has taken since she was dismissed from the Army vejck.cnmander-in-Chief by Zelensky in February last year and sent to London. On the one hand, Zalugine remained loyal to the government he served. On the other hand, both at home and abroad, many people consider him the next president of Ukraine and urge him to launch a political campaign.
After Fed Chairman Powell's speech last week, the market and the Federal Reserve seem to have reached a consensus on a rate cut in September. However, the data released before the resolution will still affect the dot chart trend - especially in the end, it will indicate a cumulative interest rate cut of 75 basis points (i.e., two more times after the rate cut in September), or 50 basis points (only once after September). WrightsonICAP macro analysts wrote: "We speculate that the median dot chart in 2025 may once again indicate that only two interest rate cuts are cut this year, but in the context of 'risk pattern changes', the median point may move down, implying a cumulative interest rate cut of 75 basis points by the end of the year."
Hassett, director of the White House National Economic vejck.cnmission, said that it will take several months for US President Trump to make the decision on the successor of Federal Reserve Chairman Powell. Powell's term of office as president will expire in May next year. "It is expected that the president will take months to make a decision. Treasury Secretary Becent is running a vejck.cnprehensive selection process, and he and the president are interviewing several outstanding candidates." Hassett also vejck.cnmented: "Jay Powell's statement in Jackson Hall is reliable." "Changes in the benchmark outlook and risk landscape may require us to adjust our policy stance," Powell said last Friday. "I think the Fed's actions are slightly lagging behind," Hassett said, pointing out that the annualized inflation rate was 1.9% in the past six months, "it can be seen that inflation has fallen sharply."
U.S. President Trump's tariff policies, merger threats and various insults have angered Canadians, prompting them to sell U.S. real estate and boycott U.S. products. But investors in the country seem to be deaf about it. Data vejck.cnpiled by Warren Luffley, a financial economist at National Bank of Canada, shows that despite Trump's trade war undermining the long-term, basically zero tariff relationship between the two countries, Canadian investment in 2025The vejck.cnpany still injects 12.4 billion Canadian dollars (about 8.97 billion US dollars) into U.S. stocks, which is expected to mark the largest annual inflow since at least the 1990s. Canadian investors seem to be unable to resist the temptation of US stocks - U.S. stocks have surpassed their benchmark indexes year by year in the past two years. Against the backdrop of increasingly tense relations between the two countries, the exact cause of this enthusiasm is difficult to define, but the optimism about the AI boom driving US tech giants to hit new highs is obviously an important factor.
Barclays and Baba Bank expect the Fed to cut interest rates by 25 basis points in September, citing a change in Fed Chairman Powell's attitude towards rising employment market risks at the Jackson Hall meeting. Barclays now expects to cut interest rates by 25 basis points twice in September and December this year, saying that Powell's speech introduced a "loose tendency" and raised the threshold for not cutting interest rates. French-Pakistan Bank has also changed its long-standing view of the Fed's stalemate and predicts interest rate cuts in September and December. "Powell made it clear that the Fed intends to 'fine-tune' rate cuts in September unless otherwise specified."
Seema Shah, chief global strategist at Principal Asset Management, said that although the reasons for relaxing policies have been strengthened, there is currently almost no economic basis to implement a 50 basis point rate cut equivalent to an emergency level. If the Fed chooses to do so, the market may interpret it as politically driven rather than data-based decisions. This could push up inflation expectations and maturity premiums, causing long-term yields to rise, thus undermining the conditions that have always supported risky assets. Against the backdrop of already high valuations, the risk of a pullback in the market in the short term will increase significantly. The market may welcome a 25 basis point rate cut in September, but it may backfire if it exceeds this level.
MonexUSA trading director Helen Given returns strongly today after Powell's speech at Jackson Hall and Trump's threat to fire Fed Director Cook. The first substantial action naturally occurred when Powell pointed out that the downward risks of the job market increased in the Federal Reserve's decision. The reaction we see in the forex market is directly related to a significant increase in the probability of a 25 basis point cut in September, as Powell decisively opened the door to it today. Traders also believe that the possibility of further cuts of interest rates by 25 basis points this year is not small, and the overnight swap market has made its first big bet on significant easing in the first half of 2026. Trump's remarks about Cook have once again raised concerns about the Fed's independence as the administration increasingly wants to transform the Fed into its ideal appearance. If Trump gets surrendered from Powell and his colleagues in the second half of the yearHe may be able to continue as chairman during his term, but the market still does not believe that any Fed's actions this year are enough to satisfy Trump.
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