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The U.S. dollar index maintains gains at monthly highs as the market awaits speeches from Fed officials
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Official Website]: The U.S. dollar index maintains its monthly high gains, and the market is waiting for the speech of Federal Reserve officials." Hope this helps you! Original content is as follows:
In Asian trading on Friday, the dollar index rose to a six-week high on Thursday, supported by strong employment data, while the yen continued to be under pressure on expectations of Japan's potential fiscal expansion policy. Investors expect the Fed to keep interest rates on hold later this month.
Analysis of major currency trends
U.S. dollar: As of press time, the U.S. dollar index is hovering around 99.35. Due to the decline in the number of initial jobless claims in the United States, the U.S. dollar has strengthened. The U.S. industrial production report for December will be released later on Friday. In addition, Federal Reserve (Fed) Governor Michelle Bowman will deliver a speech. Technically, the price remains above the 20-day exponential moving average (EMA) at 98.73, with the EMA starting to slope upward, supporting a bullish tone in the short term. The 14-day relative strength index (RSI) is at 59.87, still above the midline of 50, confirming improving momentum. The rising trendline from 96.21 provides support near 98.11, keeping pullbacks limited while buyers defend the upside. Above, horizontal resistance at 100.27 will be a key obstacle.



1. US media said that Trump is suspending the decision to use force against Iran
According to the US "Axios News Network (Axios)" report on January 15, local time, US President Trump "is suspending the decision on whether to launch a military strike against Iran." The White House is said to be conducting intensive discussions internally and consulting with allies to "evaluate the timing of strikes and 'whether they can truly shake the Iranian regime'." Sources from the United States, Israel and Arab countries said that "military options are still on the table, but uncertainty has increased significantly."
2. Market analysis: The uncertainty of the general election www.xmtraders.combined with the central bank’s decision will increase the risk of yen fluctuations
As the prospect of Japan’s interim general election becomes increasingly unclear and the Bank of Japan will hold a meeting next week, Japanese yen traders are highly vigilant about renewed volatility in the exchange rate.Volatility risk. The yen fell to its lowest level in 18 months earlier this week on expectations that Prime Minister Sanae Takaichi will call a general election that could pave the way for more government spending. Japan's finance minister and top foreign exchange official subsequently issued new warnings about the trend. Bart Wakabayashi, manager of the Tokyo branch of State Street Bank, said, "The U.S./Japan has been almost silent in the past few weeks or even months, but it started quickly as soon as election-related news emerged, and this kind of volatility will continue." Cameron Systermans, head of Asia multi-asset at consulting firm Mercer, said that the market will pay close attention to the psychological level of 160, and 162 may also become the next important focus, because 161.95 is the high point of the U.S. dollar against the yen in 2024 and has triggered official intervention.
3. Japanese media: The Bank of Japan avoided supporting Powell because it was worried about angering Trump
According to Nikkei, the Bank of Japan did not express support for Federal Reserve Chairman Powell. An official at the bank said it was inappropriate to www.xmtraders.comment on matters involving other central banks. The heads of major central banks and financial institutions issued a joint statement in support of Powell on Tuesday. Sources in the Japanese government revealed that the Bank of Japan had consulted the government on whether to join the statement. Although the government did not explicitly express opposition, considering Sanae Takaichi's emphasis on relations with Trump, the Bank of Japan may want to avoid indirectly criticizing Trump by supporting Powell. If the Japanese government angers Trump, it may lead to more remarks against the Bank of Japan, which may make it difficult for Japan to obtain U.S. support when it intervenes in the foreign exchange market in the future. The BOJ's reactive approach has also been criticized by other central banks, with some European Central Bank officials wondering why the BOJ refused to join the statement.
4. Hassett: If he takes the helm of the Federal Reserve, he will be able to convince his colleagues
Hassett, the favorite to be the next Fed chairman, denied outside concerns that if he takes office, he will have difficulty convincing other Fed officials to support his views. "I'm tough enough to win debates," Hassett said on Thursday. "Anyone who www.xmtraders.comes to the White House and faces every question they can get asked for five years in a row - as I did - is tough enough to face a hostile situation and help people understand why they are right or wrong." Hassett has argued that Fed Chairman Jerome Powell and his colleagues are cutting interest rates too slowly, echoing Trump's sentiments. Fed observers pointed out that interest rate decisions depend on a majority vote of the Federal Open Market www.xmtraders.committee, and Trump's nominated chairman may not be able to build consensus on a significant interest rate cut. Hassett reiterated that Trump believed that the Fed was politically inclined under Powell's leadership and cut interest rates before the 2024 election, but stopped the easing cycle after Trump took office in 2025. "He believes that sometimes their decisions appear to be partisan."
5. Fed Schmid advocates maintaining restrictive interest rates and warns that cutting interest rates will not solve the structural problems of the labor force
Federal Reserve Schmid said: interest rates should be maintained at a level that continues to put pressure on the economy., so that inflation can further cool down. Given that inflationary pressures remain evident, I would prefer to keep monetary policy moderately restrictive. He noted: "Although the labor market has cooled, some degree of cooling may be necessary to prevent the inflation outlook from worsening." Schmid reiterated on Thursday that further interest rate cuts may not stimulate hiring and asserted that slowing growth is driven by structural factors and that the Fed is best suited to help in cyclical recessions. Schmid said: "I don't think further rate cuts will be effective in repairing the cracks in the labor market - these pressures are most likely caused by structural changes in technology and immigration policy. "I worry that rate cuts will have a more lasting impact on inflation, because our www.xmtraders.commitment to the 2% target is increasingly challenged. Doubtful. ”
Institutional view
1. Mitsubishi UFJ: Even if it intervenes, the yen will be difficult to stabilize
Lee Hardman, an analyst at Mitsubishi UFJ, said in a report that the Japanese authorities may have difficulty supporting the yen through potential intervention measures. He noted that market concerns about fiscal risks are unlikely to abate in the short term, and the Fed is expected to keep interest rates unchanged until a new chairman takes office. Japan's finance minister hinted at possible intervention after the yen's recent sharp decline, which was mainly affected by Prime Minister Sanae Takaichi's plans for an early election. Investors are betting that if Sanae consolidates her power, she could push for further fiscal stimulus, reducing the likelihood of a rate hike.
2. Analysts: UK economic growth is expected to remain sluggish in 2026
Analyst Lale Akoner said in a report that UK GDP data in November was better than expected, bringing some relief to investors worried about a possible economic recession in the short term. UK GDP increased by 0.3% month-on-month in November, while it fell by 0.1% month-on-month in October. "The rebound in GDP in November is encouraging, but we view it more as an alleviation of concerns rather than a reacceleration of the economy," Akoner said. She noted that economic growth is expected to remain subdued in 2026, which will allow the Bank of England to continue cutting interest rates.
3. Institutions: The Australian dollar against the U.S. dollar may rise to 0.70 during the year
Peter Dragicevich, currency strategist at Corpay Financial www.xmtraders.company, said that the Australian dollar against the U.S. dollar may rise to 0.70 before the end of the year, supported by the widening interest rate differential between Australia and the United States. Australia's domestic economic environment is stable and inflationary pressure continues, which means that the Reserve Bank of Australia has put interest rate hikes back on the agenda, and the Federal Reserve may continue its interest rate cutting cycle. Policy divergence from the Fed and widening interest rate spreads could provide medium-term support for the pair.
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