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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: Trump expects the Federal Reserve to "sharp interest rate cuts"". Hope it will be helpful to you! Original content is as follows:
On September 15, during the Asian session on Monday, spot gold remained stable around $3,640/ounce. Signs of weak U.S. labor market strengthened the Fed's expectations that the Fed will cut interest rates for the first time this year. On Sunday, US President Trump said that the Fed is expected to "sharp interest rate cuts"; US crude oil trading was around $62.68/barrel, and last Friday, oil prices rose due to Ukrainian drone attacks, but the increase was limited by concerns about US demand; on Sunday, Trump urged Europe to impose sanctions on Russia, and Trump expressed his willingness to impose sanctions on Russia, and Europe must act in a stofoco.commensurate manner with the United States.
John Velis, a macro strategist at BNY in New York, said last Friday's gains were more of a position adjustment before the weekend. He said: "From a broader perspective, the outlook for the US dollar remains unoptimistic. On the one hand, the Federal Reserve is about to start cutting interest rates; on the other hand, we still see hedging behavior continues, with foreign investors buying U.S. assets and selling U.S. dollars to hedge, which will continue to put pressure on the U.S. dollar." Data shows that U.S. consumer confidence declined for the second consecutive month in September, which also posed a slight drag on the U.S. dollar. The University of Michigan said last Friday that its consumer confidence index fell to 55.4 this month, the lowest since May, with an August final value of 58.2.
Furry chief U.S. economist Tom Simons wrote in an email after the data was released: "If the Fed cut interest rates next week as widely expected and hinted that it will continue to cut interest rates in the future, stofoco.companies may feel optimistic that there is a chance to recover profits lost due to tariffs and thus improve their enrollment expansion."
OnData released on Thursday showed the largest single-week increase in the number of initial jobless claims in the United States in four years. This data overshadowed the impact of August consumer inflation data, which showed that prices rose the fastest in seven months, but the overall increase was still moderate and roughly in line with expectations.
While the inconsistent data performance may add stofoco.complexity to the Fed's policy discussion next week, investors are still focusing primarily on the prospect of rate cuts.
Fed funds futures pricing shows that the market generally believes the Fed will lower key interest rates by 25 basis points on September 17, according to CME’s FedWatch tool. However, traders have lowered their bets on a larger (50 basis points) rate cut next month, with current pricing suggesting a more moderate path to easing this year than previously expected.
The 10-year U.S. Treasury yield rose 4.9 basis points to 4.06%. Last Thursday, the yield fell below 4% for the first time since April.
New Zealand's service industry further deteriorated in August, with the New Zealand business services industry performance index falling from 48.9 to 47.5, far below the long-term average of 52.9. The reading also marks a 18th consecutive month of contraction. Double
Activity/Sales (46.2) and new orders/Business (47.8) are weak, indicating that demand remains fragile. Employment improved slightly to 48.3, but was still in a contraction range, reflecting that stofoco.companies are unwilling to expand their employment amid weak economic activity.
The survey showed that 59.6% of respondents made negative stofoco.comments in August, an increase from July, but it was still not as pessimistic as in June. stofoco.companies have listed a variety of pressures, including high interest rates, sticky inflation and tightening of living costs to erode household spending. Increased operating costs, seasonal slowdowns, supply chain disruptions and uncertainties in government policies have also suppressed market sentiment.
UK GDP remained flat in July, in line with expectations as modest growth in the service and construction sectors offset a sharp decline in output. Service output grew by 0.1%, construction industry grew by 0.2%, while production fell by -0.9%, highlighting the continued weakness of the industrial sector.
In the three months to July, GDP increased by 0.2% stofoco.compared with the previous three months. The service industry grew by 0.4%, which remained the main driver of growth, while production fell by -1.3%, and the construction industry grew by 0.6%.
Bank of England/Ipsos Inflation Attitude Survey shows that British households have pushed up inflation expectations. Median expectations for inflation in the stofoco.coming year rose to 3.6% from 3.2% in May, while biennial expectations climbed to 3.4% from 3.2%. Long-term inflation expectations also rose from 3.6% to 3.8% in five years.
Worries about rising prices are related to wider pessimism about growth. Respondents said in a 69% versus 6% gap that if inflation accelerates, the economy will eventually weaken rather than strengthen, stofoco.compared with 67% versus 5% in May.
In the interest rate outlookIn the past, 33% of respondents expect interest rates to rise in the next 12 months, the same as in May. But now more and more people are expected to be stable, with 26% saying there is no change stofoco.compared to 21% in May. The rate cut is expected to drop from 34% to 29%, indicating that households are adapting to the prospect of "higher for longer periods of time".
When asked what is most beneficial to the economy, 33% favored lower interest rates, down from 37% in May. Meanwhile, 28% hope to not change, above 26%, and 14% hope to raise interest rates, slightly above 12%. These responses suggest that even though concerns about inflation remain high, people are increasingly accepting that policies will remain restrictive.
After the Governing Council stabilized the deposit rate at 2.00% yesterday, several European Central Bank policy makers expressed their opinions.
Latvian member Martins Kazaks believes that central banks should not provide forward-looking guidance given the high degree of geopolitical and economic uncertainty. He said the December meeting will be crucial as new staff forecasts will help determine whether inflation deviates from targets in a significant or sustained manner.
The Kazakhs also listed external factors as downside risks, including a strengthening euro (which may curb import prices) and potential deflation in China's exports. “The uncertainty is high,” he said, adding that it justifies the prudent policy stance that is taken at every meeting.
Finland's Olli Rehn expressed a similar view, warning that falling energy prices and stronger currencies will have the effects of deflation. He stressed the importance of avoiding inflation “too low or above” the 2% target.
French President Francois Villeroy de Galhau opened the door to further easing, saying it was "very likely to cut interest rates again" at the upcoming meeting.
U.S. consumer confidence weakened in September, with the University of Michigan index falling to 55.4 from 58.2 in August. The current economic situation index fell slightly from 61.7 to 61.2, while the expectation index fell from 55.9 to 51.8.
In terms of inflation, short-term expectations remain unchanged at 4.8% in the next year, but long-term expectations have risen to 3.9% again. The continuous rise in long-term expectations suggests that households’ concerns about the possible ongoing price pressures are lingering.
UoM notes that consumers continue to notice multiple vulnerabilities throughout the economy, including business conditions, labor markets and inflation.
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