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Hello everyone, today XM Forex will bring you "[XM Forex Official Website]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
Policy differences inhibit expectations of radical easing: Although the market prices a 90% chance of a 25BP interest rate cut in October, disagreements within the Federal Reserve continue to ferment. Councilor Milan's radical call for 50BP to cut interest rates was not supported by his colleagues. Chairman Powell had previously made it clear that "almost no one supports a one-time major interest rate cut." Vice Chairman Jefferson emphasized that "policies need to take into account both employment and inflation risks." This cautious attitude prevented the dollar from being overly stressed.
Treasury bond demand and liquidity support: On October 6, the U.S. 3-month Treasury bond auction performed strongly, with a total amount of US$88.125 billion exceeding expectations, and the bid multiple rose to 2.91, indicating that the market still has demand for the allocation of US dollar assets, providing liquidity support for the US dollar.
The government shutdown intensifies the risk of data vacuum: The release of U.S. non-farm payrolls data for September was delayed due to the government shutdown. The market lacks key indicators to verify economic strength and is forced to rely on vague signals. Brookings Institution scholars pointed out that the lack of data may weaken the accuracy of the Federal Reserve's policy decisions, strengthen expectations of "passive easing", and suppress the U.S. dollar index.
Strengthening gold and weakening credit of the US dollar: The international gold price exceeded US$3,800 and hit a record high, forming a significant negative correlation with the US dollar index. Société Générale analyzed that the Trump administration’s intention to intervene in the Federal Reserve (such as the nomination of Milan and the judicial battle with Cook) triggered market concerns about the credit of the U.S. dollar, driving funds into gold and indirectly suppressing the U.S. dollar.
Crude oil pricing resonates with demand expectations: OPEC+ has clearly stated that the upper limit of production increase in November is only 137,000 barrels per day, and Saudi Arabia sets the November OSP of Asian crude oil to a premium of US$2.2, indicating that confidence in European energy demand is restored. As a major crude oil importer, the pressure on the euro zone's energy trade deficit has eased, indirectly supporting the euro exchange rate.
The marginal narrowing of policy gap: Although the ECB has not yet released a new easing signal, the market expects its interest rate cut cycle to end before the Federal Reserve. Currently, the core CPI of the euro zone remains 2.3%, closer to the target than the core PCE of the United States 2.9%, with relatively abundant policy space and interest rate spread advantages supporting the euro against the US dollar.
Potential negative news: Economic data window period: No key economic data was released in the UK this week, the market focused on inflation data in mid-October, and there was a lack of independent market catalysts in the short term. The probability of the Bank of England's 25BP cut rate in December is only 35%, but the stability of policy expectations is difficult to convert into rising momentum, and the pound sterling is in a range game against the US dollar.
Implicit benefits: Marginal recovery of risk sentiment: The long and short data of the foreign exchange market on October 8 showed that the total rise and fall of rising currencies reached 2326.76, far exceeding the 1418.75 of the falling currencies. The rebound in risk appetite supports risk currencies such as the British pound, but the strength is limited.
The bottom-up effect of the crude oil market: EIA raises the WTI oil price forecast for 2025 to US$65/barrel, UBS confirms the trading range of US$60-70, and the stabilization of oil prices provides core support for the Canadian dollar. As an economy where crude oil exports account for 11% of GDP, improved energy trade directly boosted the Canadian dollar exchange rate.
Policy lwcgm.cnparison advantages: The Bank of Canada suspended adjustments after interest rate cuts in September, in contrast to the Fed's expectations of loose easing. The trend of expanding the interest rate spread between the United States and Canada was blocked, and the US dollar fell from 1.1820 to around 1.1750, and the Canadian dollar received policy support.
China's demand signal is blurred: China's September crude oil import data has not been released yet, and the market's recovery of lwcgm.cnmodity demand is doubtful. Although China launched 300 billion yuan of consumption of old-for-new funds, it has not been converted into substantial import growth in the short term, and the Australian dollar lacks demand-side driving.
New Zealand data dragged down: New Zealand's NZIER-QSBO capacity utilization rate fell to 89.1% in the third quarter, a new low this year, reflecting the weak economy of lwcgm.cnmodity exporters in the southern hemisphere, and the Australian dollar is under pressure as a lwcgm.cnmodity currency linkage.
Georological risk-hazard premium: The Russian-Ukrainian conflict continues to disturb, Russia launches an offensive in Kharkov, Ukraine strikes against Russian petrochemical plants, although it has not impacted the energy channel, it has avoided risks.Money poured into the yen. The U.S. dollar fell back from 149.50 to 148.80 against the yen, highlighting the safe-haven nature of the yen.
Expectations for narrowing of the interest rate gap between the United States and Japan: The probability of the Federal Reserve cutting interest rates in October is high, while the Bank of Japan maintains loose policies. The interest rate gap between the United States and Japan is expected to narrow from 1.8% to 1.5%. The logic of the interest rate differential supports the rebound of the Japanese yen.
Positive: Negative correlation between gold and the US dollar: The Swiss franc and gold are both safe-haven assets, and the price of gold exceeded US$3,800, which led to the strengthening of the Swiss franc. Global central banks have increased their holdings of gold (accounting for 23% of demand from 2022 to 2025), strengthening the Swiss franc's safe-haven status.
Negative: Eurozone stability improves: Eurozone retail sales end three consecutive declines, and economic recovery signals weaken the safe-haven demand for the Swiss franc. EUR/CHF stabilized at 0.9750, with the Swiss franc lacking further momentum to rise.
To sum up, on October 8, the foreign exchange market was affected by policy expectations, geopolitical risks and lwcgm.cnmodity linkages, and presented a pattern of "the US dollar is under pressure, the European currency is stronger, and lwcgm.cnmodity currencies are divergent". Traders need to focus on EIA crude oil inventories in the evening (affecting the Canadian dollar), Fed officials' speeches (affecting the US dollar) and the progress of the Russia-Ukraine conflict, and stay close to key points in the long-short game to avoid chasing the rise and killing the fall.
The above content is all about "[XM Foreign Exchange Official Website]: Collection of good and bad news affecting the foreign exchange market". It is carefully lwcgm.cnpiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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