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The dollar index is weak, the market is waiting for US heavy data
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Hello everyone, today XM Foreign Exchange will bring you "[XM Official Website]: The US dollar index is weak, and the market is waiting for the heavy US data." Hope it will be helpful to you! The original content is as follows:
On the Asian session on Tuesday, the U.S. dollar index hovered around 98.95, the U.S. dollar continued to fall against multiple currencies, Trump's policy turn, and the xmserving.comprehensive spending and tax cut bills he is currently pushing, have discouraged investors from U.S. assets. The decline in the dollar has been largely beneficial to the euro over the past few months, with investors focusing on a range of non-U.S. markets.
Analysis of major currency trends
Dollar: As of press time, the U.S. dollar index hovers around 98.95, and a brief pullback from the daily high occurred as the U.S.-European trade tensions gained some support, the U.S. dollar index (DXY) remained stable around 99.00, recovering from four-week lows. The U.S. economic agenda will include April durable goods orders, minutes of the Federal Reserve's Open Market xmserving.committee (FOMC) meeting, the second estimate of GDP in the first quarter of 2025, and the release of the core personal consumption expenditure (PCE) price index, which is the Fed's preferred inflation indicator.
1. The Japanese version of Jackson Hall Central Bank Annual Meeting will open in Tokyo on Tuesday
The two-day annual meeting held by the Bank of Japan will open in Tokyo on Tuesday (27th). The meeting is similar to the Federal Reserve's Jackson Hall Central Bank Meeting. Well-known scholars and central bank officials from the United States, Europe and Asia (New York Fed Chairman Williams, etc.) will attend, and the meeting will focus on two disturbing realities: weak economic growth and high inflation. While most of the speeches are academic and not open to the media, this year’s theme is “new challenges facing monetary policy”, especially how central banks should deal with ongoing inflation, economic downturn risks, volatile markets and U.S. tariffs. One of the conferences was “Reserve demand, interest rate regulation and quantitative tightening.” Another meeting will discuss a paper titled "Monetary Policy and Inflation Panic" published by the International Monetary Fund in December.
2. European Central Bank President: Dominance of the US dollar is becoming uncertain
Local timeOn May 26, European Central Bank President Lagarde delivered a speech at a forum in Berlin. Lagarde said that the current US dollar-based international monetary system is becoming uncertain and Europe needs to reform in multiple ways to reduce its impact on changes in the international order. Lagarde further explained that global multilateral cooperation is being replaced by zero-sum games and bilateral power games, and opening up is giving way to protectionism, and even the dominance of the US dollar, the cornerstone of the system, has become uncertain.
3. Francis Scalpareja was elected Speaker of the House of Representatives in Canada
On May 26 local time, the new House of Representatives in Canada opened. Representative Frances Scalpareja, a ruling Liberal Party, was elected as Speaker of the House of Representatives in a secret ballot in the House of Representatives. Scalpaleja was born in 1957 and was first elected as a member of the House of Representatives in 2004 and was re-elected for seven consecutive times. From 2011 to 2021, he served as chairman of the Liberal Party caucus. According to Canadian practice, the Speaker will not belong to any party and its task is to monitor the daily operation of the parliament and to fully implement parliamentary etiquette and code of conduct. The Canadian Liberal Party’s seat in the House will be reduced to 168 seats after the Liberal MP serves as House Speaker.
4. Report: The EU plans to speed up trade negotiations with the United States
According to foreign media reports, the EU plans to speed up trade negotiations with the United States. "There is new momentum in negotiations now, with European xmserving.commission President von der Leyen having a telephone conversation with Trump on Sunday, who agreed to speed up the trade negotiation process and maintain close contact," a spokesman for the European xmserving.commission said on Monday. After the call, Trump postponed the originally scheduled deadline for 50% tariffs on the EU by more than a month until July 9 for further negotiations. So far, EU-US negotiations have faced many problems and cannot find a middle-level position that satisfies both sides. Europe xmserving.complained that it was unclear about the specific demands of the United States, or even who could speak out on behalf of the president; the United States accused the EU of unfairly targeting American xmserving.companies through litigation and regulation. EU Trade xmserving.commissioner Sevchovich is expected to speak with U.S. xmserving.commerce Secretary Lutnik on Monday, and EU ambassadors are also planning to hold an emergency meeting on Monday to discuss the latest developments with the European xmserving.commission.
5. Expectations of interest rate cuts by the European Central Bank have heated up under the shadow of Trump's tariffs
The interest rate strategist at the Dutch International Group said in a report that after U.S. President Trump threatened to impose a 50% tariff on EU imported goods, the market's expectations for the ECB's interest rate cuts have increased. Data from the London Stock Exchange Group shows that the money market expects euro zone deposit rates to fall to a low of about 1.57% in February or March next year. That expectation is lower than the market's expected interest rate lows before Trump announced Friday's tariff plan, although he subsequently delayed the implementation of the plan from June 1 to July 9. The initial value of the eurozone May inflation data, scheduled to be released early next week, may strengthen these expectations and support the ECB's rate cuts if necessary.
Institutional View
1. Analysts: The short-term decline of the US dollar does not mean the end of hegemony
Eurizon SLJ Capital analyst Stephen LiJen pointed out in a report that from a historical perspective, there is nothing sinister about the recent decline of the US dollar. "The US dollar remains the dominant reserve currency despite the turmoil in the global situation." He mentioned that the dollar's exchange rate against the euro has fluctuated in the range of about 0.83 to 1.60 over the past 25 years, and during this period there has been little discussion about the US dollar's loss of reserve currency or international currency hegemony. However, he believes that the dollar's share in global reserves should gradually decline, although it will remain at the top. SLJ Capital believes that the fair value of the euro against the US dollar is between $1.20 and $1.25.
2. Morgan: New Zealand's Fed's guidance may no longer be full of worries
JP Morgan chief economist Ben Jarman said the New Zealand Fed may further cut interest rates by 25 basis points at its policy meeting on Wednesday, and traders are more interested in the tone of the central bank's guidance. He added that some of the bank's previous concerns may be alleviated to some extent as the risk of the tariff war weakened. Jarman said the Fed had cut interest rates sharply, so the threshold for suspension and reassessment was low. He said that domestic data has also rebounded recently, which has eased pressure on the Fed to continue to cut interest rates quickly.
3. Institutions: The RBA may quickly turn to neutral interest rates in July
Judo Bank chief economic adviser Warren Hogan said the RBA cut interest rates last week and tended to dovish guidance, which is a signal that it intends to return monetary policy to neutral levels in the short term, and the next step is expected to cut interest rates by 25 basis points at its next meeting in July. Nevertheless, the RBA may speed up the process by cutting 35 basis points, bringing the official cash rate (OCR) to the expected neutral rate of 3.50%. Hogan added that a larger rate cut could be needed if global situations remain problems next month or if domestic data are weaker than expected.
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