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Dollar index rises as Powell pours cold water on expectations of December rate cut
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Hello everyone, today XM Forex will bring you "[XM Forex Platform]: Powell poured cold water on expectations of an interest rate cut in December, and the U.S. dollar index rose." Hope this helps you! The original content is as follows:
In the Asian session on Thursday, the U.S. dollar index hovered above 99. On Tuesday, after the release of a number of U.S. economic data, the U.S. dollar fluctuated sharply against the euro. The U.S. dollar index fell 0.08% in late trading to 98.69; the euro rose 0.14% to $1.1659. The euro against the pound also hit its highest level since May 2023, while the pound against the dollar fell to its lowest since August 1. This trading day, the market's attention will turn to the Federal Reserve's interest rate decision and Federal Reserve Chairman Powell's press conference.
Analysis of major currency trends
US dollar: As of press time, the US dollar index is hovering around 99. Due to the government shutdown and scarcity of economic data, the market can only rely on assumptions, and Powell's tone will be particularly important. If he hints that more rate cuts are possible, the dollar index could remain under pressure. If he holds out, the dollar could rebound, but with subdued inflation and slowing job growth, Powell's case for taking a hawkish stance here isn't strong. From a technical perspective, as long as the U.S. Dollar Index remains above its 50-day line, the trend remains intact. But unless bulls can break through 99.139 and reclaim 99.563, the market will continue to be in a weak uptrend. This situation will not change without new hawkish signals from the Fed, which is currently unlikely.



1. U.S. Senate Minority Leader: The government "shutdown" may last until November
On October 28, local time, U.S. Senate Minority Leader Chuck Schumer said that the U.S. federal government "shutdown" may last until November, when millions of people will face high medical insurance costs caused by the expiration of tax credits under the Affordable Care Act. Hundreds of thousands of federal workers have been furloughed, others are working without pay, and federal food aid is ending.
2. “Super Central Bank Week” is xmh100.coming and the global foreign exchange market is ready to prepare.
This week, the global financial market is ushering in “Super Central Bank Week”. Among them, the Federal Reserve, the European Central Bank, and the Bank of Japan will announce interest rate decisions on October 30, Beijing time. The market currently generally expects that the three major central banks will take different paths: the Federal Reserve will most likely continue to cut interest rates by 25 basis points; the European and Japanese central banks will maintain existing interest rates unchanged. This difference in monetary policy has also become a key factor affecting the direction of the global foreign exchange market.
3. The U.S. government continues to halt large-scale layoffs during the "shutdown"
Local timeOn October 28, a federal judge in the United States further blocked the Trump administration’s plan to lay off thousands of federal employees during the nearly month-long partial government shutdown. During a hearing in San Francisco, U.S. District Judge Susan Ilston extended an earlier interim ruling that barred nearly 40 federal agencies from implementing layoffs pending the outcome of a legal action brought by unions representing federal employees. Previously, on October 15, a federal judge in San Francisco ordered that the Trump administration must stop layoffs during the government shutdown.
4. The government’s “shutdown” resulted in the suspension of food assistance, and many U.S. states filed a lawsuit
On October 28, a coalition of states led by the Democratic Party in the United States filed a lawsuit, requesting to prevent the Trump administration from suspending food assistance benefits from November 1 during the ongoing U.S. government “shutdown”. It is reported that attorneys general and governors from 25 states and the District of Columbia filed a lawsuit in Boston federal court after the U.S. Department of Agriculture said it would not use $6 billion in emergency funds to pay Supplemental Nutrition Assistance Program (also known as food stamps) benefits. It is understood that this benefit provides food assistance to more than 41 million low-income Americans.
5. U.S. House Speaker Johnson poured cold water on Trump’s remarks about running for office in 2028
House Speaker Mike Johnson poured cold water on Trump’s remarks about seeking a third presidential term, saying that the U.S. Constitution’s presidential term limits will prevent him from running again. "I don't see where that path is," the House Republican leader said. "I think the president himself knows that, and he and I have discussed the limitations in the Constitution." Although the 22nd Amendment to the U.S. Constitution explicitly prohibits anyone from serving more than two terms as president, Trump has repeatedly hinted that he may seek a third term. Johnson said he “can’t see” a chance of passing a new amendment to repeal the restriction, arguing it could take “ten years” for a constitutional amendment to gain support from a two-thirds majority in the House and Senate and ratification by three-quarters of states.
Institutional View
1. Mitsubishi UFJ: The pound may continue to be under pressure due to interest rate cut expectations and growth concerns
Mitsubishi UFJ economist Derek Halpenny said that due to rising market expectations for further interest rate cuts by the Bank of England and concerns about British economic growth, the pound may continue to weaken against the euro in the short term. He pointed out that British inflation data last week was lower than expected, prompting market bets that the Bank of England may cut interest rates again sooner than expected. Mitsubishi UFJ predicts that EUR/GBP may rise to 0.9000. However, the bank also believes that if British Finance Minister Reeves can add enough fiscal space in next month's budget to enhance investor confidence, the pound may still rebound.
2. Market analysis: Trade concerns and the strengthening of the euro are not enough to affect the European Central Bank’s decision-making
Dilke Schumacher, chief economist of KfW (KfW), said that trade issues and the strengthening of the euro are currentlyNot enough to influence the European Central Bank's monetary policy decision this week. He noted that the trade conflict with the United States remains a major source of uncertainty, but there are currently no signs of causing a significant economic downturn or having an impact on inflation. Schumacher added that a stronger euro against the dollar would dampen future price pressures and further hit European exporters. However, services inflation remains stubbornly at around 3%, suggesting that inflation dynamics have not fully normalized. Investors widely expect the European Central Bank to keep its key interest rate unchanged at 2% on Thursday.
3. Citi: The Bank of Korea may raise its economic growth forecast next month
Citigroup economist Jin-Wook Kim said in a report that the Bank of Korea may raise its growth forecasts for 2025 and 2026 at the policy meeting on November 27. South Korea's stronger-than-expected GDP growth in the third quarter and a rebound in semiconductor exports may prompt the Bank of Korea to raise its economic growth forecasts for 2025 and 2026 to 1.0% and 1.9% respectively from 0.9% and 1.6% in August. He said the latest quarterly economic growth above potential levels may ease the central bank's concerns about the GDP output gap turning negative. He believes that the current interest rate cycle of the Bank of Korea has ended near the 2.50% policy rate.
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