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The US dollar index is expected to rise, and the Federal Reserve decided to work with US GDP and "small non-farm" to attack!
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Hello everyone, today XM Foreign Exchange will bring you "[XM Group]: The US dollar index is expected to rise, and the Federal Reserve will decide to work with US GDP and "small non-farm" to attack!". Hope it will be helpful to you! The original content is as follows:
The US dollar index hovers around 98.78 on Wednesday, and the US dollar is responsive to interest rate differences and fundamentals as the risk premium fades and trade tensions ease through an agreement. The latest Fed's interest rate decision was announced on Wednesday and is expected to attract a lot of investors' attention. The market generally expects the U.S. central bank to keep interest rates unchanged this week in the 4.25-4.5% range, but traders will pay attention to whether the Fed is still planning a new round of 25 basis points rate cuts at its next meeting on September 17. In addition to interest rate decisions by the world's most powerful central bank, investors will also face U.S. GDP updates early Wednesday. The U.S. quarterly GDP growth in the first quarter was disappointing, recording -0.5%, and the market hopes that annualized growth in the second quarter can quickly recover to 2.4%.
Analysis of major currencies
Dollar: As of press time, the US dollar index hovered around 98.78. As the trade risk premium faded, the US dollar strengthened on Tuesday, with the target of the US dollar index (DXY) pointing to the 99.177–99.838 range. Fed policy and strong yield support boosted bullish momentum. The Fed is starting a two-day policy meeting as the dollar rises, and no policy changes are expected this week. However, traders are closely watching for upcoming labor market data and June www.xm-forex.commodity trade reports, both of which will provide the basis for the second-quarter GDP data released later this week. Technically, after the US dollar index broke through 98.950, it activated the next target range between 99.177 and 99.838. If it continues to close above 99.421, it may be laid for test 100.540Set the foundation. The bullish logic of the dollar remains true until the Fed turns dovish.
1. The Bank of Japan is expected to keep interest rates unchanged and may raise price outlook
Institutional analysis is expected that the Bank of Japan will maintain the benchmark interest rate unchanged on Thursday and raise inflation expectations. Investors are looking for signs of another rate hike this year after U.S.-Japan trade deal reduces some uncertainty. The main focus of the meeting will be to what extent the Bank of Japan has signaled another rate hike this year, with traders currently seeing the likelihood of a rate hike by the end of the year being about 75%. Bank of Japan officials said earlier that the Bank of Japan may consider hikes again after the U.S.-China trade deal eliminates a key source of uncertainty. However, as the key task of identifying the actual impact of tariffs still exists, the Bank of Japan will not consider a sudden rate hike at present. Still, the momentum of finding the Bank of Japan’s hikes is growing, with the view that October is becoming increasingly popular as the market as a potential opportunity for the next rate hike.
2. Federal Reserve Director Couple is absent due to personal absence. The coupon meeting was temporarily reduced to 11 people this week. According to foreign media reports, the Federal Reserve said that Federal Reserve Director Couple is absent from the two-day July policy meeting held this week due to personal matters. This could mean that only 11 FOMC members will vote on this week's policy decision, while the unconventional 12 will be held. While Fed Director Waller and Director Bowman are expected to become two dissidents in favor of lowering interest rates this month, the www.xm-forex.committee should still support keeping interest rates unchanged with an absolute majority. According to the Fed's policy, if one local Fed president absents the vote, other presidents can participate in the vote as alternatives. However, there is no alternative to the board seat. 3. The U.S. consumer confidence index rose slightly in July
The U.S. Consultant Chamber of www.xm-forex.commerce consumer confidence index rose from 95.2 in June to 97.2 in July. The current situation index fell by 1.5 points to 131.5 points. The expected index rose 4.5 points to 74.4. But expectations remain below the 80 threshold, marking a sixth straight month of recession. "Consumer confidence has stabilized since May, rebounding from the April plunge, but remains below the exciting levels last year," said Gichard, senior economist at the agency's global indicators. In July, pessimism about the future faded, resulting in a slight improvement in overall confidence. All three www.xm-forex.components of the expected index have improved, consumers' pessimism about future business conditions and employment has eased, and optimism about future income has increased. Meanwhile, consumer assessments of the status quo have not changed much. However, their assessment of current employment opportunities has declined for the seventh straight month, reaching its lowest level since March 2021.
4. IMF: UK's economic growth will be faster than other European countries for two consecutive years
According to data from the International Monetary Fund (IMF), the UK's economic growth rate will exceed that of other major European economies this year and next year, but it still lags behind the United States and Canada in the G7. The World Economic Outlook shows that the IMF has raised its global economic growth expectations to reflect the improvement in the trade background and the fiscal stimulus brought by President Trump's Big and U.S. Act. The United Kingdom, the European Union, Japan and other countries have reached trade agreements with the United States. The International Monetary Fund said that the actual US tariff rate used in its latest forecast is 17.3%., below 24.4% in April, while the actual tariff rate for the rest of the world was 3.5%, down from 4.1% before.
5. Institutions: Price rise is the primary concern of American consumers. The Federal Reserve is right to not cut interest rates.
Numerator chief economist Leo Feler said that despite the increasing political pressure on interest rate cuts, it is right for the Federal Reserve to choose to remain silent. The Fed is now working to balance its dual mission. But monthly consumer sentiment surveys show that people's concerns about rising prices are still far more important than unemployment. In a monthly survey conducted by Numerator last year of about 2,000 representative households, "price rises" have always been the primary concern for consumers, ranking beyond unemployment, recession, crime or immigration. Even though the current annual inflation rate has dropped below 3%, this ranking remains unchanged. Economists, business leaders and consumers generally expect inflation to rise again. Although tariffs have not significantly pushed up consumer prices, this does not mean that price increases will not www.xm-forex.come. All parties are currently on the stand-by and see, but business leaders have made it clear that prices will be raised when the economic environment is clear. Given that the inflation risk is higher than the unemployment risk under the tariff background and the public is highly sensitive to inflation, it is wise for the Federal Reserve to act cautiously within its mission.
Institutional View
1. Citigroup withdrew from euro-dollar long bets
Analysts of Citigroup Group traded euro-dollar long trades at 1.1540, with a loss of 1.3% including interest. Citi's Daniel Tobon, Osamu Takashima and Brian Levine said in the report: "We believe that this week's euro/dollar pullback is due to position squeeze, and the trigger is the 'good news' market after the announcement of the EU trade agreement." They set up the position on July 11 at 1.1680 with a target price of 1.20. They said: "We still believe that if the dollar continues to weaken in the third quarter, it is more likely to be driven by weak U.S. labor market data. Therefore, despite being forced to stop losses today, we are still seeking to rebuild the dollar short position (probably against the euro or Swiss franc) before the release of U.S. employment data on Friday."
2. Institutions: The dollar's rise may not continue
MonexEurope analysts said in a report that the dollar's rise after the U.S.-Europe trade agreement is unlikely to continue. They said the U.S. Treasury Department's quarterly refinancing plan announced this week could weaken the dollar if it triggers a slump in bond markets. Additionally, the Fed expects to keep interest rates unchanged on Wednesday, but Fed officials Michelle Bowman and Christopher Waller may vote against it. This will be the first time in more than 30 years that two Fed officials have disagree. "We are currently cautious about pushing up the dollar, considering the www.xm-forex.coming risk events."
3. Institutions: European economic improvement is expected to support the euro in the medium term
MonexEurope analysts said the euro hit a one-month low against the dollar after the U.S. and the EU reached a trade deal and should rebound afterward. The euro fell amid concerns about the economic impact of the US imposing a 15% tariff on EU imports. However, analysts say the tariffs are lower than many people fear. "We still believe that in the context of slowing US economic growth, the improvement of European economic growth should support the upward trend of the euro against the US dollar in the medium term."
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