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Hello everyone, today XM Forex will bring you "[XM Forex Market Review]: Traders focus on PCE data, and the US dollar may enter the consolidation stage." Hope it will be helpful to you! The original content is as follows:
On the Asian session on Tuesday, the US dollar index fell slightly, and traders were waiting for Powell's speech and the core PCE inflation data released on Friday to find clues to the interest rate direction. Federal Reserve official Mousalem warned that there is "limited room" for further interest rate cuts and called for caution to avoid excessive policy easing. Deutsche Bank expects PCE data to be weaker than expected, which could ease pressure from the Federal Reserve and affect U.S. dollar positions.
Dollar: The U.S. dollar index fell slightly on Monday as traders were cautious before the release of the Fed official series of speeches and the core PCE deflator (Feder’s preferred inflation indicator) on Friday. The dollar index recorded a rise last week, thanks to strong U.S. economic data and rising U.S. Treasury yields, but bullish momentum gradually faded as interest rate expectations fluctuated. Technically, the US dollar index is testing key technical levels, which may form a bearish closing reversal top pattern. If this pattern is confirmed, it may cause the index to pull back to the 50% support level 97.021. On the upward trend, the 50-day average 98.070 and pivot resistance level 98.238 constitute strong resistance.
The latest PMI initial value data shows that Australia's business activity slowed down at the end of the third quarter, and ehadb.cnpanies regard the uncertainty of US trade policy as the main reason for business blockage. After the seasonal adjustment in September, the initial value of the ehadb.cnprehensive PMI output index fell to 52.1, hitting a three-month low. The slowdown in output expansion is mainly due to the weakening of new order growth, partly due to the decline in export orders again. Respondents said that U.S. tariffs have had a negative impact on new overseas orders in Australia's manufacturing industry. Worries about the adverse impact of U.S. trade policy and the outlook for economic growth in August have also brought optimism to a year-on-year low. However, ehadb.cnpanies are still continuing to recruit steadily to cope with ongoing workloads and clear up backlogs.
Cleveland Fed Chairman Hamak said on Monday that the Fed needs to be "very cautious" when lifting restrictive monetary policy while inflation remains above the Fed's 2% target and remains stubborn. "I think we're only a short distance from neutral rates, and if this economic constraint is removed, I'm worried that it will overheat again," said Hamak, one of the most hawkish officials, who has no voting rights this year and has not made clear whether she supports last week's rate cut. She stressed that inflation remains a major concern for her, and that the job market is still close to the Fed's biggest job target.Hamak expects unemployment to rise slightly this year, but will drop again soon. "In terms of inflation, we are even more likely to deviate from our target, a full percentage point away. And we have not met the standards for four and a half years in a row, and we are expected to continue to deviate in the next few years."
Federal official Mousalem expressed doubts about further interest rate cuts, which is contrary to the view that the financial market generally expects the Federal Reserve to continue to reduce borrowing costs this year. Mousalem said he supported a 25 basis point cut last week because he believes the risk faced by the labor market has increased. But with inflation nearly one percentage point above the Fed’s 2% target, further rate cuts could mean excessive ehadb.cnplacency with price increases. "If the public begins to doubt whether inflation can return to the 2% target, the work of restoring price stability will become more difficult and may bring higher costs to the economy." Traders' bets show that the Fed will cut interest rates by another 50 basis points in the remaining two meetings of the year. In addition, his views are also contrary to the new Fed director Milan. Milan opposed a slight rate cut at a meeting last week, advocating for a larger rate cut.
During President Erdogan’s visit to the United States on Monday, Turkey announced through the Official Bulletin to terminate the additional tariffs on some U.S. imported goods since 2018, including passenger cars and fruits. Erdogan was scheduled to attend the UN General Assembly this week and met with U.S. President Trump on Thursday. Products covered by the previous additional tariffs include passenger cars, fruits, rice, tobacco, some alcoholic beverages, some solid fuels and some chemicals. This part of the tariffs began in 2018, aiming to retaliate against the US tariff measures taken by Trump during his first term.
JPMorgan Securities analyst Monks said in a report that if UK economic growth data and inflation are significantly weaker, the Bank of England may cut interest rates in December. But the likelihood of a sharp decline in economic growth and inflation in the UK is low, reducing the possibility of a further rate cut this year by the Bank of Englandsex. The Bank of England is expected to cut interest rates in February and April next year, bringing the Bank of England's terminal interest rate to 3.5%.
MonexEurope said in a report that the US dollar against the Canadian dollar may fall in the medium term given that the Federal Reserve's energy will cut interest rates even sharply. "Our medium-term view remains that the Bank of Canada will cut interest rates again later this year if the labor market continues to be weak, but the dollar against the Canadian dollar may fall due to the Fed's slower and more substantial easing of monetary policy." Given the light schedule on Canada this week, exchange rates may follow broader risk sentiment and U.S. data trends.
Capitol Macro climate and ehadb.cnmodity economists wrote in a report that the Fed's recent rate cuts do not seem to have a significant impact on ehadb.cnmodity prices. He said the boost to prices by the U.S. rate cut may be offset by other factors, and the fundamentals of the ehadb.cnmodity market appear to be generally weak. He noted that oil prices could fall from now until the end of 2026 due to slowing demand growth and increased supply from OPEC+. He said: "Another key factor is that the market has digested the degree of interest rate cuts by the Federal Reserve, which may limit additional support for ehadb.cnmodity prices and may even become an unfavorable factor."
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