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A collection of positive and negative news that affects the foreign exchange market
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Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange Decision Analysis】: Collection of positive and negative news that affects the foreign exchange market". Hope it will be helpful to you! The original content is as follows:
1. Geopolitical risks intensify, risk aversion is heating up
The situation in the Middle East continues to tense
The decision of the United States to evacuate some personnel from the Embassy in Iraq, and Iran's remarks that threaten to attack US military bases if nuclear negotiations break down, further boost market concerns about interruption of crude oil supply. The increase in geopolitical risk premium directly boosts safe-haven currencies such as the US dollar and the Japanese yen, while Middle Eastern currencies (such as the UAE Dirham and Saudi Riyal) are facing volatility pressure due to their dependence on energy exports. In addition, the Ukrainian attack on the Crimea Bridge has exacerbated the escalation of the conflict between Russia and Ukraine, and the Black Sea crude oil exports, which account for about 2% of the global supply, are at risk, which may indirectly affect the energy costs of the eurozone and thus suppress the euro.
The US-Japan trade negotiations are at a deadlock
The US-Japan tariff negotiations have significant differences on core issues such as car export restrictions and agricultural product market opening. The US side asked Japan to restrict automobile exports and increase the cost sharing of US troops in Japan, but Japan refused to make major concessions and planned to counter US agricultural products of US$3.4 billion. The risk of a breakdown in negotiations has exacerbated the yen exchange rate fluctuations. If the United States imposes a 25% tariff on Japanese cars, the yen may face further depreciation pressure.
2. Economic data differentiation, the trends of the US dollar and the euro are very different
The US CPI data is lower than expected, and the US dollar is under pressure
The US CPI rose 3.1% year-on-year in May, lower than the expected 3.3%, and the core CPI increased by only 0.1% month-on-month. The slowdown in inflation strengthened market expectations for the Fed's interest rate cut, and the US dollar index fell to 98.87, down 0.23% from the previous period. However, Trump's remarks calling for the Fed to cut interest rates by 1%, hedging with hawkish differences within the Fed, and the short-term trend of the US dollar remains uncertain.sex.
Eurozone inflation cooled down, and expectations for interest rate cuts heated up
Eurozone's core inflation rate fell to 2.3% in May, lower than the expected 2.5%. The year-on-year growth rate of CPI in major countries such as Germany and Spain generally fell. The market expects the ECB to cut interest rates by 25 basis points to 2.0% next week, which will be the eighth rate cut since June last year. European Central Bank President Lagarde recently emphasized the importance of global cooperation, suggesting that monetary policy will remain loose. After the euro rose to 1.1576 against the US dollar, it gave up some of the gains, and may continue to be under pressure in the short term.
3. Central Bank policy trends: Fed hawkish expectations heat up, the European and Japanese central bank maintains easing
Some internal discrimination in the Federal Reserve is intensifying
The Federal Reserve's June interest rate meeting is approaching, and CICC predicts that Powell may be hawkish, slightly raising inflation forecasts and downplaying expectations for interest rate cuts. Despite weak CPI data in May, Fed officials have differentiated over the long-term impact of tariff policies: Some officials believe priority is needed to support economic growth, while others are concerned about a rebound in inflation. The xm-forex.combination of three hawks and one dove in the FOMC vote in 2025 further exacerbates policy uncertainty and the US dollar may remain volatile.
The ECB's easing path is clear
The ECB expects to cut interest rates by 25 basis points next week to cope with slowdown in inflation and weak economic conditions. The Bank of Japan kept interest rates unchanged by 0.5%, and although the core CPI was still above the target in May, the pressure of the depreciation of the yen restricted the policy to move to space. The easing stance of the ECB continues to suppress the euro and yen, in sharp contrast to the Fed's policy.
IV. International Trade: Tariffs between China and the United States are easing, and the US-Japan negotiations are deadlock
China and the United States have made progress in economic and trade consultations
China and the United States significantly lowered bilateral tariffs, suspended some tariff measures, and established a consultation mechanism during the May Geneva talks. The market expects that the easing of trade frictions will boost the global economic outlook, benefiting the RMB and risky currencies. However, US Treasury Secretary Bescent said that the EU is "very stubborn" in trade negotiations and may delay the conclusion of the European and American trade agreement and indirectly affect the euro's trend.
The US-Japan negotiations are in a stalemate
Japanese Economic Regeneration Minister Ryo Akazawa is visiting the United States to conduct the sixth round of tariff negotiations, but the two sides still have differences on issues such as automobile tariffs and agricultural product opening. Japan plans to impose tariffs on US$3.4 billion in US agricultural products as a countermeasure. If the negotiations break down, it may trigger a escalation of global trade tensions, and both the yen and the US dollar are facing downside risks.
5. xm-forex.commodity fluctuations and market sentiment
Crude oil prices hit two-month highs
Geographical risks in the Middle East and the decline in U.S. crude oil inventories (EIA data showed a decrease of 3.644 million barrels) drove oil prices up, and Brent crude oil approached $70 per barrel. Rising oil prices are beneficial to xm-forex.commodity currencies such as the Canadian dollar and the Australian dollar, but Goldman Sachs predicts that global crude oil supply may be over 1 million barrels per day in 2025, and long-term pressure remains.
Demand for gold safe-haven
The weakening of the dollar and geopolitical risks drove New York gold futures to $3,361.6 per ounce, an increase of 0.54%. The safe-haven attributes of gold make it an important hedging tool in the fluctuations of the foreign exchange market, and safe-haven currencies such as the Japanese yen and the Swiss franc also benefited simultaneously.
6. Operational suggestions and risk warnings
US dollar: Pay attention to policy signals after inflation data
The short-term drag is caused by CPI data, but the Federal Reserve hawks expect that the US dollar may support. It is recommended to wait and see and wait for guidance for the June interest rate meeting. If the US dollar falls below 98.50, it may further fall to 98.00; the upper resistance is 99.20.
Euro: Inflation cools down to suppress exchange rate
Expectations of interest rate cuts in the euro zone have risen. If the euro falls below 1.1500 against the US dollar, it may test 1.1450 support. Radicals can short positions with a light position and stop loss of 1.1550; steady people can wait for the ECB meeting before entering the market.
Yen: Safe-averse demand provides support
Geopolitical risks and the deadlock in Japan-US negotiations push the yen to strengthen. If the US dollar falls below 138.00, it may fall below 137.00. It is recommended to go long yen on dips and stop loss of 138.50.
Australia: favorable support for crude oil and trade
The rise in crude oil prices and easing Sino-US trade boost the Australian dollar. If the Australian dollar stands firm at 0.6850 against the US dollar, it is expected to challenge 0.6900. Aggressive people can go long with a light position and stop loss of 0.6800.
GBP: Mainly waiting and watching
Bank of England keeps interest rates unchanged, and pound fluctuations are greatly affected by the euro trend. Pay attention to the breakthrough direction of the 1.2600-1.2700 range, and follow the trend after breaking through.
Risk warning
Geopolitical situation, Federal Reserve policy trends, and progress in Sino-US trade negotiations are the core factors affecting the foreign exchange market. Investors need to pay close attention to the situation in the Middle East, the United States' June interest rate meeting, the US-Japan trade negotiations and other events, adjust their positions in a timely manner, and strictly stop losses. In high volatility environments, it is recommended to control positions to avoid excessive leverage.
The above content is all about "【XM Foreign Exchange Decision Analysis】: Collection of Positive and Negative News that Influence the Foreign Exchange Market". It was carefully xm-forex.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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