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The dollar rebound is 'dead cat jump'?
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Hello everyone, today XM Forex will bring you "[XM official website]: Is the US dollar rebound 'dead cat jump'?". Hope it will be helpful to you! The original content is as follows:
Asian market market
On Tuesday, the US dollar index fluctuated back and forth around the 98 mark during the day. As of now, the US dollar price is 98.34.
Overview of fundamentals of foreign exchange market
U.S. Treasury Secretary Bescent Besent: Meeting with 11 candidates for Federal Reserve Chairmanship around September 1
People inside the matter: The White House considers holding a Russian-Ukrainian leader summit in Hungary.
The United States and Europe will immediately start to provide security for Ukraine and xmtraders.comprehensively enhance Ukraine's military strength and xmtraders.combat capabilities. Trump has ruled out the possibility of sending ground troops to Ukraine, but said air support is an option.
S&P confirmed the US "AA+/A-1+" sovereign rating and its outlook remains stable.
The United States includes Class 407 steel and aluminum derivatives on its tariff list.
Summary of institutional views
Westpac: The dollar sell-off has not been xmtraders.completed, and the average level releases long-term bearish signals
The stabilization of the dollar index is questionable. Whether the dollar sell-off has ended, or even a period of stability or appreciation is about to usher in a period of stability or appreciation, or whether this is just a brief rest before the next round of decline of the dollar. We expect the latter view to be confirmed, although we believe the depreciation rate of the US dollar will slow down significantly, as the 10-year average of the US dollar index has fallen below 98.5, while the 20-year average of 90.3 remains inconsistent with market expectations for growth and policies in the United States and the rest of the world.
Overall, GDP growth in the United States, the euro zone, the United Kingdom and Japan are all consistent with the trend. However, the eurozone and the UK may experience a stronger or at least more resilient economic environment, while growth in the US has slowed significantly and is prone to falling intoStagnant. Furthermore, while the eurozone and British authorities have the ability to act when the economy is off track, it is difficult for U.S. policy makers to act outside of the recession given the ongoing structural price pressure and slow transmission of tariffs.
So we expect the U.S. dollar index to fall slightly from the current 98.25 to 97 in December 2025, 94.6 in December 2026 and 93.8 in June 2027. It should be noted that all these predictions are much higher than the index’s 20-year average (90.3). This means that although we believe that the era of American exceptionalism has ended and the downside risks of the US economy will remain high, the position of the US economy in the global financial order is unlikely to be threatened in the near term. This also means that the risks posed by U.S. trade policy to the global economy may last for some time, and U.S. policymakers still have the ability to provide cyclical support to the economy, thereby limiting the threat of recession.
Scotiabank is looking forward to the central bank's annual meeting: Powell may "pour cold water" on the excessively high September interest rate cut expectations?
The unofficial focus of the financial market will be whether Powell will change his position or continue to maintain a long-term suspension of expectations for interest rate cuts that began in September. I doubt he will talk directly about the September policy, because usually he will give a brief speech in September without a Q&A session, focusing on a broader development direction in the future. He may focus on the xmtraders.commitment to the framework review, which Powell has said will be xmtraders.completed by the end of the summer and will then discuss xmtraders.communication tools including the Economic Forecast Summary in the fall.
If Powell expressed his opinion on recent policies, it would suggest that the September policy might use words like “quick” or “almost quick” to show his tendency to be loose. I doubt he has this mentality and thinks expectations for a September rate cut are still too high. If the policy stance changes, it will give traders eager to cut interest rates an excuse to take the opportunity to step up efforts to implement more radical easing policies that the Fed may not be willing to do at this time.
The Fed has not won the last battle of inflation, given the recent PPI and CPI data, and the need for more data considering factors such as seasonal residuals and sampling defects. The balance point between the upward inflation risk and the downward risks of the employment market has not been determined and remains to be confirmed by more evidence. The question of how tariffs, immigration policy changes, and how broader macroeconomic policies affect inflation is still in its infancy.
In view of Trump's pressure, if the Fed cut interest rates quickly, it may appear to be xmtraders.completely politicized. The financial environment is generally stimulating. We have seen two, three or even four xmtraders.committee members have different opinions on many occasions. The risk problem is that substantial easing may fuel more unwise policies, such as trade protectionism.
Deutsche Bank: Becent's view on interest rate cuts is contrary to the Federal Reserve model
Deutsche Bank interest rate strategist said US Treasury Secretary Becent said about the Federal ReserveIt is wrong to think that interest rates are more than one percentage point higher than the appropriate level shown by the model. Becente previously said that "no matter what model" it implies that interest rates "should be 150 to 175 basis points lower." But since then, searches for models that match this claim have never worked, and a team of Deutsche Bank strategists led by Matthew Raskin have recently joined the verification effort. Raskin, a former Fed economist and adviser, and his team said in a report Tuesday that the rules the Fed used in its semi-annual monetary policy report "does not clearly point to the rate cuts that should be cut, let alone 150 to 175 basis points." "It should be noted that the current federal funds rate is within a relatively narrow range specified by the rules," they said, i.e., between about 4% and 4.65%, indicating that a 25 basis point cut is "probably reasonable."
ANZ Bank: Can the Trump administration finally find an "obedient" Fed chairman?
Last week, U.S. Treasury Secretary Bescent said that the Federal Reserve should lower the policy interest rate by 50 basis points at its September meeting and the final interest rate was 150-175 basis points. He later clarified that he was not instructing the Fed to do what, but summarizing some of the measures that models should take on policy. We are not sure which models he is referring to, nor the time frame involved. Of a series of simple mechanical monetary policy rules provided by the Cleveland Fed, only one supports his argument. Given that Becent and Trump are looking for a candidate to replace Powell as chairman, this raises the question: Can they choose a candidate who will cut interest rates under the direction of the administration? We think there are several reasons why this is difficult to achieve.
First of all, the FOMC policy is not decided by any single member. The longer term and staggered appointments of Fed members are intended to protect the xmtraders.committee from political pressure. In addition, against the backdrop of a reasonable balance in the labor market, interest rate cuts will run contrary to the target of price stability. Finally, from a political standpoint, it may not be a wise move to implement looser policies. As markets worry about inflation, too large short-term interest rate cuts may push up long-term interest rates. If the rate cut is too large and leads to a rise in inflation, this could adversely affect the Republican performance in the 2026 midterm elections.
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