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market analysis
A collection of positive and negative news that affects the foreign exchange market
Wonderful introduction:
Walk out of the thorns, there is a bright road covered with flowers; when you reach the top of the mountain, you will see the cloudy mountain scenery like green clouds. In this world, a star falls and cannot dim the starry sky, a flower withers and cannot desolate the whole spring.
Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange Decision Analysis】: 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:
1. Good news for non-US monetary currency: policy and data resonance
1. The People's Bank of China released a signal of easing, and the RMB was supported by the policy.
The regular meeting of the third quarter Monetary Policy www.xmtraders.committee held by the People's Bank of China on September 30 clearly proposed "implementing moderately loose monetary policies", emphasizing increasing coordination and cooperation between monetary and fiscal policies to guide the continuous decline in social financing costs. At the same time, the "Catalogue of Green Finance Support Projects (2025 Edition)" was officially implemented on October 1, unifying the green financial product standards, and is expected to drive more than 500 billion yuan of green credit investment this year. The policy www.xmtraders.combination strengthens the market's confidence in China's economic recovery. As of October 1, the onshore RMB exchange rate against the US dollar was 7.1820, up 120 basis points from the previous trading day, hitting a two-week high.
2. The OECD raised its global growth expectations, and European currencies were boosted.
OECD released a report on September 25, raising its global economic growth forecast for 2025 from 2.7% to 2.9%, and pointed out that the eurozone economic resilience exceeded expectations, and Germany's industrial output is expected to rebound by 1.2% month-on-month in the fourth quarter. This optimistic expectation echoes the European Central Bank's recent statement of "suspending interest rate cuts", and the market's expectation of the probability that the European Central Bank will remain unchanged in October has risen to 92%. Driven by positive news, the euro/USD fluctuated upward after opening on October 1st, breaking through the previous 1.1750 resistance level.
3. The situation in the Middle East eases and reduces the risk aversion premium, and the pressure on European currencies to hedge is eased
On October 1, the United States and Israel announced the conclusion of the "20-point peace plan" for the Gaza conflictConsensus: The geopolitical risk premium in the Middle East has accelerated its decline. Due to the high dependence of the eurozone on energy in the Middle East, the ease of the situation not only reduces energy import costs, but also alleviates market concerns about repeated inflation and indirectly supports the stability of the ECB policy. On the same day, the disturbances to crude oil supply by the Russian-Ukrainian conflict continued to weaken, and Russia's average daily crude oil export volume remained above 8 million barrels, further weakening the market's risk aversion sentiment and promoting the return of funds from the US dollar to European currencies.
2. Bad news: weakening attributes and turning expectations
1. Goldman Sachs warned that the dollar has weakened its safe-haven attributes, and the pressure of capital divert has emerged. Goldman Sachs' latest report pointed out that the dollar is experiencing the most significant weakening of safe-haven attributes in decades. The probability of the dollar depreciation in simultaneous times when US stocks fell this year has soared more than twice as much as the past decade. The core reasons include rising U.S. policy uncertainty, narrowing of asset return advantages and increasing trends in capital diversification. Data on October 1 showed that the negative correlation between the ICE US dollar index, which measures the demand for safe haven, and the S&P 500 index, fell to 0.3 (the historical average is -0.6), and the attractiveness of the US dollar as a "safe harbor" has dropped significantly. The US dollar index fell below the key support level 97.50 at the opening of the day. 2. The expectations of US economic recession have heated up, and the Federal Reserve's easing expectations have strengthened
Goldman Sachs and JPMorgan Chase have both raised the probability of US economic recession to 45% and 60% respectively. The market is worried that weak domestic demand in the United States will exacerbate downward pressure on the economy, and the expected probability of the Federal Reserve dropping another 50 basis points in the fourth quarter rose to 86%. On October 1, although New York Fed Chairman Williams stated that he needed to be vigilant against inflation risks, he failed to reverse market easing expectations, and the advantage of the short-term interest rate spread of the US dollar continued to narrow, suppressing the upward space of the US dollar index.
3. The plummeting crude oil dragged down the correlation effect of the US dollar, and www.xmtraders.commodity currency transmission put pressure on it
On October 1, WTI crude oil plummeted 1.70% to US$62.37 per barrel, hitting a three-month low of US$61.8 per barrel during the session. As the core www.xmtraders.commodity denominated by the US dollar, the price decline not only weakens the US dollar's www.xmtraders.commodity settlement demand, but also indirectly affects the www.xmtraders.composition of the US dollar index by suppressing www.xmtraders.commodity currencies such as the Canadian dollar. Although the US dollar/Canadian rose 0.32% due to the weakness of the Canadian dollar, the US dollar fell even more against major currencies such as the euro and the pound, causing the overall pressure of the US dollar index to decline.
3. www.xmtraders.commodity currency pressure news: crude oil drag and policy constraints
1. Rumors of OPEC+ increase in production impacted crude oil, and the Canadian dollar led the decline in www.xmtraders.commodity currency. Market news shows that OPEC+ plans to increase November output to more than 137,000 barrels per day at its meeting on October 5. In addition, the crude oil export pipeline resumes operations in northern Iraq and adds 400,000 barrels per day supply, and expectations of crude oil surplus are intensifying. As the core pillar of Canada's economy, crude oil exports account for more than 10% of its GDP. The plummeting oil price directly suppressed the Canadian dollar exchange rate. The US dollar/Canadian dollar rose to 1.3625 on October 1, a record high since September. Australian dollar, New Zealand dollarCommodity currencies were also dragged down, with the Australian dollar/USD falling to around 0.6480. 2. Bank of Canada's policy wait-and-see, the Canadian dollar lacks interest rate support
After cutting interest rates by 25 basis points on September 17, the Bank of Canada clearly turned to a wait-and-see position of "data dependence". Governor McClum emphasized that "the current focus is more on short-term economic trends." The plunge in crude oil on October 1 further weakened the profit expectations of Canada's energy industry. The market's expectation of the Bank of Canada's continued interest rate cuts in October rose to 35%. The lack of interest rate support has made it difficult for the Canadian dollar to get rid of its weakness.
4. Core risk warning
OPEC+ meeting exceeded expectations: If the meeting on October 5th is not confirmed to expand production, crude oil may rebound to above $65 per barrel, driving the Canadian dollar to strengthen, and the US dollar/Canada needs to be vigilant about the risk of a pullback.
U.S. non-farm data changes: If the number of non-farm employment in September released on Friday exceeds expectations, it may strengthen the Federal Reserve's hawkish expectations and push the US dollar index to rebound above 98.00.
China's economic data is lower than expected: If the subsequent release of China's PMI is below the boom and bust line, it may weaken the rebound momentum of the RMB and reverse the short-selling logic of the US dollar/RMB.
Overall, on October 1, the foreign exchange market showed a pattern of "non-strong US, weak US dollar, and differentiation of www.xmtraders.commodity currency", and policy differences and weakening of US dollar attributes were the core drivers. Trading needs to focus on the upward opportunities of the euro/dollar and the trend of the US dollar/Canadian, while closely following crude oil prices and Fed officials' statements to prevent short-term news disturbances.
The above content is all about "【XM Foreign Exchange Decision Analysis】: Collection of Positive and Negative News that Influence the Foreign Exchange Market". It was carefully www.xmtraders.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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