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US dollar index struggles, pay attention to Sino-US trade negotiations
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On the Asian session on Tuesday, the US dollar index hovered below the 99 mark. Since the Fed is expected to have no major policy changes and global growth risks are linked to trade tensions, the US dollar trend is expected to maintain range fluctuations to the bearish tone before inflation data is confirmed and trade issues are resolved.
Analysis of major currencies
U.S. dollar: As of press time, the US dollar index hovered around 98.96. The US dollar index fell slightly on Monday, falling from its rebound high last Friday, but it is still above the key technical support levels of 98.351 and 97.921. This moderate decline reflects a temporary rest of the dollar momentum, and the market has turned cautious before the Sino-US trade negotiations open in London. As the Fed is not expected to have a major policy change and global growth risks are linked to trade tensions, the US dollar trend is expected to maintain range volatility to the bearish tone before inflation data is confirmed and trade issues are resolved. From a technical perspective, the US dollar index faces resistance at key points of 99.949 and 100.300, and the 50-day moving average forms a resistance range at 100.300. If there is no trade negotiation breakthrough or CPI/PPI data unexpected, the upward space seems to be limited in the short term.
1. Focus of Sino-US trade negotiations: Can the situation be reversed?
The market attention is currently focused on high-level trade negotiations held by Chinese and American officials in London. U.S. Treasury Secretary Becente, xm-forex.commerce Secretary Lutnik and Trade Representative Jamison GreerA US delegation will be led. The discussion follows the previous rounds of negotiations in Switzerland, and is at a sensitive moment in the economies of both countries. Analysts point out that unless a structural breakthrough is reached, any agreement will be difficult to change market sentiment. "Unless a specific breakthrough is seen, the impact on sentiment may remain limited," said SaxoMarkets analyst Charu Chanana. Nevertheless, negotiations could affect short-term capital flows in Treasury and Forex markets as traders reassess the geopolitical risk premium.
2. Inflation data approaches Treasury yields decline
U.S. Treasury yields fell slightly on Monday, with the 10-year Treasury yields falling to 4.504% and the 2-year Treasury yields falling to 4.02%. This trend reflects investors' caution, and the market is preparing for Wednesday's CPI report and Friday's PPI data. The two figures are expected to provide key insights into the inflationary impact of Trump's recent 10% universal tariff on non-USMCA imports. Expectations of interest rate cuts have eased, and the futures market shows that it is only expected to cut interest rates by 25 basis points by October, reflecting the Fed's wait-and-see attitude during the silence period before the meeting.
3. The California government sued Trump for transferring troops into Los Angeles
The California government filed a lawsuit with the court on the 9th, requesting the court to rule that the presidential memorandum issued by US President Trump on the 7th and the US Department of Defense's order to dispatch the California National Guard into the Los Angeles area based on this illegal, and requesting the court to revoke the relevant orders. According to a statement issued by the California Attorney General's Office, the case was prosecuted by Trump and Defense Secretary Hegsey, accusing them of overran the federal government's authority without the governor's request for federal government orders and violated the Tenth Amendment to the U.S. Constitution.
4. New Zealand Treasury Secretary urges the Fed to increase the frequency of interest rate meetings
New Zealand Treasury Secretary Willis hopes the Fed will increase the frequency of interest rate decision-making meetings, end the three-month summer recess, and be consistent with other major central banks around the world. "I am particularly concerned about the 12-week recess in the summer, with the time between the two meetings being too long. I think the Fed should resume eight meetings a year," Willis said in a statement. The Fed had previously stated that the Monetary Policy xm-forex.committee had the ability to hold unplanned meetings if necessary. The xm-forex.committee meets seven times a year, less than in the UK, Canada, Australia and the United States. Since 2016, the New Zealand Fed has had an unusually long interval between November and February of the following year, and has actually skipped a interest rate decision.
5. Trump: Talks with Iran on Thursday
U.S. President Trump: The United States will hold talks with Iran on Thursday; Iran pursues nuclear enrichment, but we cannot allow this. They are making some unrealized demands; alternatives are very, very serious.
Institutional View
1. FaxingyinBank: The US dollar may remain stable for the time being
Foreign exchange analysts at Societe Generale said that the US dollar may be stable against other major currencies at present. Better-than-expected U.S. jobs data released last Friday boosted the dollar. The dollar is still likely to fall if investors cut their exposure to U.S. assets due to uncertainty in U.S. trade and budget policies. However, before the dollar weakens again, there may be clearer signs that tariffs are hurting U.S. economic growth. Ultimately, uncertainty in U.S. policy “will erode people’s confidence in the U.S. dollar, which will fall further.”
2. Institutions: The euro rose as market expects the European Central Bank to end interest rate cuts
Dutch International Group said that the prospect of eurozone interest rates being lowered only once should support the euro. The ECB said at a meeting last week that the rate cut is xm-forex.coming to an end. European Central Bank President Lagarde painted a picture of the eurozone economy growing despite global uncertainty. According to LSEG data, the European Central Bank will only cut interest rates by another 25 basis points, and will not cut interest rates until December.
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