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Markets evaluate the Fed's position to further cut interest rates, awaiting Bank of Japan's decision
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Hello everyone, today XM Forex will bring you "[XM Forex Decision Analysis]: The market evaluates the Fed's position to further cut interest rates, waiting for the Bank of Japan's decision." Hope it will be helpful to you! The original content is as follows:
On September 19, during the Asian market on Friday, spot gold trading around $3,640/ounce, gold prices fell in profit-taking on Thursday, and the market evaluated the Fed's position to further cut interest rates; U.S. crude oil trading around $63.22/barrel, oil prices fell on Thursday, and the number of initial unemployment claims in the United States fell last week, but as both labor supply and demand decreased, the employment market has become softer, and traders are still worried about the outlook for the US economy.
The dollar rose against most major currencies on Thursday, a day after the Federal Reserve announced an expected rate cut, but suggested there is no rush to quickly reduce borrowing costs in the xm-forex.coming months. Data shows that the number of initial unemployment claims in the United States fell last week, reversing the surge in the previous week.
The widespread strength of the dollar puts pressure on the pound, erasing the gains recorded earlier by the Bank of England after it kept interest rates unchanged and slowed down the pace of Treasury bond sales.
The Fed cut interest rates by 25 basis points as expected on Wednesday. Chairman Powell characterized the policy action as a "risk-managed interest rate cut" in the weak labor market, but said the Fed did not need to rush to relax policies.
Powell's statement failed to meet the "clear dovish position that the market originally expected," said Eric Theoret, a foreign exchange strategist at Scotiabank in Canada. He said Thursday's optimistic economic data xm-forex.combined with the heavy selling pressure encountered by the dollar at the beginning of the week was enough to drive the dollar to rebound.
"I think the market balance was originally xm-forex.completely inclined to one side, so it takes great momentum to get the dollar down further from the current level," Theoret added. Analysts have differences on the interpretation of the Fed's signal.
Goldman Sachs analysts believeMany signs indicate Wednesday's rate cut will be the beginning of multiple actions, while ANZ analysts said the Fed's chairman's remarks were "not dovish at all."
After Wednesday's interest rate resolution was announced, the US dollar index fell to 96.224, a new low since February 2022, but rebounded 0.4% to 97.347 on Thursday.
The pound initially rose slightly due to the Bank of England's resolution, but turned to a 0.6% drop to $1.35,515 intraday, after a brief jump to its highest since July 2 by $1.3726.
Bank of England policymakers decided to slow down the annual share reduction of government bonds purchased between 2009 and 2021 from £100 billion to £70 billion, basically in line with the median survey estimate of £67.5 billion.
Benjamin Ford, a researcher at MacroHive in macro research institute, said: "We believe the market is too pessimistic about the pound's position."
Asian market
New Zealand's goods trade deficit reached 1.2B NZD in August, as imports exceeded the significant increase in exports. Cargo exports rose 1.1B NZD, or 23%, to 5.9B NZD, supported by strong shipments to key partners. Imports fell slightly, down 300,000 NZD (0.4% year-on-year) to NZD 7.1B, but remained high enough to keep the monthly balance deficit.
Export growth is broadly based, with strong growth in China (+35% year-on-year), the EU (+52%), Australia (+17%) and the United States (+14%) all recording strong growth. Japan was a notable exception, with exports falling 28% year-on-year as milk powder, butter and cheese fell 110,000 NZD.
In terms of imports, the purchase volume from China increased by 6.2% year-on-year, while the purchase volume from the EU decreased by -6.0%, and the purchase volume from the United States decreased by -1.3%. The biggest pullback came from South Korea, with imports falling -32% year-on-year.
European market
The Bank of England kept the bank interest rate unchanged at 4.00% yesterday, in line with expectations. The decision was slightly dovish, with two members of the Monetary Policy xm-forex.committee, Swati Dhingra and Alan Taylor, voted to immediately cut interest rates by 25 basis points. The Monetary Policy xm-forex.committee also voted 7-2 to decide to continue to reduce the stock of UK government bonds for monetary policy purposes by £70 billion in the next 12 months, bringing the total to £488 billion.
Politicians reiterated that it is still appropriate to adopt a “gradual and prudent” approach, and the timing of further easing depends on the extent of deflation. The statement stressed that policies are not pre-set routes and will respond flexibly to new data.
In terms of inflation, the central bank acknowledged progress but continued to focus on risks. CPI stabilized at 3.8% in August and is expected to be slightly higher in September.Go higher and then fall back to the 2% target. Wage growth has slowed from its peak and is expected to slow further, while service sector inflation is basically flat. Nevertheless, the Bank of England warns that the medium-term upside risks remain “highlighted”, especially if the temporary rise in CPI affects wages and price pricing.
U.S. market
As of the week ended September 13, the number of initial unemployment benefits in the United States fell -33 to 231, lower than the expected 240. The four-week moving average of first-time unemployment claims fell -750 to 240k.
In the week ending September 6, the number of continuous unemployment benefits has dropped -7 to 1,920. The four-week moving average of the number of people who continue to apply for unemployment benefits fell by -10k to 1933k.
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