A collection of positive and negative news that affects the foreign exchange market

1. Policy and economic data dynamics

Feder policy expectations differentiate

Federal official Waller hinted that interest rate cuts may be possible later this year. In addition, the US consumer confidence index rose to 98.0 in May (the previous value of 85.7), and the market's expectations of the Fed's turn to easing have heated up, and the US dollar index fell 0.65% to 99.59 under pressure. If subsequent core PCE data meets expectations, the probability of interest rate cuts may further increase.

Badministrative: There are differences within the Federal Reserve on the impact of tariffs, and officials such as Kashkali advocated keeping interest rates unchanged until the impact of tariffs on inflation becomes clearer. In addition, core capital goods orders fell by 1.3% in April, indicating weak corporate spending, which may restrict the speed of Fed's policy shift.

European Central Bank's rate cut expectation cooled

Badminister: ECB official Nott warned that the outlook for inflation was unclear, market expectations for a rate cut in June weakened, and the eurozone's 10-year treasury bond yield fell by 2.5 basis points to 2.54%. France's inflation rate fell to its lowest level since December 2020 (0.6%), but the manufacturing PMI only rose slightly to 49.4, and the momentum for economic recovery was insufficient.

Benefits: European and American trade tariffs were postponed to July 9, easing concerns about transatlantic trade frictions, and the euro hit a new high of 1.1249 against the dollar.

The strong UK inflation data and interest rate cuts game

Favorites: UK CPI rose 3.5% year-on-year in April, hitting a 15-month high, service industry inflation rose to 5.4% beyond expectations, the market reduced its expectations for the Bank of England interest rate cuts, and the pound rose to more than 1.35 against the US dollar.

Badministrative: The yield on the UK 10-year Treasury bond is close to 4.The key level of 8% may trigger further declines in the pound. In addition, the market is expected to cut interest rates by only 35 basis points by the end of the year, lower than the 40 basis points before the data was released.

2. Geopolitics and market sentiment

The escalation of the situation in the Middle East and the demand for risk aversion

Hot negative: Israel raided Beirut, Lebanon, Hezbollah threatened to retaliate, geopolitical risks in the Middle East heated up, safe-haven funds flowed into the yen and Swiss francs, and the US dollar fell by more than 1% against the yen. The Japanese government interfered in the bond market, and the yield on 30-year government bonds fell by 20 basis points, alleviating the pressure on the depreciation of the yen.

Benefits: A joint statement of the ASEAN-China-GCC summit called for a ceasefire in the Middle East, and if the situation eases, it may boost risk appetite.

G7 meeting sends out policy signals

Badministrative: The G7 Treasury Secretary’s meeting did not mention tariffs and China, indicating that US allies are dissatisfied with their trade policies and the dollar’s ​​credibility has been damaged. Citigroup reported that the G7 may push exchange rate appreciation as a condition for lowering tariffs, and the potential appreciation space for the yen and euro increased.

Benefits: The United States postponed the imposition of tariffs on the EU until July 9, and the three major U.S. stock indexes rose by more than 2%, and the rebound in risk appetite supported non-U.S. currencies.

3. www.avaforexcn.commodity and exchange rate linkage

Crude oil price fluctuations and www.avaforexcn.commodity currency differentiation

Hacks: OPEC+ may decide to increase production at this week's meeting. www.avaforexcn.combined with the increase in US crude oil inventories, WTI crude oil closed down 0.77% to US$60.85 per barrel, suppressing www.avaforexcn.commodity currencies such as the Australian dollar and Canadian dollar.

Benefits: Geographical risks and short covers drive oil prices to rebound. If OPEC+ maintains production cuts, it may support crude oil prices and be beneficial to www.avaforexcn.commodity currencies.

Volatility of gold and safe-haven assets

Bearnings: The rebound of the US dollar and the rebound in risk appetite caused gold to fall for two consecutive days, with spot gold closing down 1.26% to $3299.91 per ounce.

Benefits: If the situation in the Middle East continues to be tense, gold as a safe-haven asset may be supported.

4. Other key events and data

New Zealand Fed rate cuts landed

Badministrative: The New Zealand Fed cut interest rates by 25 basis points as scheduled to 5.25%, but the statement was hawkish, emphasizing inflation risks, and the New Zealand dollar rebounded to 0.5968 against the US dollar. The market expects another 64 basis points to cut interest rates by the end of the year, limiting the increase in the New York dollar.

Federal meeting minutes ahead

Neutral short: The Fed will release the minutes of May meeting the next day. If the dovish signal is released, it may strengthen the expectation of interest rate cuts. On the contrary, if tariff risks are emphasized, it may support the US dollar.

5. Strategic Suggestions and Risk Warnings

Money Pair Operation Strategy

EUR/USD: After breaking through 1.1249, you can chase long, target 1.1300, and stop loss 1.1200.

USD/JPY: After falling below 143.00, you can short it, target 142.50, stop loss 143.50.

GBP/USD: Pay attention to the 1.35 resistance level. If you stand firm, you can go long, with a target of 1.36 and a stop loss of 1.3450.

AUD/USD: If it falls below 0.6650 support, it may fall below 0.6600 and rebound to 0.6700, you can short it lightly.

Key points of risk control

Position management: The overall position is controlled within 60%, and mobile funds are retained to deal with the impact of Federal Reserve policies and geopolitical events.

Data attention: Focus on the core US PCE price index and minutes of the Federal Reserve meeting on May 30. If inflation exceeds expectations, it may reverse the expectation of interest rate cuts.

Geo-risk: Middle East conflict, Russia-Ukraine negotiations and the Yellow Sea military dynamics still need to be closely followed to avoid over-exposed positions to risk events.

6. Summary and Outlook

Today's foreign exchange market bulls and short factors are intertwined: the Federal Reserve's interest rate cut expects to support non-US currencies, but weak corporate spending and tariff differences limit the decline of the US dollar; the European Central Bank's policy uncertainty and the game between the UK inflation data affects the trend of the euro and pounds; the escalation of the situation in the Middle East pushes up the demand for safe-haven, and the G7 meeting sends a signal of policy turnover. Investors need to pay close attention to the minutes of the Federal Reserve meeting and the subsequent actions of the G7, and flexibly adjust their holding structure. In the short term, it is recommended to place the euro and pound on dips, and to allocate the yen and Swiss francs to hedge risks; in the medium and long term, it is necessary to www.avaforexcn.combine the economic fundamentals and policy cycles of various countries to dynamically balance between growth currencies and safe-haven assets.

The above content is all about "【Ava Aihua Official Website】: Collection of Positive and Negative News that Influences the Foreign Exchange Market". It was carefully www.avaforexcn.compiled and edited by Aihua Avatrade Forex Editor. I hope it will be helpful to your trading! Thanks for the support!

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