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Market jitters put dollar on the defensive
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Hello everyone, today XM Forex will bring you "[XM Official Website]: Market uneasiness puts the US dollar on the defensive". Hope this helps you! The original content is as follows:
In Asian trading on Tuesday, the U.S. dollar index hovered around 97.08. The general sell-off of the U.S. dollar also boosted other major currencies. The euro and sterling both hit four-month highs against the dollar. Market analysts believe that this "selling dollar" transaction is related to concerns about political risks in the United States. Congress needs to pass an appropriations bill by January 30 to avoid a partial government shutdown, and the dispute over funding for immigration enforcement agencies has exacerbated this risk. In addition, President Trump said that he would soon announce the nominee for the new chairman of the Federal Reserve, which also added uncertainty to the market. The Federal Reserve will hold a meeting this week and is widely expected to keep interest rates unchanged.
Analysis of major currency trends
U.S. dollar: As of press time, the U.S. dollar index is hovering around 98.08. Japan’s intervention coincides with the cycle of natural weakness of the U.S. dollar, further exacerbating the weakness of the index and becoming the main driving force for the short-term downward trend. Although the short-term correction pressure on the U.S. dollar is greater, the risk premium is still high. Geopolitical uncertainty, the ambiguity of the Federal Reserve policy, and the resilience of the U.S. economy constitute the core support for the U.S. dollar. From a technical point of view, 96.2 is an important support position in history, and the support is strong. Unless there are extreme circumstances, such as key economic data bursting or the global crisis escalating, the U.S. dollar index is less likely to fall below 95.



1. The probability of the Federal Reserve keeping interest rates unchanged this week is 97.2%, and the probability of keeping interest rates unchanged by June is 40.2%
According to CME "Fed Watch": The probability of the Federal Reserve cutting interest rates by 25 basis points in January is 2.8%, and the probability of keeping interest rates unchanged is 97.2%. The probability of a cumulative 25 basis point interest rate cut by March is 15.5%, the probability of keeping interest rates unchanged is 84.1%, and the probability of a cumulative 50 basis point interest rate cut is 0.4%. The probability of keeping interest rates unchanged by June is 40.2%, and the probability of cumulative interest rate cuts of 25 basis points and 50 basis points are 45.9% and 12.7% respectively. Zelensky.
2. Ukraine, the United States and Russia are expected to hold trilateral talks again on February 1
Ukrainian President Zelensky said in a video speech on the evening of the 26th that Ukraine, the United States and Russia are expected to hold trilateral talks again on February 1. Zelensky said, "We have discussed that the (tripartite) team will hold talks again this Sunday, it would be great if this meeting could be accelerated.”
3. Polls show that support for Trump’s immigration policy has hit a new low during his current term
On January 26, local time, a latest poll showed that US President Trump Public support on immigration issues has dropped to the lowest level since his current term. Most respondents believe that his government has "overdone" immigration enforcement. Polls show that only 39% of American adults approve of Trump's performance on immigration issues. The 41% at the beginning of the month further declined; 53% of the respondents disapproved of it. In contrast, when Trump took office in January last year, immigration was an area of relative strength. In February last year, the poll also showed that about 58% of the respondents. In addition, about 90% of Democratic respondents believe that the enforcement actions of the U.S. Immigration and Customs Enforcement (ICE) are excessive, and about 60% of independent voters believe that Trump’s overall approval rating has dropped to 3. 8%, the same as the lowest level during this term, lower than the 41% in the last round of polls from January 12 to 13.
4. The US dollar weakened, and the risk of intervention drove the yen to rise.
The US dollar fell across the board on Monday, and the yen jumped. to the highest level in more than two months. After the speeches of the Japanese Prime Minister and the Ministry of Finance, speculation about joint U.S. and Japanese intervention in the currency market increased. Ahead of the Federal Reserve meeting and Trump's possible announcement of the new chairman of the Federal Reserve, investors also reduced their dollar positions again. Concerns about the swing have also weighed on the U.S. dollar, which has fallen nearly 3% against the yen in the past two sessions, its worst drop since the "Liberation Day" tariff-related market turmoil in April last year. A source said that the New York Fed has consulted traders on the USD/JPY exchange rate. This is seen as a precursor to intervention. Dominic Bunning, head of G10 foreign exchange strategy at Nomura, said: "Obviously, if both the Japanese Ministry of Finance and the U.S. Treasury Department want to limit the upside of the dollar against the yen, this will be a stronger driving force. "Given the possible involvement of the United States, we believe the signal for intervention is stronger than in 2022 or 2024, which makes any actual intervention likely to be coordinated," Goldman Sachs analysts said. “However, the impact of direct operations is often only temporary when the broader context justifies the pressure on the coin. ”
5. The European Parliament postponed its decision on whether to resume ratification of the EU-US trade agreement
Bernd Lange, chairman of the European Parliament’s International Trade www.xmtraders.committee, said on social media on the 26th that the European Parliament had not made a decision on whether to resume the ratification process of the EU-US trade agreement that day. The specific decision The decision will be made by the European Parliament negotiation team at a later date. According to the news released by Lange, the European Parliament’s International Trade www.xmtraders.committee is scheduled to meet on February 23 and 24. Before that, the European Parliament negotiation team will make a decision on February 4.Have a meeting to reassess the current situation.
Institutional view
1. PIMCO: remains optimistic about long-term Japanese bonds
After the plunge in Japanese government bonds last week, Pacific Investment Management www.xmtraders.company (PIMCO) remains firmly optimistic about Japan’s 30-year government bonds, joining the growing number of investors who are optimistic about the Japanese government bond market. PIMCO said current yield levels provide attractive investment opportunities. Last week, the market was worried that the Sanae government's fiscal policy was overly expansionary, causing the Japanese bond market to lose $41 billion in market value and triggering a sell-off in other assets. PIMCO added that higher yields would provide potential capital gains if interest rates fall and serve as a hedge against economic shocks, stock market volatility or a sharp appreciation of the yen.
2. www.xmtraders.commerzbank: Renewed trade tensions between the United States and Canada may impact the Canadian dollar
www.xmtraders.commerzbank analyst Michael Pfister pointed out that the Canadian dollar may be under pressure against the backdrop of renewed escalation of trade tensions between the United States and Canada. Trump threatened last weekend to impose 100% tariffs on Canadian goods. Risks related to the United States are the main reason for the Canadian dollar's continued weakness. Since the U.S.-Mexico-Canada Agreement will be revised this year, and Trump believes that Canada is the only beneficiary of the agreement, the Canadian dollar may face difficult situations in the www.xmtraders.coming months.
3. HSBC: The Bank of England’s February meeting is expected to remain cautious
HSBC analyst Elizabeth Martins pointed out that the Bank of England is likely to maintain interest rates unchanged at the February 5 interest rate decision and remain cautious about cutting interest rates. Recent UK data has been mixed, reducing the likelihood that the Bank of England will cut interest rates at its February meeting. Employment data showed weakness, while preliminary PMI data for January came in better than expected. Martins expects the Bank of England to reiterate its December statement on a gradual path of interest rate cuts.
The above content is all about "[XM Official Website]: Market uneasiness puts the US dollar on the defensive". It is 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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