U.S. bond yields stabilized on the eve of the Fed's interest rate meeting, and the U.S. dollar index fluctuated slightly.

In Asian trading on Wednesday, the U.S. dollar index hovered around 99.23. The U.S. dollar rose on Tuesday, with the market focusing on U.S. economic data and central bank movements ahead of the Federal Reserve's upcoming interest rate decision. Better-than-expected U.S. job openings data for October highlighted the resilience of the labor market and solidified expectations that the Federal Reserve will maintain a hawkish stance even if it cuts interest rates, thereby supporting the dollar. All eyes are on the upcoming Federal Reserve interest rate decision. The market is generally expected to cut interest rates by 25 basis points, but traders are more concerned about the "dot plot" it released for guidance on the future path of interest rates, and whether Chairman Powell will set a higher threshold for subsequent interest rate cuts. Investors are also lowering expectations for a significant interest rate cut in 2026.

Analysis of major currency trends

U.S. dollar: As of press time, the U.S. dollar index was hovering around 99.23. On Tuesday, cross exchange rate fluctuations were limited as traders avoided placing large positions before the Federal Reserve decision was announced. cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnmerzbank pointed out that market participants have not yet made significant adjustments to the exchange rate, which makes the trend of the U.S. dollar index mainly driven by U.S. interest rate levels and market expectations, rather than by general selling pressure on non-U.S. currencies. Technically, the U.S. dollar index is currently trading between the 50-day moving average (99.197) and the 200-day moving average (99.439). The deviation rate of the two moving averages has narrowed, indicating that a larger market may be brewing. Traders regard 99.580 as the immediate watershed between long and short. If the index fails to break through this level, the rebound momentum may stagnate; if it breaks through the 200-day moving average, it will indicate strong bull momentum, and the index is expected to explore the 100.000-100.395 range.. On the contrary, if the index falls back below the 50-day moving average, there is a high probability that it will test the shock low of 98.765 and further test the range of 98.307-97.814.

Euro: As of press time, EUR/USD is hovering around 1.1626, and EUR/USD remains stable. Although U.S. employment growth and job vacancies have increased, it has little impact on expectations of a Federal Reserve interest rate cut. Technically, EUR/USD remained below 1.1650 for the sixth consecutive session, forming a narrow consolidation range between 1.1650 and 1.1600. The pair’s failure to retake 1.1700 has kept buyers on the sidelines, with bearish momentum building as the Relative Strength Index (RSI) flattens and signals easing buying pressure – making any attempt to retest 1.1800 or the year’s high of 1.1918 risky. Immediate support below 1.1650 appears near the 50-day simple moving average (SMA) at 1.1604. A decisive move below this area would expose the 20-day SMA at 1.1597, followed by the psychological barrier of 1.1500.

The Bank of England's policy stance is typically more diverse than the Fed's cautious statements. However, BoE officials have become increasingly open to the idea of ​​further rate cuts since the latest Monetary Policy cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnmittee (MPC) meeting, when a narrow majority decided to keep rates on hold. The daily chart of the pound shows that the exchange rate relies on a double bottom pattern to break through, and then reaches around 1.3344, which measures the increase. The exchange rate is currently testing 1.3344 to no avail. It is expected to start falling after the meeting. Currently, 1.3344 and the 5-day line are pressure levels, and the pressure level in the distance is 1.3450, which was the intensive transaction area before the exchange rate fell. The orange line of support is the neckline generated when the exchange rate fell before resistance, within the range of 1.3280-1.3290. At the same time, the rebound in sterling means that the US dollar index may counterattack.

Foreign exchange market news summary

1. The EU climate monitoring agency: It is basically determined that 2025 will be the second warmest year on record

The European Union climate monitoring agency Copernicus Climate Change Service issued a cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnmuniqué on the 9th, showing that from January to November 2025, the global average temperature will be higher than that of 1991-2020The annual baseline value is 0.6 degrees Celsius higher than pre-industrial levels and 1.48 degrees Celsius above pre-industrial levels. It is basically certain that 2025 will tie with 2023 to become the second hottest year since relevant records began, second only to 2024. The data also shows that the global average temperature in the three years from 2023 to 2025 is likely to exceed the threshold of "1.5 degrees Celsius higher than before industrialization" for the first time.

2. Zelensky said that Ukraine is negotiating three key documents with the United States and Europe

On the 9th local time, Ukrainian President Zelensky said in an interview that Ukraine is currently negotiating with its partners on three core documents, which cover three major areas: framework agreements, security guarantees, and post-war reconstruction. Zelensky first confirmed the basic scope of the consultation documents. He said: "Ukraine is negotiating with the United States and Europe on three documents."

3. Bank of England officials have obvious differences on the outlook for interest rates

On the eve of the Bank of England's 18th interest rate decision, a number of senior policymakers sent different signals on the path of monetary policy on Tuesday, highlighting the ongoing differences within the Monetary Policy cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnmittee. Lombardelli, the deputy governor for monetary policy, said she was more worried about the upward risk of inflation and believed that the end of this interest rate cutting cycle may be near. Lombardelli was one of five members of the cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnmittee who voted by a slim 5-4 majority last month to keep interest rates on hold. Lumsden, the deputy governor in charge of markets and banking affairs (who voted in favor of an interest rate cut in November), said that there was no evidence that inflation deviated from the central bank's expected downward path. As interest rates move closer to neutral levels, the impact of monetary policy on inflation will be more difficult to judge, so it is still appropriate to gradually lift policy restrictions. External member Dhingra (who has always supported interest rate cuts) said that the overall de-inflation process is still on track. Mann, another external member, emphasized that cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnpared to the budget's impact on short-term prices, she is more concerned about the changes in long-term economic behavior caused by inflation continuing to exceed the 2% target in the past four years.

4. Zelensky responded to Trump: Ukraine is willing to hold elections

On December 9, local time, Ukrainian President Zelensky stated that Ukraine is willing to hold elections. Zelensky's move was a direct response to US President Trump's call for Ukraine to hold elections as soon as possible. It is reported that U.S. President Trump said in a recent interview that Ukraine should still hold elections despite the ongoing conflict between Ukraine and Russia. Trump said: "They are using conflict as an excuse not to hold elections. I think the Ukrainian people should have a choice. They keep saying they are a democracy, but the current situation is no longer a democracy."

5. Hassett: The current Fed has more than 25 basis points of room to cut interest rates

Kevin Hassett, director of the White House National Economic Council, said that he believes the Fed still has a lot of room to cut interest rates. Hassett is the favorite among Trump advisers and allies among the candidates for Fed chairman, sources said. At the CEO Council Summit hosted by The Wall Street Journal on Tuesday, Hassett was asked if he would serve.Chairman, will we push for the big interest rate cuts that the president wants? "If the economic data shows that we can do that, as it is now, I think there is room for a significant reduction in interest rates," he said. Asked whether that meant more than 25 basis points, he replied: "Yes." Hassett's position closely aligns with Trump's, raising questions about whether he would uphold the central bank's decades-long tradition of political independence in interest rate decisions if he takes charge of the Fed. Trump himself said in an interview with Politico on Tuesday that whether to cut interest rates quickly will be a "litmus test" for him to choose the chairman of the Federal Reserve.

Institutional Views

1. Strategists: The Canadian dollar and government bond yields have risen simultaneously and may interfere with the Bank of Canada's decision-making

Golden Ten Data reported on December 9 that Karl Schamotta, chief market strategist of the foreign exchange cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnpany Corpay, said that the synchronized rise in Canadian bond yields and the Canadian dollar exchange rate has cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnbined with traders' bets that the Bank of Canada will raise interest rates at the end of 2026, which may cause certain interference in the Bank of Canada's policy decision this week. Schamotta noted that the overnight index swap market has begun pricing in expectations for a rate hike in the fourth quarter of next year, which could lead to an "unwelcome tightening of financial conditions" and exacerbate headwinds the economy is already facing. Governor McCollum may try to curb market expectations for a rate hike by delivering a more dovish outlook at a press conference explaining the interest rate decision.

2. HSBC: The model shows that the euro is undervalued and the stock market has become a new driving factor

HSBC analysts pointed out in the latest research report that according to their model assessment, the current euro against the U.S. dollar EUR/USD is significantly low. "The rebound of the euro is much lower than the path predicted by the model." They further explained that in the U.S. dollar index (DXY), which measures the trend of the U.S. dollar against a basket of major trading partner currencies, many key cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnponent currencies are currently undervalued, especially the euro. "The dollar may already be trading at a high level relative to its historical drivers," analysts said. Usually, the trend of the euro is mainly affected by the overall trend of the US dollar and the interest rate difference between Europe and the United States. However, the recent performance of the stock market has also become an important driver. This phenomenon is not cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cn.xmtdhf.cnmon.

3. Deutsche Bank: Global monetary policy is shifting to a shift in expectations for interest rate hikes in many countries.

Global monetary policy expectations are undergoing a significant shift. From Australia to Europe and the United States, traders are betting that central bank monetary easing cycles will slow or even end. "What is striking is that markets in more and more countries have begun to price the next interest rate change as an interest rate hike," said Jim Reid, head of global macro research at Deutsche Bank. "If even the United States follows this path, it will undoubtedly subvert the performance of risk assets and the overall economic outlook next year." The trigger for this revaluation of the policy path came from the statement of European Central Bank executive member Schnabel on Monday. She said she was "comfortable that the next interest rate adjustment will be an interest rate hike," igniting market bets on the central bank's interest rate hike in 2026. The consequence of repricing is likely to be further increases in bond yields. Although ZhouThe yields on government bonds in the United States, Europe, the United Kingdom, and Japan fell slightly, but overall they have risen sharply this month. However, short-term trends may be subject to the Federal Reserve's policy decision and U.S. job vacancy data for October to be released later today.

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