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Hello everyone, today XM Forex will bring you "[XM Forex]: The probability of the Federal Reserve cutting interest rates has dropped sharply, and the U.S. dollar index has a short-term bias to strengthen further". Hope this helps you! The original content is as follows:
In the Asian session on Thursday, the U.S. dollar index fluctuated above the 100 mark. The U.S. dollar-yen exchange rate rose strongly on Wednesday, with the yen falling to a ten-month low of 156.97, a single-day decline of 0.92%. Japanese Finance Minister Satsuki Katayama said that the government is paying close attention to market dynamics "with a high sense of urgency." This xm-bx.comment failed to reverse the yen's decline.
U.S. dollar: As of press time, the U.S. dollar index was hovering near 100.17. The U.S. dollar index rose 0.59% to 100.17 on Wednesday. The minutes of the Federal Reserve's October meeting showed that although "several" members believed that a rate cut was possible in December, "many" members had ruled out this possibility, causing market expectations for a December rate cut to fall to 33%. Analysts believe that "the situation is not favorable for doves." Investors are paying close attention to the upcoming U.S. non-farm payrolls data for September, but since the October report will no longer be released and the November report will be postponed until after the December Federal Reserve meeting, analysts believe that if the data is weak, it may increase the pressure on the Federal Reserve to adopt more aggressive interest rate cuts in the future. Technically, if the US dollar index holds firm on the 200-day moving average, it can further challenge the pressure range formed by 100.2599. The first target above can be seen at the previous high of 100.3599, or even the previous high of 101.9700.
The minutes of the U.S. Federal Open Market xm-bx.committee (FOMC) meeting on October 28-29 showed that many Fed officials believed that it "may be appropriate" to keep interest rates unchanged for the remainder of 2025. Minutes of the meeting released on Wednesday also showed that "several" policymakers opposed another cut in the benchmark interest rate in December. The minutes of the meeting read: "Many participants believed that, based on the economic outlook, it may be appropriate to keep the target interest rate range unchanged throughout the year." However, several officials pointed out that if the economic performance is consistent with expectations, another interest rate cut in December "is likely to be appropriate." The minutes highlighted different views within the Fed on which side of inflation or unemployment poses a greater threat to the U.S. economy, which also increased the uncertainty of the December interest rate decision.
The U.S. government is close to reaching a "major breakthrough" with Russia on the framework agreement to end the Russia-Ukraine conflict, which is expected to be xm-bx.completed by the end of this month at the latest or even "as soon as this week." It is understood that this potential agreement was formed through direct negotiations between the White House and Moscow and may be presented to Ukrainian President Zelensky as a "fait accompli" with "little input from Ukraine or its European allies." Previously, the United StatesIt was revealed that Witkov, the special envoy for the Middle East, held three days of closed-door talks with Russian negotiator Kirill Dmitriev in Miami at the end of last month. A 28-point peace plan has now been discussed.
The U.S. Bureau of Labor Statistics announced that it would not release the October non-farm employment report and stated that the original employment data for October would be merged into the November report for release. The xm-bx.combined report is scheduled to be released on December 16. The agency noted that October household survey data used to calculate key indicators such as the unemployment rate will not be collected retroactively. The U.S. non-farm employment report consists of two parts: a household survey and a business survey. The business survey is used to collect non-farm employment data. The agency also said it would extend the data collection cycle for the November household survey and business survey.
The U.S. Department of xm-bx.commerce said on Wednesday that the U.S. trade deficit narrowed in August. The report, which was delayed due to the government shutdown, provides a retrospective perspective to show how tariffs affected the flow of international trade in the summer. U.S. imports fell to US$340.4 billion in August, down 5.1% from July; exports increased slightly by 0.1% to US$280.8 billion during the same period. This narrowed the trade deficit for the month to US$59.6 billion, a sharp 24% narrower than the US$78.2 billion deficit in July. In early 2025, before the tariffs were implemented, importers imported a large amount of needed goods in advance in order to cope with trade barriers in advance, causing the deficit to soar. Subsequently, the first round of global tariffs in April quickly suppressed trade, resulting in the largest single-month import decline on record. In the months since, the trade deficit has fluctuated around lower levels than last year, but roughly the same level as in 2023, indicating that at least so far, Trump’s tariffs have not significantly changed the U.S.’s structural tendency to “import more and export less.”
According to foreign media reports, concerns about British Prime Minister Starmer’s leadership ability have prompted British left-wing Labor MPs to prepare in advance to support Starmer’s potential challengers. The "moderate left" parliamentarian group (Tribune Group) held its first meeting on Tuesday after its reorganization. Senior members of the group said that although they have not yet decided to unify their support for a particular candidate, they have gathered 80 MPs to meet the threshold required to include candidates in the race. Some leading MPs have suggested that Labor deputy leader Lucy Powell, Culture Secretary Lisa Nandy and former Transport Secretary Louise Haigh may be left-wing alternatives to Starmer. One core member said Starmer had "shown his inability" to turn things around, having lurched from one crisis to another in his first 16 months in power.
Strategists at HSBC Global Investment Research pointed out in a report that the U.S. dollar may bottom in the first quarter of 2026 or earlier, and then rebound. They believe the Fed may cut interest rates again in December, but further cuts in 2026 are less likely. Refinitiv data shows that money markets are divided on a December rate cut, but the cumulative rate cuts are expected to be 85 basis points by the end of 2026. HSBC forecasts EUR/USD will rise to 1.20 in the fourth quarter of this year and the first quarter of next year, before falling back to 1.18 in the rest of 2026.
Suren Thiru, economic director of ICAEW (Institute of Chartered Accountants in England and Wales), said that the British government’s budget is the last obstacle before the Bank of England cuts interest rates. Thiru said: "The budget is a double-edged sword for inflation: on the one hand, raising taxes can have a deflationary effect by suppressing economic demand; on the other hand, if business costs rise, it may push up prices again and bring a 'second wind' to inflation." He pointed out that conditions for an interest rate cut in December are gradually forming, but policymakers at the Bank of England will want to assess the impact of budget-related policies before approving further easing.
Morgan Stanley analyst Bruna Scarica said in a report that with British inflation likely to have peaked, there is currently little reason to prevent the Bank of England from cutting interest rates in December. She pointed out that the "dovish" members of the Bank of England's monetary policy xm-bx.committee can cite data including: headline inflation is in line with expectations, core inflation may be slightly lower than the Bank of England's forecast, while unemployment is rising and labor market slack is higher than expected. However, she also mentioned that "hawks" can still argue that potential inflation in the service industry has not continued to fall, and food inflation is still at a high level. But unless the UK Budget brings a significant inflationary shock, a rate cut in December looks likely. As for the subsequent policy path, she said it mainly depends on the direction of the labor market rather than other factors.
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