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A collection of positive and negative news that affects the foreign exchange market
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Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange Market xm217.comment】: Collection of positive and negative news that affects the foreign exchange market". Hope it will be helpful to you! The original content is as follows:
1. US dollar index: positive and negative negative factors intertwined, the tug-of-war at the 97.7 mark has intensified
1. Core positive factors
Georological safe-haven demand heats up: On October 6, Iran’s “off-tactic challenge” escalated, Israel’s defense minister sent retaliation signals, Iran implemented flight stop control throughout the country, and market safe-haven funds flowed into the US dollar in stages. As of the Asian session that day, the US dollar index once rose to 97.85, up 0.13% from the closing price of the previous day, reflecting the short-term support of geopolitical risks to the US dollar.
Political differentiation expectations strengthen: The market expects that the probability of the Federal Reserve cutting interest rates by 25 basis points in October is 94.6%, but xm217.compared with the European Central Bank's possible interest rate cut of 50 basis points, the advantage of the US dollar spread remains. Goldman Sachs estimates show that the spread of 10-year Treasury bonds in the UK and the United States has widened to 80 basis points, hitting a three-month high, attracting spread trading funds to increase their holdings in the US dollar.
2. Key negative factors
Data vacuum weakens pricing anchor: The shutdown of the US government has led to the delay in the release of key data such as EIA inventory and non-farm employment, and the market lacks the core basis for verifying the fundamentals of the US economy. Previous API data showed that gasoline inventory rose by 2.867 million barrels, suggesting weak consumption. If subsequent reissue data is less than expected, it will suppress the upward space of the US dollar.
The technical pressure has emerged: the US dollar index encountered resistance in the range of 97.8-97.9 for three consecutive days, the RSI index is at a neutral and high level of 58, and the short-term pullback pressure is gradually increasing. Morgan Stanley pointed out that if the 97.5 support level is lost, it may trigger a technical sell-off to the 97.2 range.
2. Non-US currencies: European currencies are under pressure, xm217.commodity currencies fluctuate
1. Euro/USD: Expectations of policy easing are overwhelming, and there are hidden worries at the 1.07 mark
Dangerous: The market is betting on the ECB's 50 basis points rate cut in October rose to 62%, far exceeding the Fed's easing, and the interest rate spread between the euro zone and the United States continues to narrow. Coupled with the aftermath of the OPEC+ production increase resolution, the weak rebound in crude oil prices weakened the euro zone inflation expectations and further strengthened the pressure of euro depreciation. On the same day, the euro fell to 1.0714 against the US dollar.
Potential support: The final value of the service industry PMI in the euro zone in September was 48.7, a correction of 0.3 percentage points from the initial value, indicating that the economic contraction narrows. If subsequent data continues to improve, it may provide breathing space for the euro.
2.GBP/USD: Bank of England's policy is biased towards eagle, and the oscillation center is moving upward
The positive news is highlighted: the market expects the Bank of England to cut interest rates only twice in 2025, far less than the ECB's four expectations, and the pound's interest rate spread advantage continues to expand. On October 6, the pound hit 1.2680 against the dollar during the session, up 0.8% from last week's low, hitting a one-month high.
Risk warning: The UK's trade deficit expanded to 12.8 billion pounds in August, the second highest this year, and the deterioration of trade accounts may limit the increase in the pound.
3. Australian dollar/USD: xm217.commodity prices fluctuate, 0.64 range tug of war
Badvantage disturbance: international copper prices fell 1.2% on the day, iron ore prices fell 0.8%, and weak xm217.commodity prices suppressed the Australian dollar's xm217.commodity currency attributes. In addition, China's manufacturing PMI in September was lower than expected, and market concerns about Australian dollar export demand increased.
Buffering: The spread of 10-year Treasury bonds between Australia and the United States narrowed to -35 basis points, a narrowing of 12 basis points from the previous month. The spread pressure was marginally relieved, supporting the Australian dollar at the 0.64 mark.
3. RMB: Resilience is prominent, and two-way fluctuations are controllable
1. Positive support: balance of payments and policy support
The current account surplus is solid: China's current account surplus in the first half of 2025 is US$294.1 billion, and its foreign net assets reach US$3.8 trillion, an increase of 16% from the end of 2024, providing a solid foundation for the RMB exchange rate. On October 6, the offshore RMB stabilized against the US dollar in the range of 7.32-7.33, with the exchange rate fluctuation of the day only 0.02%.
Foreign exchange management policies are in full swing: The State Administration of Foreign Exchange has expanded the pilot program of cross-border trade opening and optimized the facilitation of settlement of new foreign trade formats. It is expected that the RMB settlement volume for cross-border trade will increase by 15% throughout the year, further enhancing the stickiness of RMB use.
2. Negative factors: external demand and capital flows
Export growth rate is under pressure: global trade protectionism heats up, and China's exports to the EU fell by 3.2% year-on-year in September. If foreign demand continues to weaken, it may affect the stability of the current account surplus.
The impact of narrowing interest rate spread: Under the expectation of the Fed's interest rate cut, the spread of 10-year Treasury bonds between China and the United States narrowed to 52 basis points, a narrowing of 18 basis points from the previous month, which may trigger a small outflow of cross-border capital in the short term.
4. Cross-trading opportunities and risk warning
1. Cost-effective trading opportunities
GBP/Euro: The policy differentiation between the Bank of England and the European Central Bank has intensified, and the interest rate spread advantage continues to expand. It is recommended to go long on dips, with the entry point of 0.8520, stop loss 0.8480, and target 0.8580.
U.S./Schwanstein: As geopolitical risks heat up, the Swiss franc's safe-haven attributes form a game with the US dollar, but the Fed's easing is smaller than that of the Swiss National Bank. It is recommended to trade in ranges, selling high and buying low in the range of 0.9280-0.9330.
2. Key risk warning
The geopolitical situation suddenly changes: If the Israeli-Iran conflict breaks through the "verbal standoff", it may trigger a global risk aversion wave. The US dollar and Swiss franc will strengthen simultaneously, and risk currencies such as the euro and the Australian dollar are under pressure to plunge.
Data reissue impact: After the U.S. government shutdown ends, non-agricultural, CPI and other data will be released in a centralized manner. If the data deviates from market expectations by more than 10%, it may cause severe fluctuations in the foreign exchange market.
The central bank unexpectedly stated: It is necessary to focus on the speech of European Central Bank Governor Lagarde on October 7. If more radical easing signals are released, the euro may fall below 1.07 key support.
To sum up, on October 6, the foreign exchange market was in a pattern of "geographical risk aversion to boost the US dollar, policy differentiation dominated the non-US, and the resilience of the RMB was highlighted." Trading requires grasping the core logic of "the US dollar looks at geographic and data, non-US policy differentiation, and RMB looks at revenue and expenditure resilience", and at the same time, it is necessary to set stop loss to deal with potential black swan events.
The above content is all about "【XM Foreign Exchange Market Review】: Collection of positive and negative news that affects the foreign exchange market". It was carefully xm217.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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