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The Fed cut interest rates as expected, and the US dollar index fluctuates downward and falls below the 97 mark
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The Federal Reserve cuts interest rates as expected, and the US dollar index fluctuates downward and falls below the 97 mark." Hope it will be helpful to you! The original content is as follows:
After the Asian session on Thursday, the US dollar index fluctuated downward, and the Federal Reserve lowered interest rates by one quarter percentage point, the dollar against the euro fell to a four-year low, and then reversed its decline and rose in trading on the day. The rate cut, and the forecast that the two remaining policy meetings of the year, are expected to cut interest rates by one quarter of each point in the remaining two policy meetings this year, suggests that Fed officials have begun to downplay the risk of continued inflation in government trade policies. Investors need to pay attention to the market's further interpretation of the Federal Reserve's interest rate resolution, the changes in the Bank of England's interest rate resolution and the number of initial unemployment claims in the United States, and the press conference held by US President Trump after meeting with British Prime Minister Stamer.
Analysis of major currency trends
U.S. dollar: As of press time, the US dollar index hovers around 96.97. The intersection of technology and fundamentals has made the support range of the US dollar 96.9500-97.0724 the focus of the current focus. If the price stabilizes here, the rebound may test the middle track; but if it is lost, the downside space will be further opened, and the expansion of the debt-to-exchange gap will become a catalyst. xm-forex.compared with the historical market, such as the tragic decline of the US dollar in the first half of the year, the current adjustment is more timely, due to the clear shift in the Fed's path.
1. The probability of the Federal Reserve cutting interest rates by 25 basis points in October is 87.7%. According to CME's "Feder Observation": the probability of the Federal Reserve maintaining interest rates unchanged in October is 12.3%, and the probability of the 25 basis points in rate cut is 87.7%. The probability of the Federal Reserve maintaining interest rates unchanged in December is 1.1%, the probability of a cumulative interest rate cut of 25 basis points is 19.0%, and the probability of a cumulative interest rate cut of 50 basis points is 79.9%. 2. Trump's policy aroused dissent within the Republican Party Johnson postponed the voting for tariffs until next year
Anxiety within the Republican Party about Trump's trade policy emerged publicly in the House of Representatives this week, a small number of lawmakers tried to fight back against the president's iconic foreign economic strategy and wanted toWe seek to have a greater say in tariff formulation. Although the objection did not last long, it revealed the cracks in the party's internal tariff issues, and its economic impact could become the core issue of next year's midterm elections. Although Congress has legally the power to set tariffs, Trump has unilaterally imposed tariffs on dozens of trading partners by using emergency authorization in recent years, and the Republican leadership in the House of Representatives obedience to Trump's words makes it harder for the opposition to launch a vote challenge on tariffs. House Speaker Mike Johnson quickly calmed protests from a handful of Republican lawmakers on Tuesday, postponing the head-on confrontation over Trump's tariff legitimacy until at least the end of January next year. Voting may follow the holiday consumption season, when consumers' attitudes to tariffs may become a key reference for lawmakers.
3. Powell set the third mission of the Federal Reserve, saying it is a derivative of the other two tasks
Feder Chairman Powell answered a question on Wednesday about the central bank's statutory requirement of "moderate long-term interest rates" at a press conference after the interest rate resolution, explaining why the three missions conferred by Congress to the Federal Reserve can be attributed to two major tasks in actual operations. Central bank officials have long positioned their mission at a dual task, namely, that monetary policy focuses on keeping inflation low and stable and ensuring that the job market continues to be strong, with basically not much emphasis on the third task. Powell told reporters that the third mission is real, but in the eyes of central bankers, it is a derivative of two more well-known goals set by the law. "We believe that moderate long-term interest rates are the result of achieving low and stable inflation and employment maximization," he said. For some time, Fed officials did not believe that the third task required "independent action."
4. New Zealand's economic contraction exceeded expectations in the second quarter
As the rising unemployment rate and global uncertainty suppressed demand, New Zealand's economic contraction far exceeded economists' expectations. Data released on Thursday showed that the country's first-quarter GDP grew by 0.9% after a revised increase, but fell 0.9% in the three months to June, after economists expected a 0.3% contraction. The New Zealand economy, which experienced a severe recession last year, responded to the central bank's sharp rate cuts. The cooling of demand is expected to ease inflationary pressures, giving the New Zealand Fed a chance to further cut interest rates by the end of this year.
5. Japan's Liberal Democratic Party announces the presidential election schedule. The election campaign is about to begin. Japan's ruling party, the presidential election will be held early next month. The Party's Presidential Election Management xm-forex.committee announced the election schedule on the 17th and made detailed arrangements for candidates to hold press conferences, policy seminars and local speeches. As the election announcement xm-forex.comes to the countdown, the election will officially begin next week. After Japanese Prime Minister and Liberal Democratic Party President Shigeru Ishiba announced his resignation on the 7th, the Liberal Democratic Party announced that it would issue an announcement on the election of the party president on September 22 and vote on October 4. Institutional Views
1. Mitsubishi UF: The Federal Reserve does notEntering the sprint mode of interest rate cuts
Mitsubishi UFLU's US macro strategy head George Goncalves said that the Fed's decision was the most dovish statement the Fed has made, and they added another rate cut this year in the dot chart expectations. However, it feels like the Fed has not entered the sprint mode of rate cuts, they have just restarted the rate cuts because they admit that the job market is not as good as they expected. This is also the reason why risky assets respond in a dull manner. The Fed may drop by 25 basis points in October and December, while a 50 basis point cut is not necessarily positive for credit.
2. Analysts: The weak labor market will lead the Bank of Canada to cut interest rates again in December. Dominique Lapointe of Manulife Investment Management believes that although the Bank of Canada may have downplayed its "prone to continue to cut interest rates" while announcing a 25 basis point cut, the possibility of a subsequent rate cut still exists. The Bank of Canada's move appears to send a signal of "staying patient." The macro strategy director said the Bank of Canada's move seemed to send a signal of "staying patient." However, as US tariffs are not expected to be cancelled, the Canadian economy needs to continue to adapt to this environment; in this context, the labor market will continue to weaken through "targeted layoffs" and "slower recruitment." Lapointe noted that the trend will curb Canadian domestic economic growth in the next 12 months, so he expects the Bank of Canada to cut interest rates again in December. 3. Analysts: Overall inflation in the UK increased the likelihood of the Bank of England to keep interest rates unchanged
Sandra Horsfield, an analyst at InvestecEconomics, said in a report that the overall inflation rate in the UK remained at a high of 3.8%, which increased the likelihood of the Bank of England to keep interest rates unchanged for the remainder of 2025. Currently, the UK inflation rate is still far higher than the 2% target set by the Bank of England. Horsfield said: "Only evidence of a decline in inflation can convince most members of the Monetary Policy xm-forex.committee that further rate cuts are appropriate." Data from the London Stock Exchange Group shows that the market believes that the Bank of England will cut interest rates again by the end of 2025 is 40%.
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