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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Analysis]: Jackson Hall meeting focuses on Federal Reserve policies, and the trend of the US dollar index rises and falls." Hope it will be helpful to you! The original content is as follows:
While the Asian session, the US dollar index maintained fluctuations, the US dollar rose and fell on Tuesday, and there were almost no important economic data to promote the market direction this week. Traders focused on Fed Chairman Powell’s speech on Friday, paying attention to whether Powell will downplay the market’s expectations for a rate cut in September. The Fed will also release records of its July 29-30 meeting on Wednesday, but the qxkkl.cnrmation it passes may be limited, which qxkkl.cnes ahead of the release of a weak July jobs report.
Dollar: As of press time, the US dollar index hovered around 98.36. The overall US dollar showed a differentiated trend on Tuesday, mainly dragged down by the cautious sentiment before the annual meeting of Jackson Hall Global Central Bank this week. At the meeting, a speech by Fed Chairman Jerome Powell will provide guidance on short-term interest rate expectations. Traders are re-aligning their positions as there were no important economic data released before Powell’s speech on Friday, coupled with previous differentiation of inflation signals and weak employment data in July pushing up market bets on a September rate cut. From a technical perspective, all the market's attention is focused on the 50-day moving average of 98.100. Traders' reaction to this technical indicator will determine the market tone before the closing of the day: if the US dollar index breaks through the pivot of 98.317, it may strengthen further; but if it falls below the recent low of 97.626 and has strong momentum, it may continue to have a weak trend.
On the 19th local time, the White House Press Secretary Levitt said that the US military will not be deployed in Ukraine, but can provide coordination and security assistance. Trump directed the national security team to coordinate with Europe. Levitt said Trump has proposed a solution to get NATO to buy American weapons. Levitt also said that Russian President Putin and Ukrainian President Zelensky have expressed their willingness to sit down and negotiate, and that Trump hopes Russia and Ukraine will engage in direct diplomacy. At present, arrangements for Zelensky's meeting with Putin are underway.
On August 19, local time, EuropeThe board held a video conference to discuss the Ukraine issue and met in Washington. EU High Representative for Foreign and Security Policy, Karas, said after the meeting that EU leaders are qxkkl.cnmitted to achieving lasting peace to protect the vital security interests of Ukraine and Europe. Karas said the EU will continue to take measures against Russia, and the next round of sanctions plan against Moscow is expected to be released in September. Karas said the topics have been listed as the top topics for the EU's foreign and defense ministers to discuss the agenda next week.
Data released by the Japanese Ministry of Finance on Wednesday showed that Japan's exports in July fell 2.6% year-on-year, the third consecutive month of decline, with economists predicting a decline of 2.1%. Imports fell 7.5% year-on-year in July, a 10.4% drop below economists' expectations. Affected by this, Japan recorded a trade deficit of 117.5 billion yen (US$795.5 million), while the expected surplus was 196.2 billion yen.
Traders are pouring in a specific option bet, believing that the Fed will cut interest rates significantly by more than 25 basis points next month. Since the beginning of this month, there has been strong demand for positions related to overnight financing rates (SOFR) related to policy expectations. This week, traders once again raised the bet, with open interest rates climbing sharply. Fed Chairman Powell will make a key speech at Jackson Hall in a few days. Previously, inflation data released by the United States exceeded expectations, causing some traders to lower their interest rate cut expectations. Despite a pullback in the near term, traders still seem to be confident that interest rates will be cut next month. On Tuesday, U.S. Treasury bonds ended a three-day sell-off, with yields of Treasury bonds falling for all maturities. Ian Lingen, head of US interest rate strategy at BMO Capital Markets, said: "As the market prepares for Powell's speech, the biggest risk facing U.S. Treasury bonds is the choice of the Federal Reserve to pour cold water on the widely expected rate cut in September."
A group of economists said that the Swiss National Bank should not seek to ease the impact of high U.S. tariffs through monetary policy channels. Swiss exporters are currently in a double dilemma, facing 39% tariffs this month while the Swiss franc strengthens. The Swiss franc has appreciated about 10% against the dollar since Trump first announced trade tariffs in April. The Swiss National Bank Watch said that while the Swiss National Bank can help lower interest rates or weaken currencies through intervention, both practices have costs, uncertainties and risks. "Any policy intervention will bring inflation risks and trigger a new round of allegations about exchange rate manipulation. In practice, the Swiss National Bank is almost unable to effectively mitigate the impact of tariffs without causing other problems."
RBC's ClaireFan said Canada's overall CPI was still affected by the downward revocation of federal consumer carbon tax surcharges in April this year, but inflation slowed to 1.7% in July from 1.9% in June, reflecting more of the relief of potential inflation pressures. She pointed out that the median and corrections of the core CPI preferred by the Bank of Canada once again grew below 0.2% month-on-month after the quarterly adjustment in July, but the CPI diffusion indicators still show that inflation pressure is widely distributed in the consumption basket. Therefore, given that the central bank has cut interest rates significantly over the past year and signs of weakness in the labor market are expected to bottom out, Fan believes there will be no new interest rate cuts in this cycle.
Capito Macro's RuthGregory said in a report that UK inflation is expected to drop below 2% in 2027. She noted that although euro zone inflation has fallen, UK inflation has rebounded recently, but price pressure should fade next year. Eurozone inflation has dropped from 2.4% in December to 2.0% in June this year, while UK inflation has rebounded from 2.5% to 3.6% in June. The Bank of England expects inflation to rise to 4.0% in September. Gregory said the UK inflation pressure mainly qxkkl.cnes from government-made rising prices, taxes and rents, but these factors should ease next year. This will align UK inflation with the euro zone in 2027 and support the view that UK interest rates may drop lower than most people expect.
Dec Bank analysts said that the New Zealand Fed is expected to cut interest rates by 25 basis points. Since this result will be expected by the market, it is highly likely that there will be no significant impact on the New Zealand dollar. However, given the recent signs of a rise in inflation and the improvement of both labor market and economic confidence, the Fed's position at this meeting is expected to turn significantly - even at its last meeting in early July, its attitude was quite dovish. The market is still digesting expectations of another rate cut (except for a possible rate cut tomorrow), and most economists also believe that by the middle of next year, this round of interest rate cut cycle will end with interest rate dropping to 2.75%. But the bank's view is that 3% will be the end of this round of interest rate cuts. If the New Zealand Fed initially releases signals similar to its views tomorrow, this may provide some support for the New Zealand dollar.
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