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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market jq.xmxmxm.cnmentary]: The Federal Reserve's 'non-QE' bond purchase starts, substantively injecting liquidity The U.S. dollar faces a 'triple pressure' impact". Hope it helps! The original content is as follows:
On Thursday, the U.S. employment data was lower than expected, and the U.S. dollar index continued its downward trend. As of now, the U.S. dollar is quoted at 98.34.
The number of people filing for unemployment benefits in the United States last week hit the largest weekly increase since the epidemic.
The Federal Reserve reappointed 11 regional Fed chairmen to ease concerns about personnel uncertainty.
jq.xmxmxm.cnrmed sources: The United States and Ukraine. The European Union will hold a meeting on the Russia-Ukraine conflict in Paris on Saturday.
The U.S. House of Representatives’ motion to impeach Trump was shelved after a vote.
Zelensky responded to the issue of territorial jq.xmxmxm.cnpromise: Whether it is through an election or a referendum, the position of the Ukrainian people must be made clear.
The U.S. Treasury Department has stepped up. There is news that the United States is preparing to seize more ships transporting Venezuelan oil, and 6 million barrels of oil shipments have been put on hold.
The "hoarding tide" of gold has receded, and the U.S. trade deficit fell to a five-year low in September.
Australia and New Zealand Bank: Signs of inflationary pressure in Australia. Once again, the Federal Reserve will remain on hold for a long time in 2026
The RBA Board of Governors unanimously decided to keep the cash rate unchanged at 3.60% in December. The Board of Governors pointed out that although recent data indicate that inflation risks are tilted to the upside, the labor market is expected to cool only moderately, and we now expect the cash rate to be prolonged.remained at 3.60%. Monthly CPI shows that inflationary pressures are still continuing, and GDP growth has returned to near the potential level, indicating that the Reserve Bank of Australia will remain cautious on the path of monetary policy in the future. The risk of a rate hike in 2026 is rising.
GDP growth in the third quarter was 0.4% quarter-on-quarter, lower than the 0.6% growth in the second quarter. However, domestic demand surged 1.2% month-on-month, the strongest since the second quarter of 2023, supported by a rebound in public demand and a rebound in private investment. The first monthly CPI data showed underlying inflation has accelerated recently. The trimmed average inflation rate in October was 3.3%, but consumption started strongly in the fourth quarter. The household expenditure indicator surged 1.3% month-on-month in October, the largest monthly increase since January 2024, mainly due to promotions such as "Black Friday" in advance. ANZ-RoyMorgan consumer confidence is currently weak, mainly due to the end of the Black Friday promotion, continued high inflation indicators, and the prospect of no further easing by the Reserve Bank of Australia.
House price momentum is cooling. House prices in major cities rose 1.0% month-on-month in November, down from 1.1% in October. Auction clearance rates have continued to fall since September. Australian jq.xmxmxm.cnmercial construction activity will slow down modestly in 2025, but Brisbane has become the city with the strongest jq.xmxmxm.cnmercial real estate performance. The unemployment rate fell to 4.3% in October from 4.5% in September, but has increased overall in the past six months. ANZ-Indeed job ads have also fallen recently, while private sector wage growth has also slowed.
ING: The landscape of European government debt has changed, and the "political shadow" of core countries has emerged
In the past two years, European sovereign debt has undergone structural adjustments - peripheral countries (Italy, Spain) have performed prominently, while traditional "core or quasi-core" countries (France, Belgium) have weakened significantly. This pattern may face resistance in 2026.
The interest rate spreads between Italian and Spanish government bonds relative to German Bunds have fallen to multi-decade lows. This is mainly due to good economic performance, improved fiscal prospects, relatively stable politics, and continuous upgrades of sovereign ratings. It must be pointed out that the performance of a large number of peripheral countries jq.xmxmxm.cnes from NGEU (Next Generation EU Recovery Fund) fiscal transfers, and this factor will gradually disappear after 2026. Italy's overall debt levels remain high and it will be increasingly difficult to continue to receive rating upgrades.
At the other end is France and to an extent Belgium. The widening of French interest rate spreads reflects more of a political risk premium than a pure deterioration in fundamentals. The expected rating downgrade has basically occurred and the outlook has stabilized, which may give French debt some respite in the short term, but political uncertainty may still recur before the 2027 presidential election.
Overall, we believe that as the European Central Bank maintains interest rate stability and the economy gradually recovers, there is still room for further convergence of interest rates between high-rated and low-rated countries. But if the ECB does not continue to cut interest rates, this convergence rate will slow down significantly jq.xmxmxm.cnpared with the past year. For Italy, at least, to continue to outperform France by a wide marginIt won't be easy, as there is still a clear rating gap and debt burden gap between the two.
We still prefer Spain and Portugal in terms of choice, and among defensive positions, we prefer to hold Dutch government bonds than German government bonds.
ANZ: The Bank of England cut interest rates by 25 basis points in December and will release further easing signals in 2026
We expect the Bank of England to lower the policy rate by 25 basis points to 3.75% at next week’s interest rate meeting. The Monetary Policy jq.xmxmxm.cnmittee (MPC) is likely to signal that there is still room for further easing in 2026. We expect three more interest rate cuts in 2026, each by 25 basis points, at a quarterly pace, with the final policy rate falling to 3.00%.
We believe that CPI inflation will gradually decline and return to the 2.0% target in 2027. Inflation is expected to average 2.3% in 2026, down from this year’s forecast of 3.4%. Key factors driving inflation lower in the jq.xmxmxm.cning months include weak consumer demand, slower wage growth due to a sluggish labor market, and defensive spending by consumers ahead of planned tax increases. We believe November's fiscal budget further strengthens the deflationary forces already in the economy. At a time of economic weakness, it is necessary to ease monetary policy to prevent real interest rates from rising.
Downside risks in the labor market have intensified significantly. Payroll employment has fallen in 11 of the past 12 months, and the employment breakdown of the services PMI in November showed that the decline in employment has accelerated. The unemployment rate from the third quarter to September reached 5.0%, the highest level in ten years excluding the epidemic. The ratio of vacancies to unemployed people fell to 0.42:1, also the lowest in ten years except for the epidemic. Private sector regular wage growth slowed to 4.2% in the three months to September. Wage growth will fall further. The Bank of England's November staff forecast shows that wage growth will slow to 3.2% by June 2026.
We believe that the Monetary Policy jq.xmxmxm.cnmittee will still maintain a 12-18 month forward-looking perspective and gradually ease policy. As inflation recedes, interest rates must be cut to avoid rising real interest rates. A weak labor market coupled with deflationary budgets means price pressures will cool further in the jq.xmxmxm.cning months. However, the current inflation expectations of households and businesses are still on the high side. Therefore, the Monetary Policy jq.xmxmxm.cnmittee (MPC) is likely to adopt gradual interest rate cuts to anchor inflation expectations at lower levels. After the expected 25 basis point rate cut next week, we predict that there will be three more rate cuts of 25 basis points in 2026, each time on a quarterly basis, with the final policy rate falling to 3.00%. According to our Taylor rule calculations, a terminal interest rate of 3.00% will have a mild stimulating effect.
Analyst GhilesGuezout: The jq.xmxmxm.cnbination of a weaker U.S. dollar and a stronger Japanese yen has continued to put pressure on the United States and Japan.
According to the latest data from the U.S. Department of Labor: For the week ending December 6: the number of initial claims for unemployment benefits rose to 236,000: jq.xmxmxm.cnpared with 19 the previous week.20,000 people: This number far exceeded the expected 220,000 people. The four-week average also rose to 216,700, confirming that labor market conditions are gradually deteriorating. At the same time: Continuing claims for unemployment benefits fell to 1.838 million: but the overall level is still at a high level: deepening concerns about a deeper economic slowdown.
The Federal Reserve's interest rate cut overnight was within expectations: However, Federal Reserve Chairman Powell's dovish words and less hawkish opposition further strengthened the market's view that the Federal Reserve is worried about an economic slowdown and believes that further interest rate cuts may be made in 2026. According to the FedWatch tool: The market is already pricing in at least two more rate cuts next year. The dollar has also been pressured by speculation surrounding Powell's succession, whose term is set to expire in May. The possible replacement by Hassett, who is seen as a more dovish representative, further increases the downward pressure on the dollar.
In contrast, the Japanese yen still maintains a favorable background. Investors continue to price in the possibility that the Bank of Japan could raise interest rates as early as next week. Bank of Japan Governor Kazuo Ueda recently said conditions needed to support policy normalization "have gradually improved" while the corporate price index remains at historically high levels. Expectations of tighter monetary policy in Japan, coupled with broader caution in global markets, have supported demand for the yen.
Market focus now turns to the Bank of Japan policy meeting scheduled for next Friday. During this period, the jq.xmxmxm.cnbination of a weaker dollar and a stronger yen kept the U.S. and Japan under pressure.
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