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Hello everyone, today XM Foreign Exchange will bring you "【XM Foreign Exchange Market Analysis】: Collection of positive and negative news that affects the foreign exchange market". Hope it will be helpful to you! The original content is as follows:
In the early morning of September 18, Beijing time, the Federal Reserve lowered the target range of the federal funds rate by 25 basis points to 4.00%-4.25%, which is the first rate cut since December 2024. The dot map shows that officials are expected to cut interest rates twice this year, with only one rate cut in 2026. Federal Reserve Chairman Powell called the rate cut a "risk-management rate cut" and implied that the policy focus shifted to employment. This news has negative news for the US dollar, but for other currencies, which may trigger changes in global capital flows and drive the exchange rate of non-US currencies to rise.
After the Fed's action, the Bank of Canada also announced a 25 basis point cut to 2.50%. In addition, Saudi Arabia, the UAE, Qatar, Kuwait and other Middle East Gulf countries also announced interest rate cuts of 25 basis points simultaneously. The following rate cuts by many central banks may further affect the interest rate pattern of the global money market and have a chain reaction to the exchange rate trends of each currency.
Data from the State Administration of Foreign Exchange shows that as of the end of August 2025, China's foreign exchange reserves were US$332.2 billion, again standing at the 3.3 trillion US dollar mark after the end of June, setting a new high in the past 10 years. The stable increase in the scale of foreign exchange reserves will help boost market confidence in the RMB and support the RMB exchange rate.
French Prime Minister Bellu demands that the National Assembly vote on confidence in the government on September 8,The main opposition leaders expressed their dissatisfaction, which increased the risk of Beiru being removed. In addition, left-wing parties and trade union organizations promoted the September 10 strikes and protests due to the 2026 budget plan including proposals such as “cancel two public holidays.” French bond yields are therefore included in more risk premiums, safe-haven funds flow into German bonds, and the interest rate spreads of French and German widen, which suppresses the euro exchange rate.
UK July CPI was 3.8% year-on-year, exceeding the expected 3.7%, and the previous value was 3.6%; the core CPI was 3.8% year-on-year, also exceeding the expected value 3.7%, and the previous value was 3.7%. The initial value of the www.qgrse.cnprehensive PMI in August was 53, higher than expected by 51.6, and the previous value was 51.5. Exceeding economic growth data and inflation data may strengthen the Bank of England's "hawkish" stance, and further decline in interest rate cuts this year, which will bring good news to the pound and pressure on the euro-to-GBP exchange rate.
Judging from the historical preventive rate cut experience, the US dollar index may continue to run weakly before the Fed's interest rate cut in September, and the possibility of the US dollar index rebounding after the rate cut is implemented is high. The current Markit-ISM manufacturing PMI difference, momentum factor and futures positions also point to the undervalued US dollar index and have appreciation potential. In addition, the issuance of US bonds in September was large. Under the www.qgrse.cnbined www.qgrse.cnbination of multiple factors, we need to be wary of the impact of the liquidity tension in the US dollar currency market on the pulsed push of the US dollar exchange rate. This means that there is uncertainty in the future trend of the US dollar and may have a volatile impact on the exchange rates of other currencies.
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