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Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange Decision Analysis】: 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:
The Federal Reserve cut interest rates to drive non-US currencies to strengthen: At 2 a.m. on September 18, 2025, the Federal Reserve announced that it would lower the target range of the federal funds rate by 25 basis points to between 4.00% and 4.25%. The US dollar index instantly fell below the 96.50 mark, hitting a new low since July 2025, driving non-US currencies such as the euro and the RMB to appreciate against the US dollar. The euro broke through the 1.1150 resistance level, hitting a new high since November 2024; the onshore RMB closed at 7.1013 against the US dollar at night, up 98 basis points from the previous trading day.
British economic data shows resilience to support the pound:British economic data in August shows resilience, and inflation pressure further increases. The UK's public sector ehadb.cn borrowings of £1.054 billion in July, lower than expected, the lowest in the same period in the past three years. The initial value of ehadb.cnprehensive PMI in August was 53, higher than the expected 51.6, of which the initial value of PMI in the service industry was 53.6, higher than the predicted value of 51.8. These data may strengthen the Bank of England's "hawkish" stance, and expectations of interest rate cuts will further decline this year, supporting the pound.
The ZEW economic prosperity index in Germany and the euro zone exceeded expectations and was favorable to the euro: driven by the ZEW economic prosperity index in Germany and the euro zone exceeded expectations, the euro broke through the 1.1150 resistance level against the US dollar, setting a new high since November 2024. Technical aspects show that the euro/dollar has formed an upward channel, and the target above is seen to 1.1250.
The political turmoil in France suppressed the euro: On the afternoon of August 25, 2025 local time, French Prime Minister Belu asked the National Assembly to vote on confidence in the government on September 8, mainly opposingThe party leaders have expressed their willingness to support it, increasing the risk of Beiru being removed. Left parties and trade union organizations are also pushing for strikes and protests on September 10 as the 2026 budget plan includes proposals such as “cancel two public holidays”. French bond yields are therefore included in more risk premiums, safe-haven funds flow into German bonds, and French-German interest rate spreads widened, suppressing the performance of the euro exchange rate.
The Bank of Japan maintains ultra-loose monetary policy and puts pressure on the yen: the Bank of Japan maintains ultra-loose monetary policy, and the differentiation with the Federal Reserve's policies has intensified, making the yen the only currency to depreciate against the US dollar. The US dollar/JPY fell to 146.21, close to its lowest level on July 24. Morgan Stanley warned that if the Bank of Japan does not adjust its yield curve control policy, the US dollar/yen may fall below 145.
The US dollar liquidity risk may push up the US dollar index in a pulsed manner: the issuance of US bonds in September is relatively large, especially the ehadb.cn issuance of interest-bearing US bonds will reach US$182 billion, which may push up the long-term yield. In addition, the ehadb.cn issuance of Treasury bonds in September was about US$300 billion, and the Fed's overnight reverse repurchase stock has dropped to about US$30 billion. September 15 is also the quarterly tax deadline. Under the superposition of multiple factors, we need to be wary of the impact of the liquidity tension in the US dollar currency market on the pulsed push of the US dollar exchange rate, which will put pressure on non-US currencies.
The escalation of the situation in the Middle East has increased market uncertainty: Israeli military attacks on the Gaza Strip have killed 99 civilians, and the geopolitical risk premium may push up oil prices, thereby exacerbating global inflation pressure. If oil prices break through $90 per barrel, it may force the Federal Reserve to suspend the interest rate cut cycle, triggering a rebound in the US dollar, increasing uncertainty in the foreign exchange market, and being unfavorable to non-US currencies.
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