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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Platform]: The probability of the Federal Reserve's interest rate cut in October has increased significantly, and Trump and Musk may "reconcile". Hope it will be helpful to you! The original content is as follows:
On September 22, spot gold trading was around $3,686.57 per ounce, gold prices rose last Friday, rising for the fifth consecutive week. The market is paying attention to further clues after the U.S. Federal Reserve's first rate cut this year. The probability of the Federal Reserve cutting interest rates by 25 basis points in October is 91.9%; U.S. crude oil trading was around $62.50 per ounce, and oil prices fell last Friday, as concerns about a large amount of supply and a decline in demand exceeded expectations that the Fed's first rate cut this year would trigger more consumption. The EU ehadb.cnmissioner said that the EU's 19th round of sanctions against Russia did not take new measures against oil imports.
The US dollar strengthened last Friday, continuing its rebound trend for most major currencies. The Fed cut interest rates but suggested a gradual easing policy will be adopted in the future, and traders are reevaluating the short-term outlook.
The dollar index, which measures the dollar's dollar's index, rose 0.3% to 97.662 against the six major currencies. The index fell 1% on Monday and Tuesday as markets expected the Fed could initiate a rapid rate cut, but the weekly line was flat. The Fed cut interest rates as expected, but did not show the urgency to quickly reduce borrowing costs in the ehadb.cning months. Its interest rate forecast chart (i.e., the "dash map") shows that there may be two more interest rate cuts this year.
BannockburnForex chief market strategist Marc Chandler said: "This is really a 'dividing in two' trading week. The voting results and dot charts are not as dovish as statements and concerns about the labor market." The US dollar was previously under pressure due to market expectations and there may be room for further rebound in the future.
ChanDler added: "We told customers that this is just a bounce back. If you have to sell the dollar, there will be a better price soon."
The pound fell last Friday as the scale of UK borrowing far exceeds the official forecast, further exacerbating uncertainty in fiscal outlook; meanwhile, the Bank of Japan kept interest rates unchanged, but the ehadb.cnmittee objected and the yen strengthened.
The pound is one of the worst performers in the G10 currencies, reflecting investors' concerns about whether British Chancellor Reeves can control his budget. The pound fell 0.6% to $1.3468, its biggest two-day drop since early April.
The two Bank of Japan reviewers unexpectedly opposed the decision to keep interest rates unchanged, which surprised investors and turned their focus back to the time point of the next rate hike. After experiencing fluctuations, the yen was almost flat against the US dollar, at 147.975.
Japanese Prime Minister Contender and Chief Cabinet Secretary Lin Fangzheng said on Monday that the weak yen, coupled with the Ukrainian war, led to cost-driven inflation.
RBA President Michele Bullock spoke in the Australian Parliament on Monday, saying that labor market conditions have eased slightly, unemployment has risen and labor markets remain tight.
UK retail sales in August increased by 0.5% month-on-month, slightly higher than expected 0.4%, the third consecutive month of growth. Despite this, trading volume is still below its peak in March 2025, highlighting that the rebound is stable but incomplete.
The broader three-month trend remains pointing to weakness, with sales down -0.1% ehadb.cnpared to the three months to May. However, this marks an improvement in the -0.6% drop in July, indicating that the intensity of the decline in spending is weakening.
Canadian retail sales fell -0.8% month-on-month to CAD 69.6B in July, down from the expected decline of -0.6%. Core sales, excluding motor vehicles, ehadb.cnponents and fuel, fell more significantly, down by -1.2%.
The decline was widespread, with eight of the nine sub-industries showing a decline, with food and beverage retailers leading the decline. Data show that consumer demand is cooling as households remain squeezed by high borrowing costs and lingering price pressures.
Nevertheless, Statistics Canada's forecasts indicate a brighter future, with retail sales expected to rebound by 1.0% month-on-month in August.
Minneapolis Fed Chairman Neil Kashkali said the balance of risks faced by the U.S. economy is tilting towards the labor market, rather than inflation. In one article, he argued that given the “simultaneous changes” of trade, immigration and tax policies, as well as mixed signals in the economy, the more pressing danger is “rapid further weakness” in employment rather than a serious overshoot of inflation.
KashkaliOut of the fact that the labor market historically may deteriorate “rapid and nonlinear”, so preemptive action is necessary. In contrast, he said tariff-related uncertainty means the risk of inflation continuing to approach 3%, rather than a sharp surge to 4-5%.
This background prompted him to support this week's rate cut, raising his own forecast from the Fed's economic forecast twice to three times this year.
Nevertheless, Kashkali stressed that policy is not on the preset route. If the labor market proves to be more elastic or inflation rises unexpectedly, the Fed should pause interest rate hikes and even consider hikes again. Conversely, if job weakness is faster than expected, he said policymakers should be prepared to take more aggressive actions to support growth.
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