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This week's foreign exchange market review: the US dollar strengthens, the Japanese yen falls, the british pound rebounds, focusing on the Federal Reserve and the usa election.
This week, the focus of the forex market is mainly on the strong rebound of the US dollar, the downward correction of the Japanese yen, and the signs of a rebound in the British pound. The market is concerned about the upcoming US presidential election and the Federal Reserve policy meeting, which will have a significant impact on the trend of major currencies. Here is an overview of important events in the forex market and the performance of major currencies this week: US dollar: Weak job data and election uncertainty support the dollar rebounding On Friday, the US dollar rose against the euro and other major currencies, partly benefiting from the soft US labor market data due to the impact of hurricanes and strikes. The number of non-farm jobs increased by only 0.012 million in October, far below the market's expectations of 1
"The worst ever"! Trump attacks Harris using non-farm data: pushing the usa economy off a cliff.
①As the USA election day approaches, the two presidential candidates of the parties do not miss any opportunity to attack each other; ②Trump harshly criticized the non-farm report at a rally in Michigan on Friday, calling it the 'worst employment report in our country's history'.
New York Foreign Exchange Market: The US dollar rises, and the volatility soars as the US election approaches.
The US dollar hit an intraday high on Friday afternoon, as traders shifted their focus from the weak employment report to next week's US election. The Canadian dollar touched its lowest level in two years. The Bloomberg US dollar index rose by 0.3%, after earlier dropping by 0.2%; the early US October non-farm payroll report showed that recruitment by businesses slowed to its slowest pace since 2020 due to the impact of hurricanes and strikes, causing the index to decline sharply. Monex forex trader Helen Given said, "Traders were aware in advance that the data would lean towards the negative and are handling it appropriately." "This is one of the most difficult non-farm payroll data to predict."
Wall Street comments on October non-farm payrolls: Will not affect the Federal Reserve's 25 basis point rate cut this month, the interpretation of the data is subjective.
Nick Timiraos, a Wall Street Journal journalist known as the 'new Fed news agency', stated that the analysis of this employment report can be 'subjective', while most Wall Street analysts believe that the poor data is mainly due to the two hurricanes in October and the Boeing strike, but some analysts are also concerned that the job market is indeed deteriorating. Almost all analysts believe that this report will not affect the expectation of a 25 basis point rate cut by the Fed this month.
Various sectors in the usa assess non-farm payrolls: Can 0.012 million still do the "American-style downward revision"? Rate cut expectations are stable.
1. The release of the USA non-farm payroll figures for October on Friday was only a meager 0.012 million, far below the market's expected 0.113 million, and the market expectations had already taken into account natural disasters and strikes; 2. The even weaker endogenous trend makes the Fed's interest rate cut next Thursday a foregone conclusion; 3. Considering the non-farm data for the first 9 months of this year, there have been 7 downward revisions, and the October data presents a potential highlight of 'revised to negative numbers.'
USA October ISM Manufacturing PMI fell to 46.5, hitting a 15-month low, with the price index soaring.
USA's October ISM Manufacturing PMI index fell to 46.5, hitting a new low since July 2023, below the expected 47.6 and lower than the previous value of 47.2 in September. The employment index has been below the boom-bust line for the fifth consecutive month, the price payment index surged by 6.5 points in a single month, production activities plummeted sharply, and inventories further declined.
What a shocking news! The US non-farm employment in October plummeted, will there be a rate cut in November?
Double impact of hurricane and strike.
GBP/USD: BoE Outlook Less Certain – Scotiabank
GBP/USD: Likely to Trade in a Range – UOB Group
With the strong return of the US dollar, how will the Asia market respond? $6 trillion forex reserves act as a shield.
The US dollar index rose more than 3% in October. If Trump regains power and triggers trade tensions again, the depreciation pressure on non-US currencies may continue. However, analysis indicates that Asia's $6.4 trillion in foreign reserves gives investors confidence that central banks have enough ammunition to counter the US dollar's strengthening caused by the US election. The continuous growth of Asia's foreign exchange reserves gives central banks in various countries enough intervention capabilities.
Nationwide: UK Annual House Price Growth Softens to 2.4% in October
US Employment Figures Set For Key Release Amid Election Tensions
British pound retracement may be temporary, with institutions revealing a major reason behind it!
Market analyst Gary Howes wrote that a looser fiscal policy would lead to a tighter monetary policy. This rule will guide the interest rate decision that the Bank of England is about to make, ultimately meaning that interest rates will not decrease as previously expected. The market currently expects that after the introduction of a budget increasing spending by 70 billion British pounds annually for the next five years (loose fiscal policy), the Bank of England will maintain interest rates at a higher level for a longer period of time. Economist Philip Shaw said: "If we take a closer look at the overall situation of public finances, we will find that this budget clearly relaxes fiscal policy."
United Kingdom interest rate cut expectations are under pressure, the British pound is expected to rise to 1.34 if it breaks through 1.30 in the short term.
Investors are selling British bonds and pounds, indicating concerns about the Labour government's expenditure and tax extravagance once again. Ballinger Group forex analyst Kyle Chapman said: "As the sale of UK government bonds intensifies after the budget, the pound has fallen to a two-month low. Following revelations that Reeves' borrowing plan exceeded expectations, bond investors continue to sell British government bonds." On Thursday, the pound against the dollar briefly fell to a near one-and-a-half-month low of 1.2743, currently slightly rebounding, trading around 1.2890. XTB Research Director Kathleen
No need to fear the rebound of the US dollar? Asian currencies have a "shield": over 6 trillion US dollars in forex reserves
Due to the strong US dollar, asian currencies plummeted significantly in October, but asian central banks still have large forex reserves to withstand fluctuations.
The Fed may not have gotten what they wanted most, but the PCE data is not enough to change the rate cut outcome this month.
The Federal Reserve may not have received the inflation data it wanted on Thursday, but many economists believe that the new reading of the price indicator most favored by the Federal Reserve may still be sufficient to prompt the Federal Reserve to "cut interest rates by 25 basis points" in a step-by-step manner at its policy meeting next week.
Citic Sec: How were major assets interpreted during the 2016 USA election?
Citic Securities stated that the extent of market disturbance due to the uncertainty of the general election is expected to be relatively lower than that in 2016, with the expectation of U.S. bond yields showing high-level volatility rather than large increases (similar to post-2016 election).
GBP/USD Holds Below 1.2900 Ahead of US NFP Data
Forex Today: The Continuation of the Dollar Rally Now Looks at US NFP
United Kingdom market decline intensifies, budget concerns spread to various types of assets.
The UK bond market, stock market, and British pound all plummeted, as investors sold off British assets in a swift response to the new Labour government's increased borrowing and inflation-raising ambitions. The sell-off has driven short-term borrowing costs to their highest level since May, as investors bet on the Bank of England scaling back the rate cut. The adjustment in interest rate pricing has affected all assets in the UK, with the FTSE 250 index recording its biggest drop since early August, and the British pound falling against all major currencies. Although this market downturn is not on the same scale as the shockwaves caused by the tax cut plan proposed by Liz Truss without financial support two years ago.