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The dollar strengthened and gold prices fell, and a major bill committee hinted that it would not cut interest rates at the next meeting!
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: The dollar strengthens and gold prices fall, and a major bill www.xmtraders.committee hinted that there will be no interest rate cuts in the next meeting!". Hope it will be helpful to you! The original content is as follows:
On Thursday, during the Asian session, spot gold trading around $3,740.71/ounce, gold prices fell on Wednesday due to the strengthening of the US dollar. Investors are waiting for the economic data to be released later this week to find further clues about the Fed's policy path; U.S. crude oil trading around $64.71/barrel, oil prices climbed nearly 2% on Wednesday, hitting a seven-week high. U.S. crude oil inventories unexpectedly fell last week, coupled with the obstacles in exports from Iraq, Venezuela and Russia, and the market's concerns about tightening supply increased. "The dollar is generally slightly firmer against most G10 currencies, but is still in volatility and range volatility. According to our capital flows and holdings data, the dollar is still in a significant low-level state among large groups of medium and long-term investors, so I think it is in a consolidation period, which is what is happening right now."
Powell maintained a cautious tone on Tuesday, saying that the Fed still needs to weigh risks between high inflation and weak job markets in future interest rate decisions. The market expects the Fed to cut interest rates by 25 basis points in the remaining two meetings of the year and to lower it again in the first quarter of 2026, an expectation consistent with the Federal Reserve's guidance after last week's meeting.
U.S. economic data will be the focus of attention this week, especially the personal consumption expenditure (PCE) price index to be released on Friday, which is a key indicator that affects the market's expectations for the Fed's next policy.
Loh added: "We are still evaluating the Fed's movements point by point based on the data, which will serve as a catalyst for interest rates and the U.S. dollar trends, deciding whether the market believes the Fed will be more radical or hawkish."
The candidate running for the next president of the ruling Liberal Democratic Party answered a reporter's question on Wednesday. Sanae Takaichi, one of the leaders and is known for his dovish fiscal and monetary policy, said monetary policy is decided by the Bank of Japan, but higher interest rates may affect mortgage rates and corporate investment.
Asian Market
BoJapan's July meeting minutes show that debate among policymakers over whether interest rates need to be raised to neutral levels is becoming increasingly fierce. One member believes that it is appropriate for the Bank of Japan to "return policy rates to neutral levels as much as possible" as possible, with rising prices and output gaps approaching zero.
Another www.xmtraders.committee member warned against "over-caution", saying the central bank should not miss the opportunity to raise interest rates, especially as stocks react positively to the recent U.S.-Japan trade deal. Several other www.xmtraders.companies agree that if the drag on the economy is limited, it is feasible to raise interest rates again before the end of the year.
At the same time, policy makers have differences on inflation. While some believe that the overshoot is temporary and food-related, others highlight the risk that continued rise in food prices may consolidate higher inflation expectations.
The debate has since grown intensified, as the September meeting showed, when two members opposed raising interest rates to 0.75%. The growing hawkish faction has allowed the Bank of Japan to raise interest rates again in the www.xmtraders.coming months, especially if growth and inflation prove resilient.
European Market
Megan Green, a member of the Bank of England's Monetary Policy www.xmtraders.committee, said in a speech overnight that UK inflation remains an outlier among developed countries, with the overall CPI above its target for more than four consecutive years and has risen again in the past year. She noted that deflation is concentrated in interest rate-sensitive industries, which suggests that “most of the deflation may have passed” and that labor market weakness has emerged.
Green believes that the data is "a sign of an adverse supply shock", but says that the second round of wage effects is unlikely to pose a significant risk as the labor market relaxes. She added that while trade risks persist, they have been alleviated and GDP growth is expected to rebound and job opportunities will not deteriorate drastically.
She highlighted two lessons from the recent supply shock: when inflation persists uncertainty, policy makers should prioritize inflation to prevent it from being deeply rooted, and when inflation rises, prices may react faster than output.
In this context, she said, “A proper response to the uncertainty and risks we are currently facing should include a cautious attitude towards future rate cuts” and reinforced her vote to keep bank interest rates at 4% last week.
DeIn September, the Ifo business prosperity index fell from 88.9 to 87.8, the current situation index fell from 86.4 to 85.7, and the expected index fell from 91.4 to 89.7. The institute said the recovery prospects were “settling”.
Sweakness is widespread by industry. Manufacturing confidence has further declined, www.xmtraders.companies have reported weak orders and optimism among capital goods producers has weakened. The service industry was hit hardest, plunging to -3.0, the lowest level since February as expectations became even more pessimistic. Trade sentiment has also deteriorated, while the construction industry has provided rare highlights with a slight improvement.
U.S. Market
San Fed Chairman Mary Daly said she "full support" last week's rate cut and expected further rate cuts to be needed. However, during an overnight event, she stressed that the timing of further cuts remains uncertain. It's hard to say, she said.
Daly described the labor market as no longer stable, but not weak, calling it "sustainable." She said she did not want to see further weakness, noting that the Fed's latest decision was actually a "insurance" move to support employment as inflation continues to slow.
She added that the economy still needs "the shackles of monetary policy, but not as much as we used to."
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