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Under the strong counterattack of the US dollar, risk assets and gold are in danger! How should investors plan their plans?
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Hello everyone, todayXM Foreign Exchange will bring you "[XM Foreign Exchange Platform]: Under the strong counterattack of the US dollar, the life and death of risk assets and gold! How should investors plan?". Hope this helps you! The original content is as follows:
On Thursday (October 30), the U.S. dollar index continued its rise, breaking through the highest price in the month, which is also the most critical price mark in the near future. It is currently up 0.38% and is trading around 99.50. Affected by the Federal Reserve's hawkish interest rate cut and boosted by the easing of Sino-U.S. trade, the U.S. dollar index continues to strengthen. It is worth noting that the U.S. 10-year Treasury bond is currently stretched by 0.8% ahead of schedule, while U.S. stocks fell collectively before the market opened, and risk aversion once rose, supporting the rise of the U.S. dollar index.
After the volatile market caused by the Federal Reserve's interest rate decision on Wednesday, it maintained a volatile and stable trend. The Federal Reserve lowered the federal funds rate from 4.25% to 4.00% as scheduled. This is the second rate cut this year and is fully in line with the market's previous pricing.
Federal Reserve Chairman Jerome Powell’s stance after the interest rate resolution was cautious, making it clear that the future policy path will strictly rely on the performance of economic data. This guidance directly led to a significant cooling down of market expectations for another interest rate cut in December. The US dollar’s short-term trend and market focus
The US President stated that the two sides have reached a preliminary agreement: they will reduce tariffs on some goods in exchange for free trade in rare earths and minerals, and in exchange for China’s resumption of purchases of US soybeans.
Reviewing the core event in the market on Thursday: The Federal Reserve lowered interest rates by 25 basis points to a range of 3.75%-4.0% as expected, and announced the end of the quantitative tightening program. The U.S. dollar exchange rate remained essentially flat ahead of a speech by Fed Chairman Powell, who made it clear that due to the job marketThere is a structural conflict between the market and the inflation outlook, and there are significant differences in the views of various parties on the direction of monetary policy. Therefore, an interest rate cut in December is far from an inevitable option.
At the same time, the latest signed sales data of existing homes in the United States increased by 0.0% month-on-month, far less than the 1.6% market expectation, confirming the continued weakness of the U.S. real estate market. As the U.S. government is still shut down, the U.S. quarterly GDP, PCE, consumer spending and other data originally scheduled to be released today will not be available to everyone.
U.S. Dollar Index Trend and Market Impact
The downward trend of the U.S. Dollar Index was effectively contained in July, and has since opened a channel of steady strength. Since mid-July, the U.S. dollar has continued to show a recovery trend, a trend that has had a substantial impact on global risk asset pricing.
There are multiple interpretations in the market as to why the downward trend of the US dollar was broken, but for investors, the impact path is clear and clear: the rebound of the US dollar will directly suppress market risk appetite, weaken the driving logic of profit growth of the S&P 500 Index (SPX), and constitute a significant negative for the bullish pattern of gold and the entire precious metal sector.
Although the market discussion on the devaluation of the US dollar and de-dollarization continues to ferment, since the US dollar index (DXY) hit a stage bottom near 96 in mid-summer this year, the US dollar has shown resilience beyond expectations. So far, the U.S. dollar index has rebounded by about 3%. Judging from recent trends, the probability of breaking through the key psychological mark of 100 continues to rise.
Standard Chartered Bank’s global head of foreign exchange strategy Steve Englander has maintained a bullish view on the U.S. dollar recently. He believes that “the market has significantly underestimated the potential risks of a rebound in the U.S. dollar.”
In the strategy report released last week, he clearly pointed out that the United States is in a productivity surge cycle. This trend will attract more portfolio funds to flow into the U.S. market, push up the equilibrium real interest rate level, and thus provide continued support for the U.S. dollar.
England is not the only institutional person who is skeptical about the trend of de-dollarization. He said that "the evidence related to de-dollarization is still extremely uncertain" and emphasized that "despite the heated discussion around the diversification of foreign exchange reserves, reserve managers still maintain a high degree of caution when selling U.S. dollar assets."
The guidance released by Federal Reserve Chairman Powell that "an interest rate cut in December is not a given" has reduced the market's probability of an interest rate cut in December from the previous high of over 90% to 69% (based on federal funds rate futures FF00 pricing), and at the same time pushed the 10-year U.S. Treasury bond yield back to above 4%. Historically, higher interest rates generally support the U.S. dollar exchange rate.
In the latest report released on Wednesday, England once again reiterated its contrarian view, believing that the Fed may not even implement interest rate cuts at all in 2026.
The relationship between a stronger US dollar and risk appetite
Why might a stronger US dollar suppress market risk appetite? From the perspective of asset attributes, the U.S. dollar has long been regarded as a core safe-haven currency, and its strengthening cycle is often related to market risk events.The stages of fermentation and rising uncertainty are highly coincident, and vice versa. When investor confidence is at a high level, they will be more inclined to allocate stocks, emerging market assets, www.xm-forex.commodities and other products with higher risk attributes.
At the same time, as the "quotation currency" in global trade and financial markets, a stronger US dollar usually indirectly suppresses global economic growth by increasing financing costs and suppressing exports.
For U.S. stock market investors, the weakening of the U.S. dollar has previously been an important factor in driving earnings growth for the S&P 500 Index—large www.xm-forex.companies in the index’s constituent stocks derive a significant proportion of their revenue from overseas markets.
When the market was most bearish on the U.S. dollar this summer, UBS issued a report stating that for every 10% decline in the U.S. dollar, S&P 500 earnings would increase by an additional 2.5%. Wisdom Tree Investment www.xm-forex.company further added data: "In any six-month period, if the U.S. dollar shows a weakening trend, the historical average growth rate of S&P 500 index earnings is 6%."
The current market is questioning the high valuation of large technology stocks and AI theme stocks. In this context, any factors that may weaken earnings growth (including a stronger U.S. dollar) will pose substantial negative pressure on the S&P 500 index.
The linkage between the trend of the US dollar and www.xm-forex.commodities
The weakening environment of the US dollar since 2025 has generally provided support for the rise of www.xm-forex.commodity prices, with gold benefiting most significantly. If the U.S. dollar rebounds materially, it will weaken at least one of the core driving forces of gold's rise - especially now that many traders are already discussing whether the rebound will stop due to a stronger U.S. dollar when gold hits the $4,000 mark.
In addition, lower tariff expectations may reduce inflation expectations that push up gold prices (which is one of the main driving forces for gold price increases); at the same time, the easing of trade tensions between the world's two largest economies will also reduce the period of geopolitical uncertainty and reduce the market's allocation demand for gold, a traditional hedging tool.
From the perspective of traditional trading logic, gold and the US dollar have a negative correlation, so the rebound of the US dollar poses a clear resistance to the further rise of gold. Starting from the pricing mechanism, www.xm-forex.commodities are priced in U.S. dollars. A rise in the U.S. dollar will directly increase the import cost of www.xm-forex.commodities in other currencies, thereby suppressing end demand and ultimately suppressing www.xm-forex.commodity prices.
Technical analysis:
The U.S. dollar index broke through the rising wedge and at the same time broke through the key price of 99.36. If it can stand firm at 99.36 US dollars, it is expected to continue to strengthen. The current 99.36 will become the nearest support.
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