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Hello everyone, today XM Forex will bring you "[XM Official Website]: A collection of good and bad news affecting the foreign exchange market". Hope this helps you! The original content is as follows:
On December 15, the foreign exchange market focused on the differentiation of global central bank policies and the game of economic data. The U.S. dollar index continued to fluctuate and weaken after the Fed cut interest rates. Non-U.S. currencies showed the differentiation characteristics of "Europe is strong, Britain is weak, and risk aversion is strong." As of the beginning of the Asia-Pacific session, the U.S. dollar index was at 103.12, down slightly by 0.11% during the day; the euro against the U.S. dollar was at 1.0915 (+0.23%), the pound against the U.S. dollar was temporarily stable at 1.2608, the U.S. dollar against the Japanese yen fell back to 141.52 (-0.20%), and the offshore RMB against the U.S. dollar maintained a narrow range of fluctuations around 7.0480. The following is the core good and bad news that affects the market that day.
The Fed’s interest rate cut and rising expectations for policy easing have become the core support for non-U.S. currencies. On December 11, Beijing time, the Federal Reserve announced that it would lower the federal funds rate by 25 basis points to 3.5%-3.75%. This was the sixth rate cut this year. The latest research from the Federal Reserve Bank of San Francisco shows that the impact of tariffs is more likely to suppress demand than increase inflation, strengthening the market's expectations for another 50-75 basis points drop in 2026. The 10-year U.S. bond yield fell back to 4.02%, and the attractiveness of U.S. dollar assets has declined marginally.
The European Central Bank's hawkish policy stance boosted the euro. President Lagarde made it clear that there will be no interest rate cut in December, and the euro zone’s economic growth of 0.2% in the third quarter exceeded expectations. Although core inflation remained at 2.4%, it showed a cooling trend. Barclays Bank pointed out that the real exchange rate of the euro on a trade-weighted basis is close to a historical high, coupled with expectations of a weakening US dollar, the EURUSD is expected to break through the 1.10 range in the short term.
Geographical risks boost demand for safe-haven currencies. EU starts freeze on December 11Ukraine expanded its attack on Russian energy facilities due to written procedures for binding the assets of the Russian Central Bank. Attacks on Caspian oil fields and Black Sea oil tankers triggered concerns about energy transportation. Safe-haven currencies such as the Japanese yen and Swiss franc received support. The U.S. dollar continued to fall from the high of 143 yen against the Japanese yen.
Expectations of an interest rate cut by the Bank of England suppress the pound. UBS predicts that the Bank of England will cut interest rates by 25 basis points to 3.75% at its December 18 meeting, which may be the final move of this easing cycle. In November, the British unemployment rate increased, wage growth slowed, inflation was in line with the central bank's expectations, and dovish forces within the Monetary Policy jq.xmxmxm.cnmittee increased. The market has digested the negative effects of interest rate cuts in advance, and the pound against the U.S. dollar is under short-term pressure at the 1.26 mark.
Eurozone trade concerns limited gains in the euro. Data show that the euro zone's trade deficit with China reached 33 billion euros in September, and the strong euro further weakened export jq.xmxmxm.cnpetitiveness. HSBC warned that if the trade deficit continues to expand, it may trigger deflationary pressure and force the European Central Bank to reassess its policy direction in 2026. The current rally in the euro has shown signs of waning momentum.
The structural resilience of the U.S. economy provides a dollar buffer. Although the labor market has cooled, the theme of artificial intelligence has promoted the prosperity of US stocks and supported the consumption of high-income groups; at the same time, the new version of the US National Security Strategy proposes "military expansion + supply chain restructuring", medium and long-term inflation expectations have heated up, and the 10-year US bond yield has found support around 4.0%, limiting the downside of the US dollar index.
The short-term market focus will be on the UK’s November inflation data and the European Central Bank’s economic outlook report. Euro trading can rely on 1.0880 to support the placement of long orders on dips, with the target looking at 1.0980; GBP needs to be wary of the "buying expectations and selling facts" market after the interest rate cut is implemented, and it is recommended to wait and see. The Japanese yen pays attention to the key support of 141.20, and can follow the trend after breaking through. Operationally, positions need to be controlled to prevent the risk of fluctuations caused by higher-than-expected U.S. retail sales data in the evening.
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