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The dollar index fluctuates, market focus turns to US non-farm employment data
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Official Website]: The US dollar index fluctuates, and the market focus turns to US non-farm employment data." Hope it will be helpful to you! The original content is as follows:
On the Asian session on Friday, the US dollar index fluctuated, and the market's attention began to turn to the upcoming U.S. non-farm employment data and the Federal Reserve's policy trends.
Analysis of major currencies
Dollar: As of press time, the U.S. dollar index hovered around 98.70, indicating that it could end a year-long easing cycle, and U.S. data showed that the dollar fell against the euro on Thursday amid increasingly weak labor market conditions amid increasing economic resistance from tariffs. Although the dollar weakened against the euro, the dollar strengthened slightly against safe-haven currencies such as the yen and Swiss francs, reflecting possible position adjustments before the release of employment data. Technically, technical analysis of the daily chart shows that there is currently a bearish bias and the index is still in the downward channel mode. DXY remains below the nine-day exponential moving average (EMA), indicating that the short-term momentum is weak. In addition, the 14-day relative strength index (RSI) is below the 50 level, indicating a sustained bearish outlook. On the downside, DXY is likely to target 97.91, the lowest level since March 2022, recorded on April 21, followed by the lower boundary of the downward channel, at about 97.70.
1. The expectation of interest rate cuts on the eve of the release of non-agricultural data is strong. US bond traders are looking forward to lowering interest rates in September
After more data show that the US job market slows down, US bond traders expect the Federal Reserve to initiate interest rate cuts in advance. They adjusted their first rate cut from October to September, and expected at least once by the end of the year. The U.S. will release non-farm employment data for May on Friday, with an increase in first-time unemployment benefits claiming has led to a repricing of interest rate swap contracts linked to the Fed's meeting period. The U.S. Treasury market also rebounded, with investors responding to weak employment indicators after Wednesday's biggest single-day gain in two months.
2. Treasury Semi-annual Report: No country is listed as a exchange rate manipulator
The U.S. Treasury Department submitted a semi-annual report on the macroeconomic and foreign exchange policies of major U.S. trading partners to Congress. In the report, the Treasury Department reviewed and evaluated the policies of major U.S. trading partners, which accounted for about 78% of U.S. foreign trade in goods and services in the four quarters ended December 2024. Review found that the U.S. had no major trading partners for the four quarters to December 2024. Currently, there are 9 economies on the "monitoring list" of the Ministry of Finance's major trading partners, including: Japan, South Korea, Singapore, Vietnam, Germany, Ireland and Switzerland.
3. European Central Bank officials are reportedly predicting that the pace of interest rate cuts will be suspended in the July meeting
According to people familiar with the matter, European Central Bank officials expect that the July meeting will be suspended in the interest rate cuts. Sources said that given the uncertainty brought by Trump's tariff policy, after eight rate cuts, they are currently believed to be the most likely to suspend interest rate cuts in the future. Some officials believe the rate cut cycle may be over, while others support another rate cut, which may be in September. People familiar with the matter stressed that policymakers’ ideas may still change, especially as the July 9 deadline for U.S.-EU trade negotiations approaches. The next interest rate meeting is scheduled to be held from July 23 to 24. Traders have reduced their bets on further rate cuts, betting that a further 25 basis points cut this year is no longer a foregone conclusion.
4. The United States voted to reject the draft resolution of the Security Council, Iran strongly condemned it.
In response to the failure of the UN Security Council to pass a resolution calling for an immediate ceasefire and end the genocide of Gaza, Iran's Foreign Ministry spokesman Bagae described the US government's veto of the resolution as a crime of continuing to participate in the Israeli regime on the 5th, and expressed strong condemnation. Bagae pointed out that the resolution was supported by 14 of the 15 members of the Security Council, and only the United States expressed its opposition. He said the U.S. government rejected the resolution aimed at forcing the Israeli regime to stop the genocide of Gaza, which is not only an obvious rejection of the international zeizao.cnmunity and the people in the region to terminate Israeli crimes, but also a sign of the moral decline of American policymakers and evidence of their participation and conspiracy to carry out the massacre in Palestine. (CCTV)
5. The number of layoffs of American Challenger zeizao.cnpanies increased significantly
The US Challenger Report shows that U.S. employers announced layoffs of 93,816 in May, a 12% decrease from 105,441 in April and a 47% increase from 63,816 in the same period last year. "Tariffs, funding cuts, consumer spending and overall economic pessimism are putting huge pressure on corporate employees. The zeizao.cnpany is reducing spending, slowing down hiring and issuing layoffs." As of May this year, employers have announced 696,309 layoffs, an 80% increase from 385,859 announced in the first five months of last year. zeizao.cnpared with the total number in 2024, there are still 65,049 people behind.
Institutional View
1. Economist: Tariff uncertainty remains, and the ECB may further cut interest rates. Economist David Rea said that considering the uncertainty related to tariffs remains, it takes great courage to assert that the end of the ECB's monetary easing cycle now. The rate cut in June has been largely digested by the market, but without the USTrade policy, this decision will not be so clear. The euro zone inflation rate is low, but price pressures have not zeizao.cnpletely disappeared from the system, as can be seen from the sharp rise in core inflation in April. Under normal circumstances, this is likely to lead to the ECB's monetary easing monetary policy suspension, Rea said. Further rate cuts later this year will send a clear signal that policymakers believe the economy will need more stimulus measures to sustain. 2. JPMorgan Chase Strategist: The ECB further cuts interest rates will support funds flowing from the United States to Europe
Faller, a global investment strategist at JPMorgan Chase Private Bank, said that the ECB may continue to cut interest rates, and European assets are expected to benefit from the reduction of U.S. assets. Faller said JPMorgan Private Bank believes that terminal deposit rates may be lowered to 1.5%. "This supports our belief that Europe can provide a valuable landing point for global investors seeking to diversify their investments from U.S. assets, she added that real yields in Europe remain supportive, corporate earnings show future prospects, and Germany's fiscal plan predicts future growth.
3. HSBC: European assets will benefit from the ECB's active policies
Hussain Mehdi, an analyst at HSBC Asset Management, said: Current market pricing shows that there is a huge gap between the ECB and the Federal Reserve's expectations for interest rate cuts in 2025. In short, the Fed is still subject to inflationary pressures due to the supply shock caused by high tariffs and the weak dollar. We believe this will keep U.S. yields sticky and intensify volatility in U.S. stock markets. On the other hand, European assets are expected to benefit from the ECB’s active actions, especially as Germany is making the biggest shift in its fiscal policy stance in a generation, which we believe may promote structural growth. We believe that in the long run, these “policy put options” could provide a powerful catalyst for many European stock markets to unlock value. German Treasury bonds also look like an attractive option for multi-asset investors looking to protect their portfolios from downside risks, and the safe-haven nature of U.S. Treasury bonds are increasingly questioned.
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