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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market Analysis]: The decisive battle lags behind non-agricultural sectors! Employment may pick up in September, but the policy confusion is difficult to solve." Hope this helps you! The original content is as follows:
On Wednesday, boosted by risk aversion and expectations that the Federal Reserve may remain on hold in December, the U.S. dollar index strengthened for the fourth consecutive trading day, standing above the 100 mark, a new high in the past two weeks. As of now, the U.S. dollar is quoted at 100.27.
Major developments in the situation between Russia and Ukraine: It is reported that the United States and Russia have secretly formulated a 28-point peace negotiation framework, requiring Ukraine to cede territory, disarmament and limit weapons. The framework was discussed with little input from Ukraine or Europe. White House officials expect Russia and Ukraine to reach a framework agreement by the end of November. Ukraine reportedly opposes the deal.
Federal Reserve - ① The U.S. authorities canceled the October non-farm payrolls report and rescheduled the November report to December 16. This means that the Federal Reserve will lack the latest non-farm data for reference when it discusses interest rates in December. ②Milan: It is "possible" to reduce its balance sheet again in the future. ③ If interest rates are not lowered, Bessant will be fired. Trump’s joke on the Treasury Secretary alluded to Powell. ④The minutes of the Federal Reserve’s October meeting showed serious differences among officials: During the October interest rate cut, several people opposed the rate cut, while others were inclined to cut interest rates but accepted keeping interest rates unchanged. Several people believe that interest rates should be continued to be cut in December, while many people believe that interest rates should be kept unchanged.
The United States released trade data for August, and the trade deficit narrowed significantly to US$59.6 billion.
British inflation fell for the first time in seven months, and the market increased expectations for the Bank of England’s DecemberBets on rate cuts.
The European Union is planning the 20th round of sanctions against Russia, targeting the "Shadow Fleet" oil tankers.
Poland announced the revocation of the operating license of the Russian Consulate in Gdansk.
Scotiabank: The Bank of Japan’s hope of raising interest rates before the end of the year is very slim...
The yen continued to weaken today, pushing the US dollar against the yen to break through 156, underperforming almost all G10 currencies. The market is concerned about the independence of the Bank of Japan and its impact on the relative policy prospects of the central bank. The Finance Minister's statement on adjusting the joint statement between the government and the central bank has created obvious pressure.
It is reported that Takaichi Sanae's adviser has stated that the probability of the Bank of Japan raising interest rates before March next year is very low, which is far from market expectations that the Bank of Japan will further raise interest rates at the end of the fourth quarter. Short-term interest rate markets have priced in this expected change, with current pricing pointing to only 8 basis points of rate hikes in December, 19 basis points in January, and a total of 23 basis points in March.
Citigroup: Position data and option flows show that the market consensus on the yen is...
On Tuesday, the Nikkei 225 index hit its worst single-day performance since April this year, while the price of ultra-long-term Japanese government bonds also fell to a record low, and the yen's performance remains fragile. Fiscal concerns, geopolitical tensions and widespread position reduction are all xm-bx.coming together, but perhaps the most critical factor for the local market is fiscal.
The scale of the Japanese government’s latest fiscal plan has attracted much attention. According to local media reports, Prime Minister Takaichi's economic plan budget may total 17 trillion yen (including a 14 trillion supplementary budget), but the Liberal Democratic Party's fiscal policy group has proposed an astonishing 25 trillion yen plan. Our internal forecast is that the supplementary budget will be between 15 and 20 trillion yen. Reuters said the cabinet could approve the economic package as soon as Thursday.
The sell-off in Japanese government bonds continues and the yield curve steepens. Our Tokyo team observed that selling pressure started in the 10-year variety and then spread to the intermediate-term bonds - with the ultra-long term only starting to weaken after the curve trade entered. Bank of Japan Governors Kazuo Ueda and Sanae Takaichi did not disclose specific xm-bx.comrmation after their first bilateral talks, saying only that "the degree of monetary easing is being gradually adjusted."
We expect that even if the US dollar weakens against the yen, the downside may be very limited. Whether it is Citi's foreign exchange flow position data or options flow, shorting the yen is the market consensus. Especially if the US dollar index continues to strengthen, the currency pair may test 157.
Wells Fargo: The U.S. dollar will begin to rebound after the Federal Reserve ends its easing cycle, and it is expected that the Federal Reserve still has X basis points of room to cut interest rates
The annual real GDP growth rate of the United States in 2026 is expected to be 2.3%. The good performance was attributed to a more favorable fiscal policy environment, a less restrictive monetary policy and a tariff regime that is no longer escalating as it has been this year.
Although consumer spending will not be the main driver of growth in 2026, resilient consumerswill continue to support economic activity. The tax policy changes in the Big Beauty Act will provide some relief in the xm-bx.coming year, especially for low- and moderate-income families who need help most. While tariff rates will not return to 2024 levels anytime soon, we believe 2026 data will point to 2025 as the high point for average U.S. effective tariff rates. As the direction of trade policy is relaxed, this in turn will bring benefits to U.S. economic growth in 2026.
Inflation continues to hover around 3% this year, showing a tug-of-war between slowing service prices and rising xm-bx.commodity prices due to tariffs. We expect inflation to remain above 2% by the end of 2026. Nonetheless, we predict that core PCE inflation in the fourth quarter of 2026 will be 2.6% year-on-year, showing a directional improvement - a weak labor market, solid inflation expectations, and easing tariff pressure next year will jointly drive inflation downward.
In the absence of data due to the government shutdown, alternative indicators show a mixed picture for the job market: neither significantly improving nor worsening. Solider economic growth and reduced uncertainty should lead to improved hiring next year and keep the unemployment rate below 4.5%.
Our baseline expectation for the Fed's future monetary policy path is still to cut interest rates by 25 basis points at the December meeting this year, although the latest Fed statement makes this prediction uncertain. As for 2026, two more rate cuts are expected before the June meeting, each with room for 25 basis points, until the policy rate reaches 3%-3.25%.
Although the global economy remains resilient, the pace of global growth in 2026 may not exceed that in 2025. Loose monetary policies and fiscal support from some central banks can underpin global growth, but protectionist trade policies may inhibit global economic activity. Some other central banks may continue to cut interest rates, but the likelihood of a repeat rate-cutting cycle on the scale of this year is low. The theme of monetary policy divergence will intensify and drag down the U.S. dollar in early 2026. However, once the Federal Reserve ends its easing cycle, the U.S. dollar is expected to rebound, and discussions about the U.S. dollar losing its reserve currency status will also subside.
Goldman Sachs looks forward to delayed non-farm payrolls in September: risks are hidden in October data that may not be released
New non-agricultural employment: 80,000, unemployment rate: 4.3%, average hourly wage monthly rate: 0.2%
Original The non-agricultural data for September, scheduled to be released on October 3, has now been rescheduled for release on Thursday. It is expected that new release dates for subsequent non-agricultural data will be announced in the next few days. The non-agricultural data for November, originally scheduled for release on December 5, may be postponed by at least a week.
We expect new non-agricultural employment in September to reach 80,000, which is higher than the market consensus of 55,000 and higher than the average level of 29,000 in the previous three months. On the one hand, large data indicators overall show that the momentum of private sector employment growth has strengthened month-on-month. On the other hand, we expect government sector employment to decrease by 5,000 people, of which federal government employment will decrease by 10,000 people, while state and local government employment will increase by 5,000 people.We judge that there is a high probability that August's employment growth will be revised upward, which has been quite xm-bx.common in the past decade, although most revisions so far this year have been biased towards downward revisions.
At the same time, the rounded unemployment rate is expected to remain unchanged at 4.3%, consistent with the number of people continuing to receive unemployment benefits stabilizing over the past month. However, it should be pointed out that the unrounded unemployment rate in August was 4.32%, so the threshold for rounding up to 4.4% is not high. In addition, we expect the average hourly wage rate in September to reach 0.2%.
Looking ahead, we expect non-farm employment to record -50,000 people in October, mainly due to the 100,000-person drop in employment due to the end of the federal government's extended separation program. Although we do not expect the Bureau of Labor Statistics to release October's unemployment rate, we estimate that there is a high probability that this indicator will rise, reflecting upward pressure from government shutdown-related unpaid furloughs and the broader labor idleness indicator.
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