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Trump may appoint new Fed chairman next week, Japan's finance minister issues strong warning of intervention
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market Analysis]: Trump may appoint a new Federal Reserve Chairman next week, and Japan's Finance Minister issues a strong warning of intervention." Hope this helps you! The original content is as follows:
On December 23, in the Asian market on Tuesday, spot gold was trading around US$4,490 per ounce. Affected by the intensification of geopolitical tensions and market expectations that the United States will further weaken in 2026, Driven by the interest rate cuts, gold and silver prices soared, both hitting record highs; U.S. crude oil traded around $57.83 per barrel, with oil prices rising nearly 2.5% on Monday. Rising geopolitical risks provided key support for oil prices.
After Japanese officials released a strong signal of intervention, the yen's exchange rate against the US dollar showed a technical rebound on Monday, ending its recent losing streak. The U.S. dollar index continued to slide, and is expected to post its largest annual decline since 2017.
The rise in the yen was mainly driven by warnings from Japan’s Ministry of Finance and Chief Cabinet Secretary. Financial Officer Jun Mimura made clear that recent currency movements were "unilateral and sharp" and said the government was prepared to "take appropriate action" against excessive volatility. Market analysts generally regarded this as a strong verbal intervention signal, which triggered short covering of the yen.
The U.S. dollar fell 0.5% against the yen to around 156.94 yen. However, the exchange rates of the euro against the yen and the Swiss franc against the yen both rose to record highs during the session, highlighting that the overall weakness of the yen remains.
The U.S. dollar weakened overall, with the U.S. dollar index falling 0.4% to 98.3, mainly dragged down by declines against the Japanese yen and the euro. This is mainly due to the continued fermentation of market expectations for further interest rate cuts by the Federal Reserve next year, which has inhibited the attractiveness of the US dollar. In contrast, both the euro and the pound posted gains against the dollar, with the pound rising 0.6% to $1.3458.
Analysts pointed out that although the Bank of Japan raised interest rates to a thirty-year high last week, the move has already been criticized.The market has fully digested it. Without further clear guidance on future interest rates, the yen will remain under pressure. Officials issued an intervention warning at this time, aiming to provide the yen with breathing space. However, the limited effectiveness of past interventions has also left markets wary of the actual impact of verbal warnings.
Asian Markets
The Reserve Bank of Australia (RBA) released the minutes of its December monetary policy meeting on Tuesday, showing that board members are increasingly less confident that monetary policy will remain restrictive as mounting evidence suggests that inflationary pressures may be more persistent than previously expected.
China kept its benchmark lending rate unchanged for the seventh consecutive month, in line with expectations. The best interest rate for one-year loans remains at 3.0%, while the five-year loan rate (an important reference for mortgage loan pricing) remains at 3.5%.
The ruling reinforces the view that short-term monetary easing is not a priority. While a lower LPR helps lower financing costs and supports investment and consumption, authorities appear willing to maintain existing settings as they assess the impact of early stimulus and targeted support measures on the economy.
However, earlier policy guidance from the Central Economic Work Conference pointed out that the strategic tendency is broader. Officials said China will adopt a more active fiscal policy in 2026, coupled with a moderately loose monetary policy, suggesting that support for growth will increasingly www.xmtraders.come from government spending and structural measures rather than immediate interest rate cuts.
U.S. Market
In an interview with Beth Hammack published by the Wall Street Journal, the president of the Cleveland Fed believed that there is no urgency for the Fed to adjust interest rates. He said that the policy can at least maintain interest rates at 3.50% to 3.75% until the spring. Hammack said that time frame would allow policymakers to better judge whether www.xmtraders.commodity price inflation is truly easing as tariffs are gradually advanced through the supply chain.
Hammack frames his point as patience, not reaction. Her basic view is that rates should remain at current levels "for some time" until there is clearer evidence of "either inflation falling back to target or more significant weakness in employment."
She was clearly skeptical of last week's November CPI report, which showed headline inflation fell sharply from 3.1% to 2.7%, with a similar decline in core inflation. Hammack said she took the data "with a grain of salt," pointing to distortions associated with the fall government shutdown. Her own estimate puts inflation closer to 2.9% to 3.0%.
While Hammack described the current policy rate as broadly neutral, she would actually prefer a slightly more stringent stance to put additional pressure on inflation.
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