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market analysis
A collection of good and bad news affecting the foreign exchange market
Wonderful introduction:
Optimism is the line of egrets that go straight up to the sky, optimism is the thousands of white sails on the side of the sunken boat, optimism is the luxuriant grass blowing in the wind at the head of Parrot Island, optimism is the little bits of falling red that turn into spring mud to protect the flowers.
Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Decision Analysis]: A collection of good and bad news that affects the foreign exchange market." Hope this helps you! The original content is as follows:
1. The U.S. dollar: the long-short game under the divergence of eagles and doves
Positive factors
The U.S. dollar index continues its rise: the U.S. dollar index on November 3 It rose 0.07% and closed at 99.874. It maintained high fluctuations for two consecutive days and showed a general upward trend for six major currencies. 1 US dollar was 154.19 yen and 0.8077 Swiss francs, both higher than the previous trading day. Technically, the U.S. dollar index stands firm at the 60-day moving average, the RSI indicator is in the neutral to strong range of 55, and the short-term upward trend has not changed.
Economic data implies resilience: Although there are differences within the Federal Reserve on the path of interest rate cuts, the U.S. ISM non-manufacturing PMI unexpectedly recorded 51.2 in October, higher than the expected 50.8, showing that the service industry is still dynamic and providing fundamental support for the US dollar.
Negative factors
Expectations of interest rate cuts have not xm-forex.completely subsided: Although the probability of the Federal Reserve cutting interest rates in December has dropped from 91% to 72%, it is still more than 70% likely. Governor Waller made it clear that "interest rates should continue to be cut in December." Policy uncertainty suppresses the upside of the US dollar.
The risk of government shutdown continues: The U.S. government shutdown continues and the release of key economic data is delayed, resulting in a vague market judgment on the economic outlook. Some funds shift from the U.S. dollar to gold and other safe-haven assets, weakening the buying power of the U.S. dollar.
2. Euro: Policy stability cannot hide economic pressure
Positive factors
The European Central Bank released a hawkish signal: the European Central Bank kept its benchmark interest rate unchanged at 2%. President Lagarde emphasized that the current interest rate is in the "comfortable zone" and clearly ruled out the possibility of an interest rate cut in the short term. The policy stance is more hawkish than the Federal Reserve, which provides support for the euro.
Trade deficitNarrowing: The euro zone's trade deficit narrowed by 3.2 billion euros in September xm-forex.compared with August, mainly due to the decline in energy import costs. OPEC+'s suspension of production increases in the first quarter of next year may further ease the pressure on energy expenditures and improve the euro zone's international balance of payments.
Negative factors
Concerns about slowing economic growth: The IMF predicts that the Eurozone’s economic growth will be only 1.4% in 2025, which is lower than the average level of developed economies. In October, the Eurozone manufacturing PMI was still in the contraction range of 45.8. Weak fundamentals limit the height of the euro’s rebound.
The exchange rate is under obvious pressure: the exchange rate of the euro against the US dollar has fallen for three consecutive days, closing at 1.1520 on November 3, down 0.04% from the previous trading day. The daily level showed a "three consecutive negative" pattern, and the short momentum continued to be released.
3. Japanese Yen: The pull of policy easing and hedging demand
Positive factors
Hedging demand is rising marginally: Ukraine urged the United States to strengthen sanctions against Russia, and geopolitical tensions triggered short-term risk aversion. As a traditional safe-haven currency, the Japanese yen received a small amount of buying. On November 3, the increase of the U.S. dollar against the Japanese yen narrowed to 0.06%, which was significantly slower than the previous few days.
Interest rate hike expectations remain: Bank of Japan Governor Kazuo Ueda said that "potential inflation will gradually rise," implying that interest rates will continue to rise if the economy meets expectations. The market's expectation for the probability of an interest rate hike in December has risen to 35%, which will provide long-term support for the yen.
Negative factors
The tone of policy easing has not changed: the Bank of Japan has kept its benchmark interest rate unchanged at 0.5% and has not reduced the scale of bond purchases. The policy interest rate gap with the Federal Reserve and the European Central Bank still exists. One US dollar against the Japanese yen has exceeded the key mark of 154, hitting a new high in the past three months.
Long-term willingness to intervene in the foreign exchange market: Officials from the Japanese Ministry of Finance stated that "the current exchange rate fluctuations have not deviated from fundamentals." The market's expectations for the central bank's intervention in the foreign exchange market dropped to a low this year, and the pressure for depreciation of the yen continued to be released.
4. RMB: Resilient but still subject to external disturbances
Positive factors
The foreign exchange market has become more resilient: as of the end of June 2025, my country's external net assets reached US$3.8 trillion, ranking third in the world. The corporate foreign exchange hedging ratio has risen to 30%, and foreign exchange risk exposure has been significantly reduced. On November 3, the central parity rate of RMB against the US dollar was reported at 7.0867, a slight appreciation of 2 basis points from the previous trading day.
Precise monetary policy: On November 3, the central bank launched a 78.3 billion yuan 7-day reverse repurchase operation to maintain reasonable and sufficient liquidity, and clearly "selected opportunities to cut reserve requirements and interest rates", and policy easing is expected to stabilize market confidence.
Negative factors
The strong transmission pressure of the U.S. dollar: the U.S. dollar index continues to run at a high level, and the RMB index against a basket of currencies fell slightly by 0.12%. This, together with rising expectations of an increase in domestic oil prices, may intensify short-term demand for foreign exchange purchases.
Weak external demand drags down: global trade growth slows down. The IMF predicts that global trade volume will grow by only 2.9% in 2025. my country’s OctoberThe export leading index fell to 41.2, and foreign trade was under pressure or indirectly affected the RMB exchange rate.
5. Other currencies and core market concerns
Sterling: The positive factor is that the Bank of England has suspended interest rate cuts, and the negative factor is that the service PMI fell to 48.7 in October. The pound closed at 1.313 against the US dollar. 8, at the lowest level in nearly two months;
Australian dollar: The positive factor is the rebound in crude oil prices driven by OPEC+ policies, while the negative factor is the strong wait-and-see mood in the market before the RBA decision, and the Australian dollar maintains a shock around 0.6550 against the US dollar.
Core attention: Today, we need to focus on the U.S. ADP employment data for October. If the data is stronger than expected, it will strengthen the Fed's hawkish stance and benefit the dollar. At the same time, pay attention to the Eurozone's industrial output data in September. If it is less than expected, it may further suppress the euro.
The above content is all about "[XM Foreign Exchange Decision Analysis]: Collection of good and bad news affecting the foreign exchange market". It is carefully xm-forex.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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