A collection of good and bad news affecting the foreign exchange market

On the first trading day of December, the foreign exchange market ushered in a www.xmasseuse.complex pattern of multiple policies and data intertwined. The swing in expectations of the Federal Reserve's interest rate cut, the prominent two-way fluctuations in the RMB exchange rate, the Eurozone's policy determination, and the foggy British economic data all together constitute the core contradiction in the current market. The following is a summary of the key positive and negative factors affecting today's foreign exchange transactions to help investors grasp the context of the market.

In terms of the US dollar, the long and short signals are significantly different. Negative factors focus on policy expectations and data concerns: In November, many Federal Reserve officials released signals of policy divergence. Governor Waller clearly supported an interest rate cut in December and believed that the downward risk of the job market required policy hedging. New York Fed President Williams also mentioned that there is room for further interest rate cuts. The current market pricing probability of a 25 basis point interest rate cut in December remains around 60%. At the same time, there are hidden worries in the job market. Although ADP private sector employment rebounded to 42,000 in October, the number of people continuing to apply for unemployment benefits continued to grow at a rate higher than 4% year-on-year, suggesting that the unemployment rate may gradually rise, weakening the support of U.S. dollar interest rates.

The positive factors supporting the dollar www.xmasseuse.come from the voice of policy hawks and risk mitigation: Cleveland Fed President Hammack clearly opposed interest rate cuts and warned that high inflation was not under control. Chicago Fed President Goolsby also expressed "unease" about the December interest rate cut and was worried about the risk of a rebound in inflation. In addition, the U.S. House of Representatives passed an appropriation bill to end the government shutdown, eliminate short-term policy uncertainty, and provide periodic safe-haven support for the U.S. dollar. As of November 30, the U.S. dollar index was at 99.82, still holding on to the key support level of 99.5.

The RMB exchange rate shows the characteristics of "policy support + two-way fluctuations". Positive factors include exchange rate appreciation inertia and regulatory protection: at the end of November, the central parity rate and closing price of the RMB against the US dollar both exceededAt 7.08, the effective exchange rate rebounded, the market exchange settlement was waiting for band opportunities, and there was a strong expectation that the appreciation inertia would continue in December. At the same time, the central bank's "Details for the Management of Bank Card Binding of Payment Accounts" were officially implemented on December 1, strengthening the supervision of capital flows by standardizing payment scenarios, indirectly reducing the risk of illegal foreign exchange outflows, and providing institutional guarantees for exchange rate stability.

The negative factors that need to be vigilant www.xmasseuse.come from the differentiation of monetary policy and uncertainty in trade policy: China has made it clear that it will implement a moderately loose monetary policy in 2025, and the downward pressure on interest rates and the difference in the pace of the Federal Reserve's policy may intensify the pressure to narrow interest rate spreads. In addition, trade policy variables have intensified after the U.S. election. If high tariffs are imposed on China, it may trigger a periodic devaluation of the RMB. However, the central economic work conference's tone of "maintaining moderate stability of the exchange rate" has formed bottom-line expectations.

The euro and the pound are subject to the game of economic fundamentals and policy prospects. The good thing about the Eurozone is that inflation is approaching the target. In September, the European Central Bank kept interest rates unchanged. The inflation rate is expected to be 2.1% in 2025, close to the 2% policy target. The economic growth forecast was raised to 1.2%, providing fundamental support for the euro. However, the negative factors are also prominent. Stable currency regulatory risks and weak economic recovery may limit the upward space of the euro. The euro is currently fluctuating in the 1.09 range against the dollar.

The above content is all about "[XM Foreign Exchange Platform]: Collection of good and bad news affecting the foreign exchange market". It is carefully www.xmasseuse.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!

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