Top American economist and Wharton School of Finance professor Jeremy Siegel recently stated that the Federal Reserve may keep interest rates unchanged at next week's interest rate meeting, which would surprise the market. Siegel indicated that although investors are almost certain that the Fed will cut rates by 25 basis points again in November, if this Friday's non-farm employment report is strong, it could overturn these expectations. For the Fed, as inflation gradually approaches its target, the next step after starting an easing cycle largely depends on economic data, and the resilience of the job market may continue to be a key factor affecting the Fed's monetary policy stance. Economists expect that this Friday's non-farm employment report will show an increase of 110,000 jobs in October. Following the astonishing increase of 254,000 non-farm jobs in September, the October data may also significantly exceed expectations, potentially further adjusting market expectations for the extent of Fed rate cuts.
Additionally, J.P. Morgan investment strategists Matthew Landon and Samuel Zief wrote: "As investors grapple with geopolitical uncertainty and reposition their bets on the future rate-cutting cycle, the volatility in the foreign exchange market has reached its highest level since May 2023." They emphasized that conflicts in the Middle East and rate cuts are the main drivers of foreign exchange market volatility. Developments in the Middle East are also important for market impact, triggering investors to flee to safe havens, with assets such as the US dollar and gold often benefiting from inflows. The two analysts also stated: "Although the US dollar has been weak recently, there is still a 5-10% premium at the current level relative to the level shown by its historical relationship with interest rates. This situation may continue to ease at some point in the next few years, but before we see this, we believe that a significant devaluation of the US dollar requires three necessary conditions: certainty of Fed rate cuts; improved global (excluding the US) growth; and positive risk sentiment." The analysts said: "At this point, the first condition seems to have been met. The pace of rate cuts may not be so clear, but the Fed has made it clear that it intends to lower rates to support the labor market as inflation risks recede."
Advertisement
Data to watch today includes the German November Gfk consumer confidence index, the US September wholesale inventory monthly rate preliminary value, the US October Conference Board consumer confidence index, and the US September JOLTs job openings.
US Dollar Index
The US Dollar Index fluctuated downwards yesterday, closing slightly lower on the day, and is currently trading near 104.30. In addition to profit-taking exerting some downward pressure on the exchange rate, investor expectations for a Fed rate cut in November were also an important factor in the US Dollar Index's decline. However, the continued cooling of expectations for the Fed to continue aggressive rate cuts limited the exchange rate's回调 space. Today, pay attention to the pressure near 104.80, with support near 103.80.
Euro/USD
The Euro fluctuated upwards yesterday, closing slightly higher on the day, and is currently trading near 1.0810. In addition to short covering providing some support for the exchange rate, the US Dollar Index's softening due to profit-taking and expectations for a Fed rate cut in November was also an important factor supporting the Euro's climb. However, recent reports that the European Central Bank has begun discussing lowering rates below neutral levels limited the exchange rate's rebound space. Today, pay attention to the pressure near 1.0900, with support near 1.0700.
Pound/USD
The Pound fluctuated and consolidated yesterday, closing slightly higher on the day, and is currently trading near 1.2970. In addition to short covering providing some support for the exchange rate, the US Dollar Index's softening due to expectations for a Fed rate cut in November was also an important factor supporting the Pound's rebound. However, technical selling near the 1.3000 level and expectations for a rate cut by the Bank of England limited the exchange rate's rebound space. Today, pay attention to the pressure near 1.3050, with support near 1.2900.
Leave a Comment