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Hello everyone, today XM Foreign Exchange will bring you "【XM Group】: Collection of positive and negative news that affects the foreign exchange market". Hope it will be helpful to you! The original content is as follows:
Trump's meeting with Ukrainian President Zelensky and European leaders has become the focus of attention in the foreign exchange market. Previously, the market was worried that the United States imposed secondary sanctions on Asian importers that still purchase Russian oil, which would seriously affect the flow of energy trade settlement currencies and have an impact on the currencies of relevant countries. After the meeting, Trump stated that he would not take punitive tariff measures against Asian countries in the short term, which eased the market panic. For example, India was previously accused of being "a global liquidation center for Russian crude oil". If it is sanctioned by the United States, its currency rupee will face huge depreciation pressure. The news has not yet been implemented, which has potential benefits for currencies such as rupee. But Trump mentioned that "may be reassessed within two or three weeks" in the next "uncertainty is still hanging high like the sword of Damocles, which may trigger markets' renewed concerns about geopolitical risks at any time, which will affect the currencies of countries that rely on energy imports and the position of the US dollar in the international settlement system.
Although some economic data recently released by the United States were not directly released on August 19, it has a sustained effect on market expectations. For example, the US non-farm employment increased by only 73,000 in July, far lower than expected, and the market's probability of the Fed's interest rate cut in September increased significantly to 78%. The dollar is closely linked to interest rates, and rising expectations of interest rate cuts usually lead to a decline in the attractiveness of the dollar. Judging from historical data, when the Fed's interest rate cut cycle begins, the US dollar index often under downward pressure, which is relatively positive for non-US currencies such as the euro and the pound. Because the interest rate difference is shrinkingNarrow will prompt funds to seek higher yield monetary assets, flowing into economies such as the euro zone and the UK, driving their currency appreciation. However, there is volatility in the US economic data. If strong data in the future reverses market expectations for the Federal Reserve's monetary policy, the US dollar may stop falling and rebound, which will constitute a negative impact on other currencies.
Since this year, the RMB exchange rate against the US dollar has risen steadily. As of 16:30 on August 18, the onshore RMB exchange rate against the US dollar closed at 7.1792, an increase of 1.64% this year; the offshore RMB exchange rate against the US dollar was 7.182, an increase of 2.11% this year. From the perspective of domestic factors, countercyclical and stable growth policies have continued to be introduced, economic data has remained relatively stable, technological innovation and industrial upgrading have boosted growth potential, and "anti-internal circulation" supports the stabilization of prices, which all provide a solid foundation for the RMB exchange rate. The "China Monetary Policy Implementation Report for the Second Quarter of 2025" released by the People's Bank of China proposes to adhere to a floating exchange rate system based on market supply and demand, referring to a basket of currencies for regulation, enhance the resilience of the foreign exchange market, stabilize market expectations, resolutely prevent the risk of exchange rate overshooting, and maintain the basic stability of the RMB exchange rate at a reasonable equilibrium level. The clear statement of the policy will help stabilize the market's expectations for the RMB exchange rate, attract foreign capital inflows, and provide positive support for the RMB. However, the risk of global geoconflicts remains. If the geopolitical situation deteriorates and the market risk aversion is warming, funds may return to safe-haven currencies such as the US dollar, causing phased disturbances to the RMB exchange rate.
Some currency pairs showed obvious fluctuations on August 19. For example, the Australian dollar rose 1.5045% against the Argentine peso, and the Canadian dollar rose 1.7527% against the Argentine peso. There are many reasons behind this volatility. Argentina's economic situation is unstable, domestic inflation is high, and there is certain uncertainty in the political situation, which has led to continued pressure on its currency peso. The economies where the Australian dollar and Canadian dollar are located are relatively stable, and Australia and Canada have certain advantages in resource exports and other fields. The economic data performs relatively well, attracting capital inflows and promoting currency appreciation. For investors, the sharp fluctuations in this pair both bring about trading opportunities and risks. If you make a mistake in judging the economic situation in Argentina, shorting the Australian dollar or Canadian dollar against the peso may suffer losses; otherwise, grasping the trend can make a profit. At the same time, this also reflects the trend of differentiation of different currencies under the background of uneven global economic recovery and affected by their respective economic fundamentals, which has a guiding role in the flow of funds in the entire foreign exchange market. Funds will flow from economically unstable areas to currencies in relatively stable areas with growth potential.
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