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Hello everyone, today XM Forex will bring you "[XM Group]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
On December 9, the foreign exchange market was driven by multiple factors such as global central bank policy expectations, geopolitical situation and economic data, and major currency pairs showed divergent trends. The U.S. dollar index fluctuated weakly before the Federal Reserve's interest rate meeting, the euro and the pound benefited from the difference in policy expectations, the Japanese yen strengthened due to the Bank of Japan's interest rate hike expectations, and the RMB remained resilient due to favorable domestic policies and foreign exchange controls. The following is the core good and bad news that affects the foreign exchange market that day, as well as corresponding trading tips.
Inflation data is picking up at the margin: The U.S. core CPI maintained 3.3% year-on-year in November and did not fall further, indicating that inflation is still sticky, limiting the Fed's room for significant interest rate cuts to a certain extent, forming short-term support for the U.S. dollar.
Geographic hedging demand: The situation in the Middle East continues to be tense, and some funds flow into the U.S. dollar for safe haven, which supports the U.S. dollar index to maintain fluctuations around 103.5 during the 9th session without any significant decline.
The Federal Reserve is strongly expected to cut interest rates: CME Fed Watch shows that the market is betting on a 92% probability of cutting interest rates by 25 basis points at the December 9-10 interest rate meeting, which is significantly higher than at the beginning of the month. Expectations of interest rate cuts suppress the attractiveness of the US dollar.
The Supreme Court challenges the tariff policy: The U.S. Supreme Court hinted that it may support Trump’s dismissal of independent agency members, triggering market concerns about the independence of the Federal Reserve. If the tariff policy is rejected, it will weaken the support of the U.S. dollar’s trade policy.
Weak economic data: the U.S. manufacturing PMI in November was 47.8, in contraction territory for six consecutive months, and the service industry PMI fell to 50.2. Close to the boom-bust line, the weak economic recovery drags down the dollar index.
The European Central Bank's interest rate cut expectations lag: the market expects the European Central Bank to keep interest rates unchanged in December and start cutting interest rates only in the first quarter of next year. The difference in the pace of interest rate cuts from the Federal Reserve gives the Euro and British Pound an interest rate advantage over the U.S. dollar.
UK inflation data fell back: UK CPI fell to 3.1% year-on-year in November, the lowest since 2022, easing the pressure on the Bank of England to cut interest rates. The pound rose 0.2% against the US dollar during the 9th day, at 1.2780.
The euro zone economic recovery is weak: the euro zone’s industrial output fell by 0.3% month-on-month in November, and the manufacturing PMIs of Germany and France were both below the boom and bust line. Economic weakness limited the height of the euro’s rebound, and the euro was under pressure near 1.0850 against the dollar.
The British real estate market is sluggish: British house prices fell by 0.5% month-on-month in November, falling for three consecutive months. High mortgage rates have suppressed demand for home purchases, weighing on the pound.
The Bank of Japan’s interest rate hike expectations have soared: Bank of Japan governor hinted 1 The February 19 meeting will assess the pros and cons of raising interest rates. Market expectations for an interest rate hike by the end of the year have risen to more than 80%. The yen rose 0.3% against the US dollar during the session on the 9th to 142.50. The unwinding of carry trades promoted the strength of the yen.
Japanese inflation remains high: Japan’s core CPI rose 2.5% year-on-year in November, exceeding the 2% target for 20 consecutive months, providing data support for the central bank to raise interest rates and enhancing the attractiveness of the yen.
Economic growth is under pressure: Japan’s manufacturing PMI fell to 48.2 in November, exports fell 2.3% year-on-year, and the economic recovery momentum is insufficient. If interest rates are raised too quickly, it may intensify the risk of economic downside and limit the gains of the yen.
High government debt: Japan’s government debt accounts for more than 260% of GDP. Raising interest rates will increase debt interest payments. The market is worried that the central bank’s interest rate hikes will be limited, and the space for appreciation of the yen may be www.xmyktj.cnpressed.
Australian employment data is good: Australia's unemployment rate remained at 3.7% in November, with 21,000 new jobs, exceeding market expectations. Expectations of an interest rate cut by the Reserve Bank of Australia have cooled, and the Australian dollar has found support near 0.6520 against the US dollar.
Canadian inflation data rebounded: Canada’s CPI rose to 3.2% year-on-year in November, higher than the expected 2.9%. The Bank of Canada has an 85% chance of keeping interest rates unchanged in December. The Canadian dollar fluctuated around 1.3650 against the US dollar.
www.xmyktj.cnmodity prices fell: international crude oil and iron ore prices fell on the 9thAfter a sharp drop, WTI crude oil futures fell by more than 2%, dragging down www.xmyktj.cnmodity currencies such as the Australian dollar and Canadian dollar. The Australian dollar fell 0.3% against the US dollar to 0.6505.
Economic growth slowed: Australia’s retail sales fell by 0.2% month-on-month in November, and Canada’s GDP in October increased by 0.1% month-on-month, lower than the expected 0.2%. Weak economic data has increased expectations for interest rate cuts by the Reserve Bank of Australia and the Bank of Canada next year.
Domestic policy efforts: On December 8, the Political Bureau of the Central www.xmyktj.cnmittee set the economic work for 2026, proposing the implementation of proactive fiscal policies and moderately loose monetary policies, increasing countercyclical adjustments, increasing market risk appetite, and supporting the RMB exchange rate.
Raise the foreign exchange deposit reserve ratio: The central bank announced that it will raise the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points to 9% starting from December 15, reducing the supply of U.S. dollars in the foreign exchange market and stabilizing the RMB exchange rate. The offshore RMB rose 0.1% against the U.S. dollar on the 9th, to 6.3420.
Inverted interest rate differential between China and the United States: Although the Federal Reserve is expected to cut interest rates, the interest rate differential between China and the United States' 10-year treasury bonds still reaches 1.2 percentage points. The inverted interest rate differential puts the RMB under certain depreciation pressure.
Export growth slowed: China’s exports in November increased by 5.9% year-on-year, down from 7.2% in October. Weak external demand dragged down exports and suppressed the RMB exchange rate.
Core focus: the results of the Federal Reserve’s December interest rate meeting (announced on December 10), the Bank of Japan’s interest rate hike expectations, the European Central Bank’s policy statement and www.xmyktj.cnmodity price trends.
Risk warning: Escalating geopolitical conflicts, unexpected central bank policy adjustments, and sharp fluctuations in economic data may trigger violent fluctuations in the foreign exchange market. It is recommended to control positions and set stop losses.
Operation suggestions: In the short term, you can pay attention to the trading opportunities of the euro against the US dollar in the 1.0800-1.0900 range. The pound against the US dollar can sell high and buy low in the 1.2750-1.2850 range. The Japanese yen against the US dollar needs to be alert to the risk of a correction after interest rate hike expectations cool down.
The core contradiction in today's foreign exchange market lies in the difference in policy expectations of major central banks. Investors need to closely track central bank decisions and economic data to cope with periodic fluctuations in exchange rates.
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