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Hello everyone, today XM Forex will bring you "[XM Official Website]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
On December 4, 2025, the foreign exchange market focused on policy differentiation and the game of economic data. The U.S. dollar index was under pressure and fluctuated near the 99 mark, and non-U.S. currencies showed a pattern of "European currencies leading the rise, and www.xmasseuse.commodity currencies following the rise." CME Fed Watch shows that the probability of a 25 basis point interest rate cut in December has risen to 89%. The weak U.S. data is in sharp contrast to the relative resilience of non-U.S. economies. The following is a summary of the core good and bad news that affected the market that day.
1. The U.S. ADP employment data unexpectedly showed negative growth, and interest rate cut expectations have increased. The U.S. ADP private sector jobs announced on December 3 decreased by 32,000 in November, which was far lower than market expectations of an increase of 180,000, marking the first negative growth since March 2024. After the data was released, the U.S. dollar index fell 8 points in the short term, and the 10-year U.S. Treasury yield fell 2.32 basis points to 4.0633%. The weak data confirmed the cooling of the labor market and strengthened the logic of the Federal Reserve's policy shift. The expected probability of CME interest rate cuts increased by 3 percentage points from the previous day to 89%, which directly benefits non-US currencies such as the euro and the pound.
2. The economic resilience of the Eurozone is highlighted, and the European Central Bank’s policy stance is firm. Although the long-term growth of the Eurozone is under pressure, short-term data show resilience. The final PMI value of the service industry in November rebounded to 53.6 more than expected, and the role of consumption and the service industry in driving the economy has increased. European Central Bank officials have recently stated intensively that they will maintain the 2% deposit mechanism interest rate unchanged, which is in contrast with the Fed's easing tendency. The interest rate advantage has pushed EUR/USD to around 1.1650, a new high in the past two weeks. In addition, the Baltic Dry Bulk Index rose to 2,845 points for 15 consecutive days, hitting a new high in the past two years, indirectly boosting Eurozone trade expectations.
3. The British pound took advantage of falling inflation and a weak U.S. dollar to rebound. The British inflation rate unexpectedly fell to 2.5% in November, lower than the previous value of 2.6%, and core inflation simultaneously fell to 3.2%, easing policy pressure on the Bank of England. Although there are still risks of weakness in the British economy, the weakening of the U.S. dollar index has provided support for the pound. GBP/USD has fluctuated and strengthened above the 1.32 mark, showing a short-term bullish signal from the technical perspective.
4. The offshore RMB hit a new high, and economic data provided support for the offshore RMB to rise above the 7.06 mark against the US dollar, setting a new high since October 2024. Support www.xmasseuse.comes from the resilience of China's exports and the stability of the foreign exchange market. In November, China's exports denominated in RMB increased by 5.8% year-on-year. The trade surplus continued to expand, providing internal support for the exchange rate. At the same time, global capital demand for RMB asset allocation rebounded modestly.
1. The candidate for the chairman of the Federal Reserve tends to be dovish, and expectations of policy easing have strengthened. Hassett, director of the White House National Economic Council, has become the top favorite to be the next chairman of the Federal Reserve. His consistent dovish stance has triggered market expectations for "radical easing." Previously, hawkish officials such as Federal Reserve Governor Waller had turned to supporting an interest rate cut in December, and policy had turned to a consensus. The U.S. dollar's appeal as a high-interest currency continued to decline, and the index had fallen to a more than one-month low of 99.
2. Risks in the U.S. credit bond market are heating up, and concerns about U.S. dollar liquidity have emerged. The price of Oracle's credit default swap has risen to a new high since 2009. AI giants' aggressive bond issuance has triggered concerns about the imbalance between supply and demand of credit bonds. JPMorgan Chase predicts that the credit spread of the technology industry will expand to 100-110 basis points next year. Tightness in the credit market may be transmitted to the foreign exchange market, weakening the attractiveness of U.S. dollar assets. At the same time, the size of the Federal Reserve's overnight reverse repurchase agreement dropped to $2.514 billion, indicating that the market's U.S. dollar liquidity is marginally loose.
3. Geopolitical and trade policy uncertainty disturbed the market. U.S. President Trump signed the U.S.-Taiwan Relations Act, which triggered opposition from China. He also hinted that the U.S.-Mexico-Canada Agreement may be adjusted, and trade policy uncertainty increased. Although the current geopolitical risks have not triggered large-scale safe-haven buying, they may intensify short-term fluctuations in the US dollar. In addition, there was no breakthrough in the Russia-Ukraine peace talks. Although it supported energy prices, the safe-haven boost to the US dollar was overshadowed by expectations of interest rate cuts.
In terms of core data, focus is on the U.S. ISM non-manufacturing PMI in November and the number of initial jobless claims last week. If the service industry data continues to be weak, the U.S. dollar may further test the 98.8 support; if the data exceeds expectations, it may trigger a revision of interest rate cut expectations and promote a short-term rebound in the U.S. dollar.
In terms of operation, the EUR/USD can rely on the support of 1.1600 to go long, with the target looking at 1.1680; the GBP/USD focuses on the breakthrough of the resistance of 1.3270; the offshore RMB may fluctuate in the 7.05-7.08 range in the short term, and we need to be wary of fluctuations caused by US data in the evening. It is recommended to set a strict stop loss to guard against sudden speeches by Fed officials or geopolitical news.Send impact.
The above content is all about "[XM official website]: Collection of good and bad news affecting the foreign exchange market". It is carefully www.xmasseuse.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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