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Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange Official Website】: 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:
U.S. CPI rose 3.2% year-on-year in July, lower than market expectations, setting a new low since December 2024. The year-on-year increase in core inflation (excluding food and energy) narrowed to 4.1%, indicating that the lag effect of the Fed's aggressive interest rate hikes has begun to appear. After the data was released, the market's probability of a rate cut in September rose from 35% to 45%, and the US dollar index fell 0.8% to around 103.5 at one point. Traders bet that the Fed may cut interest rates by 50 basis points in the second half of 2025, providing rebound momentum for non-U.S. currencies.
The ECB announces raising the deposit interest rate from -0.1% to 0%, ending the eight-year negative interest rate era. This is the 11th rate hike since July 2022, aiming to cope with energy price volatility and core inflation stickiness. In the policy statement, the ECB deleted the wording of "there may be further rate hikes in the future" and instead emphasized that "the interest rate path will be decided according to the data." Affected by this, the euro-dollar exchange rate jumped 0.6% to 1.0850, hitting a new high in the past two months.
The "2025 Second Quarter Monetary Policy Implementation Report" released by the People's Bank of China clearly stated that it will "resolutely correct the market's pro-cyclical behavior., prevent the risk of overshooting the exchange rate. The report also proposes to "improve the transmission mechanism of market-oriented interest rates to promote the decline of social qxkkl.cnprehensive financing costs" and release signals of stable growth. Supported by policy expectations, the spot exchange rate of the RMB against the US dollar stabilized near 7.18, and the implicit volatility in one month fell to a 17-month low of 3.2%, indicating that the market's concerns about the depreciation of the RMB are alleviated.
The leaders of Russia and Ukraine met in Alaska. Although no ceasefire agreement was reached, they agreed to establish a "military hotline" to avoid misjudgment. Market concerns about interruption of energy supply have cooled down, and Brent crude oil futures prices rebounded by 1.2% from the two-month low of US$65.79 per barrel. At the same time, the Sino-Indian border question Special Representatives met with the question to reach a 10-point consensus to alleviate the risk of trade frictions in Asia. Improved risk appetite drives the general strengthening of emerging market currencies, with the Korean won and Indian rupee rising 0.4% and 0.3% against the US dollar respectively.
The UK GDP fell 0.3% month-on-month in the second quarter, negative growth for two consecutive quarters, and confirmed a technical recession. Sub-item data showed that consumption expenditure fell 0.5%, and qxkkl.cnmercial investment decreased 1.2%, the largest drop since the third quarter of 2024. Although the Bank of England maintained interest rates of 5.25% in August, the minutes of the meeting showed that "most members believed that interest rate cuts need to wait for inflation to continue to fall back to 3%. Below. Affected by this, the pound fell 0.8% against the US dollar to 1.2450, a new low in the past three months.
Japan's core CPI (excluding fresh food) rose 2.1% year-on-year, lower than the market expectations of 2.3%, for the third consecutive month. Data reflects the inhibitory effect of the fall in energy prices and weak wage growth on consumption. Bank of Japan Governor Kazuo Ueda said in a policy statement that "there is no inflation currently dealing with lag risks", implying that the yield curve control (YCC) policy will not be adjusted in the short term. The yen against the US dollar fell 0.5% to 145.80 under pressure, close to the intervention warning line set by the Japanese Ministry of Finance.
The U.S. Department of qxkkl.cnmerce announced that it would include 407 types of steel and aluminum derivatives such as wind turbines in the tariff list, and the tax rate was raised from 25% to 50%. This move directly impacted China's exports to the United States, and was expected to affect the annual export volume of about US$8 billion. Due to concerns about escalating trade frictions, the offshore RMB exchange rate against the US dollar once depreciated by 0.3% to 7.2050, and the demand for foreign exchange hedging by export-oriented enterprises surged.
Israel launched air strikes on Yemen's Hodeid Port, and the Houthi armed forces then launched hypersonic missiles to Israel. The escalation of geopolitical tensions has led to safe-haven funds such as gold and US bonds.Production prices rose, qxkkl.cnEX gold futures broke through the $2,100/ounce mark, and the yield on the 10-year U.S. Treasury bond fell 2.7 basis points to 4.30%. The U.S. dollar index rebounded 0.4% to 104.20 due to safe-haven buying, while the yen rose 0.2% to 145.30 against the trend.
3. Preview of key events
The Federal Reserve announces the minutes of July meeting (02:00, Beijing time on August 21)
The market pays attention to the Federal Reserve's latest judgment on the inflation path and discussions on the time point of interest rate cuts. If the minutes of the meeting show that "most officials support the rate cut in September", the US dollar may weaken further; if the emphasis is on "inflation risks are still rising", it may strengthen hawkish expectations.
The core CPI is expected to remain unchanged by 5.5% year-on-year. If the data is higher than expected, it may strengthen the European Central Bank's market pricing of "high interest rates to last longer", which is beneficial to the euro.
The market generally expects that the 1-year and 5-year LPR will remain unchanged by 3.45% and 4.20% respectively, but it is necessary to pay attention to whether the policy statement sends a signal of "structural interest rate cuts".
The three major U.S. stock indexes rose and fell on Tuesday, with the Nasdaq falling 1.46% to the largest single-day decline since April. The S&P 500 closed down 0.59%, and the Dow Jones Industrial Average barely closing down as Home Depot rose by more than 3%. The Panic Index VIX rose to 22.5, a record high in the past month, showing market concerns about valuation pullbacks in technology stocks and geopolitical risks. In contrast, the European STOXX600 index rose 0.69%, benefiting from the rebound of energy and bank stocks.
The daily chart of the US dollar index shows that the price is suppressed by the 200-day moving average around 104.50, and the RSI indicator is overbought to above 70, and there is pressure to pull back in the short term. If it falls below the 103.80 support level, it may open up space for a fall to 103.00; on the contrary, if it stands firm at 104.50, it may test the 2025 high of 105.78.
In the short term, pay attention to the resistance range of 1.0850-1.0900. If the breakthrough is made, you can look to 1.0950; the support below is at 1.0780, and if it falls, it may fall back to 1.0700. It is recommended that day traders sell high and buy low in the range of 1.0800-1.0880, and set 30 points at each stop loss.
BoJP policy turns toward expectations and if it falls below the key support of 145.50, it may accelerate downward to 144.00; the upper resistance levelOn 146.50, we need to be wary of the risks of intervention. It is recommended that arbitrage traders gradually close long positions and turn to wait and see.
Supported by the rebound in iron ore prices and China's stable growth policy, the Australian dollar against the US dollar is expected to test the 0.6500 resistance. If the breakthrough is made, you can look to 0.6550; the support below is at 0.6400, so you need to pay attention to the release of China's August trade data (August 21).
Risk warning: Geopolitical conflicts, energy price fluctuations, and central bank policy adjustments beyond expectations may cause severe market fluctuations. Investors are advised to control their positions and strictly stop losses.
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