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On April 26, according to the Wall Street Journal, in order to simplify the negotiations on reciprocal tariffs, US negotiating officials plan to use a new framework developed by the Office of the United States Trade Representative (USTR), which lists major categories of negotiations, such as tariffs and quotas, non-tariff trade barriers, digital trade, product origin principles, economic security and other commercial issues. In these categories, US officials will put forward specific requirements for individual countries, but people familiar with the matter emphasized that this document may also be adjusted at any time. People familiar with the matter said that the United States initial plan is to negotiate with 18 major trading partners in turn over the next two months. The initial plan is to alternately participate in the talks with six countries per week for three weeks (six countries in the first week, another six countries in the second week, and another six countries in the third week) until the deadline of July 8. If US President Trump does not extend the 90-day suspension period he set by then, those countries that cannot reach an agreement will begin to face reciprocal tariffs.On April 26, after the United States announced additional tariffs on goods from many countries, Peruvian business people expressed concerns that the US governments extreme measures would disrupt the global trade order and may even trigger a global economic recession. Alvaro Barrenechea Chavez, vice president of the Peruvian-Chinese Chamber of Commerce, said that the negative impact of the US tariff policy has begun to emerge and hoped that the US government would rethink. Recognizing the importance of countries working together to promote development, I think this is the best way to become a true "world citizen."Market news: Musks xAI company plans to raise about US$20 billion in a financing round.Conflict situation: 1. Ukrainian top commander: Russia tried to use air strikes as a cover to increase ground attacks, but was repelled by Ukraine. 2. Ukrainian Air Force: Russia launched more than 103 drones in the night attack on Ukraine. 3. Local officials said Ukraine launched an attack in the Belgorod region of Russia, killing two people. 4. The local governor said that Russia launched an attack on the Dnipropetrovsk region of Ukraine, killing one person and injuring eight people. Peace talks: 1. Trump: ① The situation between Russia and Ukraine is gradually becoming clear, and they are "very close" to reaching an agreement. ② Ukraine is unlikely to join NATO. ③ Ukraine has not yet signed the rare earth agreement and hopes that the agreement can be signed immediately. ④ It is foreseeable that the United States will conduct commercial cooperation with Ukraine and Russia after reaching an agreement. 2. Russian Foreign Minister: Russia is "ready to reach an agreement on Ukraine." 3. Russian Presidential Assistant Ushakov: Russia and the United States will continue to maintain active dialogue. 4. Russian Presidential Assistant: Putin discussed the possibility of resuming direct negotiations between Russia and Ukraine with the US envoy. 5. The differences between the United States, Europe and Ukraine are clear. The documents show that European countries and Ukraine have raised objections to some of the US proposals to end the Russia-Ukraine conflict. 6. Market news: As part of the peace agreement, the United States asked Russian President Putin to abandon the demilitarization requirement. Other situations: 1. President of Hungarys OTP Bank: We hope to return to all business areas in Russia after the (Russia-Ukraine) conflict ends. 2. Ukrainian President Zelensky: US ground forces are not necessary for Ukraine. 3. Trump said Crimea will remain in Russia, Zelensky: Never recognize it. Agreeing with Trumps view, Crimea cannot be recovered by force. 4. NATO Secretary-General Rutte met with Trump and senior US officials to discuss defense spending, NATO summit, and the Ukrainian conflict.Rising global trade risks, overall policy uncertainty and the sustainability of U.S. debt top the list of potential risks to the U.S. financial system, according to the Federal Reserves latest financial stability report released on Friday. This is the first time the Fed has conducted a semi-annual survey on financial risks since Trump returned to the White House. 73% of respondents said that global trade risks are their biggest concern, more than double the proportion reported in November. Half of the respondents believe that overall policy uncertainty is the most worrying issue, an increase from the same period last year. The survey also found that issues related to recent market turmoil have received more attention, with 27% of respondents worried about the functioning of the U.S. Treasury market, up from 17% last fall. Foreign withdrawals from U.S. assets and the value of the dollar have also risen on the list of concerns.

Foreign exchange trading reminder on October 5: The U.S. dollar has fallen for three consecutive days, commodity currencies have risen, waiting for the Reserve Bank of Australia's decision

Oct 26, 2021 10:54

On Monday (October 4), the U.S. dollar fell against G-10 currencies across the board, U.S. Treasury yields rose, crude oil prices soared, and the stock market was weak. After OPEC+ stated that it would maintain a plan to gradually increase production, the Canadian dollar and the Norwegian krone were supported.

The US dollar index fell 0.27% to 93.80. The market weighed the risks of economic growth, energy shortages, the Fed’s policy path, and the threat of continued high inflation. The 10-year U.S. Treasury yield rose by 2 basis points to 1.48%; US President Biden warned that the government faces the risk of breaking the debt ceiling in two weeks.

Data released earlier showed that the growth of new orders for manufactured goods in the United States accelerated in August, indicating that the manufacturing industry remained strong, but due to shortages of raw materials and labor, economic growth appeared to have slowed in the third quarter. The US dollar received almost no support from this data.

However, in recent weeks, speculators in the foreign exchange market have become increasingly bullish on the U.S. dollar. The weekly position data released last Friday showed that the U.S. dollar net long position climbed to the highest level since March 2020.

However, Bank of America said it was right to buy the dollar on dips; analyst Ben Randol expects the dollar to regain its upward trend and maintain the forecast that the euro will reach 1.15 against the dollar in the fourth quarter. Randol said that the medium-term pressure on production capacity in the United States has overshadowed the impact of energy-related pressures in other regions, making the balance of inflation risk and its impact on the outcome of monetary policy a net positive for the dollar.

Traders pay attention to the US employment data that will be released this Friday to find clues about the Fed's next move.

Jefferies global foreign exchange director Brad Bechtel said that non-agricultural employment data will be a major focus of the market this week. Friday’s U.S. employment data is expected to show continued improvement in the job market, with 488,000 jobs expected to be added in September-enough to prompt the Fed to start reducing its stimulus before the end of the year.

The Fed has hinted that it may begin to reduce the size of monthly debt purchases as early as November, but traders worry that the sharp reduction in new jobs may delay the Fed's plan.

Bechtel said that if the increase is around 300,000, will the Fed react negatively? Probably not. Given that the momentum of reduction is already very strong, if this recent volatile data is only slightly lower than expected, it is difficult for the Fed's position to make a 180-degree turn. If we see some more extreme situations, such as the reduction of non-agricultural jobs, then another matter, the Fed may at least be forced to suspend.

The euro rose 0.22% to 1.1621 against the dollar; the dollar fell 0.11% to 110.93 against the yen; the Swiss franc led the rise of G-10 currencies; the dollar fell 0.9% to 0.9230 Swiss francs against the Swiss franc; the euro fell to 1 month against the Swiss franc Low point.

The pound rose 0.47% to 1.3610 against the dollar, continuing its rebound after hitting a nine-month low last week. Shaun Osborne, chief foreign exchange strategist at Scotiabank, said, “We believe that the pound is still unstable, as the UK may still face energy and food shortages in the fourth quarter, coupled with strong US data this week, the pound may Retest the $1.34 area and regain the September decline."

Oil-related currencies rose as New York crude oil futures rose to their highest level since 2014; the U.S. dollar fell 0.7% against the Canadian dollar to 1.2558 Canadian dollars, the lowest level since September 7, accompanied by a series of speculation and cross-platform Canadian dollar buying. The implied volatility of the US dollar against the Canadian dollar fell almost across the board, except for the one-month period, which covers the October 27th meeting of the Bank of Canada. The US dollar fell 1% against the Norwegian krone to 8.5459 kronor, the lowest point since July.

In terms of other currency pairs, the Australian dollar rose 0.32% to 0.7281 against the US dollar; the New Zealand dollar rose 0.30% to 0.6969 against the US dollar.

Preview Tuesday


time area index The former value Predictive value
07:30 Japan September Tokyo CPI annual rate (%) -0.4 -0.1
08:30 Australia August Goods and Services Trade Account ($100 million) 121.17 101
08:30 Australia Monthly import rate in August (%) 3 1
08:30 Australia Monthly export rate in August (%) 5 -3
16:30 U.K September Markit Service Industry PMI Final Value 54.6 54.6
20:30 America August trade account (100 million U.S. dollars) -701 -706
20:30 Canada August trade account (100 million Canadian dollars) 7.78 3.3
22:00 America September ISM non-manufacturing PMI 61.7 59.9
04:30 AM America Changes in API crude oil inventories in the week as of October 1 (10,000 barrels) 412.7
04:30 AM America Changes in API gasoline inventories in the week ending October 1 (10,000 barrels) 355.5
04:30 AM America Changes in API refined oil inventories in the week as of October 1 (10,000 barrels) 248.3

11:30 Reserve Bank of Australia announces interest rate resolution
16:00 European Central Bank Management Committee Holtzman delivered a speech
23:00 European Central Bank President Lagarde delivers a speech

Summary of Institutional Views


Institutions look forward to the Reserve Bank of Australia interest rate decision


Michael Hewson, chief market analyst at CMC Markets: It is expected that the Reserve Bank of Australia interest rate decision will not change much. At the September meeting, the Reserve Bank of Australia will reduce the weekly bond purchases from A$5 billion to A$4 billion, but it is also cautious not to rule out The possibility of further deterioration in economic conditions. At the same time, the deadline for the bond purchase plan was extended from November to February next year, reflecting its concern that due to various blockade measures, any recovery may take longer. Looking ahead to the October interest rate resolution, Australia’s economic outlook has not improved significantly, but this is not surprising, as many restrictions still exist. This shows that the meeting is not expected to change much. The Reserve Bank of Australia may reiterate that it will continue to support the economy. Once the vaccination rate rises and restrictions are relaxed, we will see an economic rebound.

ANZ Bank looks ahead to the Reserve Bank of Australia interest rate decision: We believe that after the August and September statements, the October statement will be somewhat irrelevant, because the August and September statements must deal with the lockdown caused by the delta strain, and How to deal with the bond reduction plan.

Bank of America says it is still reasonable to buy U.S. dollars on dips


Bank of America strategists said that it is a good time to buy U.S. dollars on dips recently, as the economic slowdown and planned cuts in monetary stimulus are pushing investors to withdraw from risky assets. A U.S. dollar index has fallen for three days after hitting a high for the year on September 29; the index has risen nearly 4% so far in 2021. Strategists Ben Randol, Adarsh Sinha and Janice Xue believe that the market’s expectations for the Fed’s rate hike are still lagging behind the value in the 2024 dot plot. As long as this week's US non-agricultural employment report "avoids substantial weakness", it should pave the way for the reduction in size from next month.

Although downsizing and raising interest rates are still different aspects of the normalization of monetary policy, confirming the downsizing still reduces one reason for the foreign exchange market to doubt the Fed's determination. Rising inflationary pressures are also bound to push the central bank toward normalization of policy. The "buy on dips" mentality has boosted the stock market so far in 2021, but rising volatility and debt ceiling disputes may lead to further corrections in risky assets. Although risky markets Stabilization may trigger a further correction in the US dollar in the short term, but medium-term drivers still support the US dollar.

Financial website Fxstreet analyst Yohay Elam: Is the pound bear market coming?


The market may ignore consumption-related information and pay more attention to two headlines. First of all, British Prime Minister Johnson has stated that he does not intend to ease the fuel shortage by relaxing immigration regulations. The withdrawal of EU citizens from the British transportation system has caused the gas stations to run out of gasoline, and the ongoing crisis may undermine the economic recovery. Second, Frost, the former chief negotiator of the United Kingdom, will say that the EU must abandon its requirements related to the Northern Ireland Agreement. According to the "Daily Telegraph" report, he will also invoke Article 16 of the Brexit Agreement to take emergency measures to threaten the EU. Frost's remarks may be negative for the pound. Both the Federal Reserve and the Bank of England are preparing to tighten monetary policy. However, everything else is good for the bears.