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As soon as Powell was hawkish, Williams was hawking doves. What on earth is the Fed planning?
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market xmniubi.commentary]: As soon as Powell made a hawk, Williams started to call a dove. What is the Fed planning?". Hope this helps you! The original content is as follows:
November 21, Friday. The U.S. dollar index is currently trading above the 100 mark during the North American session. The market is in a critical stage of restructuring policy expectations at the end of the year, and the overall atmosphere is highly sensitive and volatile. The suspense over whether the Federal Reserve will cut interest rates in December remains unresolved, and many officials have recently released conflicting signals, further exacerbating market uncertainty.
Previously, Federal Reserve Chairman Powell made it clear that "an interest rate cut in December is not a set path." This statement once triggered a hawkish reassessment of interest rate expectations, pushed U.S. bond yields back up, and suppressed risky assets. However, the latest developments show that the Fed is not monolithic. New York Fed President Williams publicly pointed out that downside risks to the job market are rising, economic growth has slowed, and the labor market is gradually returning to the neutral state before the epidemic. He also emphasized that the current monetary policy is within a moderately restrictive range and there is still room for interest rate cuts in the future. These remarks were quickly interpreted by the market as a dovish signal, and short-term interest rate futures began to price in a December interest rate cut again.
Structural changes in the U.S. economy are affecting the Federal Reserve’s decision-making logic. Although September's non-farm employment data showed that the number of new jobs exceeded expectations, a closer look at its xmniubi.composition shows that public and non-cyclical industries such as government, education and medical care contributed 81,000 jobs, and the momentum of the private sector was relatively weak. What is even more noteworthy is that the unemployment rate rose from 4.32% to 4.44%. Although the rate is not large, it is the second consecutive month that the number of labor force participants has increased more than the number of new jobs. In September, the labor force increased by 470,000 people, while the actual number of jobs created was only 251,000. This phenomenon reflects the laborThe expansion of labor supply faster than demand may indicate that xmniubi.companies are less willing to recruit and the job market is transitioning from tight to balanced. In addition, the number of people continuing to apply for unemployment benefits has climbed to cycle highs, further supporting the trend of marginal weakening in the labor market. Although these data have not yet reached the level of triggering emergency easing, they are undermining the narrative that "high interest rates can be maintained for a long time" and also provide a basis for the Fed to retain policy flexibility.
Judging from market reaction, the U.S. dollar has recently shown a high and volatile pattern, lacking a clear direction. After the release of non-agricultural data, the U.S. dollar was once supported by strong job growth, but failed to extend its gains. Instead, it encountered selling pressure due to rising unemployment rates and rising unemployment claims. This shows that traders do not place orders based solely on a single data, but xmniubi.comprehensively assess the overall momentum of the labor market.
Technical aspects
From the daily structure, the U.S. dollar index has maintained an upward channel after rising from the low of 96.2109. It has recently consolidated at a high level above the 100 mark, showing that the bullish trend is still there but has entered a resistance-intensive area. Short-term pressure formed near the previous high of 100.3900, and the K-line continued small entities and intertwined upper and lower shadows, reflecting the increasing divergence and slowing down of momentum. The 99.0000 level below is the key platform support level and is also the retracement area after the previous breakthrough, which determines the stability of the mid-term trend.
In terms of indicators, MACD is above the zero axis, the fast and slow lines maintain a positive opening but the slope is slowing down, and the columnar kinetic energy has shortened, indicating that the rise has entered the digestion stage; the relative strength index is about 65, which is in the strong range but not extreme. The short-term is still resilient and we need to be alert to the intensification of high fluctuations. Overall, prices are at the junction of trend continuation and phased consolidation, and subsequent trends are more sensitive to changes in interest rate expectations and risk sentiment.
Looking to the future
Market logic will still revolve around "data dependence" and "risk balance". The Federal Reserve meeting on December 10 will be a key node. Not only will there be an interest rate decision, but the Summary of Economic Projections (SEP) will also be updated. The change in the dot plot of the interest rate path in the next two years is particularly critical. If the Federal Reserve raises its long-term neutral interest rate forecast, the dollar is expected to regain upward momentum. On the other hand, if officials keep interest rates unchanged while acknowledging the risk of an economic slowdown, achieving a so-called "dovish pause" and hinting at two or three interest rate cuts in 2026, the dollar may face a periodic correction. At the same time, the personal consumption expenditures (PCE) price index to be released next week is the inflation indicator that the Fed is most concerned about, and its reading will directly affect the market's judgment on the policy path. If the inflation data is soft, it may reignite bets on interest rate cuts, suppress U.S. bond yields and weaken the appeal of the dollar. In addition, changes in consumer confidence indicators cannot be ignored. If the willingness to spend continues to decline, the GDP growth rate in the fourth quarter may be revised downwards, further shaking the rationality of the high interest rate stance.
It is worth noting that Williams’ latest speech specifically mentioned that “clear xmniubi.communication can reduce market disturbances.” This statement was widely interpreted as the Fed’sIt was intended to avoid triggering financial turmoil through mild language. xmniubi.combined with its judgment that fiscal policy will boost growth next year and immigration policy may offset some of the impact, it can be seen that the Fed is trying to find a balance among multiple variables. For the dollar, the real test is whether the high interest rate environment can be maintained when economic growth slows, the job market cools, and financial market vulnerabilities increase. At present, the answer is trending towards no.
The above content is about "[XM Foreign Exchange Market xmniubi.commentary]: As soon as Powell started to play hawk, Williams started to play dove. What is the Fed planning?" It was carefully xmniubi.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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