A collection of positive and negative news that affects the foreign exchange market

1. Economic data: Market fluctuations under the interweaving of bulls and bears

(I) US money supply and fiscal trends

Money supply shrinks: After the seasonally adjusted US money supply in May, the amount of M2 was US$21862.5 billion, and the amount of M1 was US$18668 billion, both of which declined from the previous value. A decrease in money supply may suggest a decline in economic activity, and the long-term confidence of the US dollar is facing a test, which is theoretically negative. However, in the short term, the market is more concerned about the Fed's policy statement and needs to be xmmarkets.cnprehensively judged in xmmarkets.cnbination with Powell's testimony.

Treasury bond auction performance weakly: the total amount of the three-month Treasury bond auction in the United States on June 23 was US$77.809 billion, lower than the expected US$79.226 billion; the bid multiple was 2.99, far lower than the previous value of 3.49. This reflects the weakening market demand for short-term Treasury bonds, which may be related to investors' concerns about US fiscal stability, and indirectly pressure the dollar.

(II) European and British economic indicators

Germany IFO business prosperity index is under pressure: Germany's expected IFO business prosperity index in June is 88.3, ​​lower than the previous value of 90.1. If the actual data is less than expected, it may intensify market concerns about the weak economy of the euro zone and suppress the euro. Economic recovery and differentiation within the euro zone (such as the initial value of French manufacturing PMI is lower than expected) has put pressure on the euro. If the IFO data deteriorates further, it will strengthen the downward trend of the euro.

UK industrial orders improved beyond expectations: The difference in CBI industrial orders in June was -18, better than the expected -25 and the previous value -33. This data shows that the marginal recovery of demand in the UK's industrial sector, coupled with the policy tone of the Bank of England's maintaining interest rates unchanged, may provide short-term support for the pound. ButThere is still uncertainty in the reshaping of trade relations after Europe, and the rebound space of the pound is limited.

(III) Differentiation of Canadian inflation expectations

Canada's May CPI monthly rate is expected to be 0.5%, and the previous value is -0.1%. If the actual data meets expectations, it may alleviate market concerns about Canadian economic stagflation and support the Canadian dollar; if it is lower than expectations, it will strengthen the weak pattern of the Canadian dollar dragged down by the plummeting crude oil price. Current crude oil prices (WTI fell to $68.51 per barrel) have put pressure on the Canadian dollar. If inflation data is weak, it may exacerbate the downward risk of the Canadian dollar.

2. Central Bank policy: Interest rate resolution and officials' statements dominate market expectations

(I) Federal Reserve: Internal discrimination under cautious wait-and-see

Powell's testimony sends dovish signals: Federal Reserve Chairman Powell said in the House of Representatives that there is a high degree of uncertainty in the impact of tariffs on inflation, and the Federal Reserve will maintain a "wait-and-see mode." He stressed that the current interest rate is "slightly restrictive", but the possibility of a rate cut within the year is not ruled out. This statement is in contrast to the position of seven officials in the dot chart supporting the maintenance of interest rates, showing that there are differences within the Federal Reserve on policy paths. The market is interpreted as dovish, which may suppress the upward space of the US dollar.

Expectations for interest rate cuts have heated up: Although Powell did not specify the time point for interest rate cuts, the market's probability of interest rate cuts in July has risen to 23%. If subsequent inflation data (such as the June PCE price index) show that the tariff transmission effect is limited, the Federal Reserve may restart interest rate cuts in September. The rise in interest rate cut expectations is usually bad for the US dollar, but we need to be wary of safe-haven demand caused by geopolitical risks (such as the escalation of conflict in the Middle East).

(II) ECB: The easing cycle is xmmarkets.cning to an end

Lagarde reiterates the priority of interest rate tools: ECB President Lagarde said that interest rates are the best tool to curb inflation. Although the ECB toolbox has other tools, it prefers to use interest rates. This statement implies that the ECB may continue to maintain its easing policy, but the market expects that the easing cycle is xmmarkets.cning to an end. The initial value of the manufacturing PMI in the euro zone in June was lower than expected (47.8). Under the pressure of economic weakness, the European Central Bank has limited room for interest rate cuts, and the euro will still be under pressure in the short term.

Structural Reform and Euro Internationalization: Lagarde emphasized in recent articles that Europe needs to enhance the Euro international status by strengthening geopolitical credibility, economic resilience and institutional integrity. The EU's move to promote single-market construction and capital market alliances may benefit the euro in the long run, but it will be difficult to offset the impact of weak economic data in the short term.

(III) Bank of England: Stability is the top priority

Bank of England Governor Bailey said when attending the meeting of the House of Lords Economic Affairs xmmarkets.cnmittee that the Bank of England will continue to maintain interest rates unchanged to cope with inflationary pressures and geopolitical risks. UK CPI rose 4.6% year-on-year in May, still higher than the central bank's target of 2%. The expectation of a rate hike cools down but the possibility of a rate cut is low. The pound is relatively resistant to declines among European currencies, but we need to pay attention to the progress of post-Brexit trade negotiations.

Three, Geopolitics: Middle East conflict and NATO summit disturb the market

(I) The situation in the Middle East escalates

Israeli air strikes on Iran's nuclear facilities: Israel launches air strikes on three nuclear facilities in Iran, Fordo, Natanz and Isfahan, and Iran claims to reserve the right to counterattack. Although the risk of blockade of the Strait of Hormuz (bearing 20% ​​of global oil transportation) is low (about 10%), it is still a potential catalyst for a rebound in crude oil prices. If the conflict escalates further, it may push up oil prices, which will benefit the Canadian dollar and Australian dollar; on the contrary, the decline in geopolitical risk premium will intensify the decline in xmmarkets.cnmodity currencies.

Trump's military threat: U.S. President Trump said that if Iran cannot achieve peace, the United States will continue to attack. This remark has aggravated the market's concerns about the full conflict between the United States and Iran, and demand for gold safe-haven has rebounded (COMEX gold futures hit $3,343 per ounce), and safe-haven currencies such as the Japanese yen and Swiss franc may benefit.

(II) NATO Summit and Trade Policy

Trump attended the NATO Summit: NATO Heads of State and Government held a summit in The Hague from June 24 to 25, and Trump confirmed his attendance. The market is concerned about the differences between the United States and Europe on issues such as trade policies and defense spending. If the negotiations break down, it may intensify trade frictions between the United States and Europe and suppress the euro; if a xmmarkets.cnpromise is reached, it may boost risk appetite and be negative for safe-haven currencies.

After the global tariff war: There is still uncertainty about the transmission effect of the "global reciprocal tariff" policy implemented by the Trump administration on inflation. The Fed expects tariff costs to be absorbed by businesses by about 40%, but consumer price pressures may emerge after the summer. If U.S. inflation rebounds beyond expectations, it may strengthen the hawkish position of the Federal Reserve and support the US dollar.

IV. Market sentiment and other factors

(I) The plummeting crude oil price impacted xmmarkets.cnmodity currencies

Georological risk premium faded: Iran's retaliatory attacks did not cause any substantial casualties, the market interpreted it as a "performance conflict", and crude oil fell by more than 7% in a single day (WTI fell to US$68.51 per barrel). xmmarkets.cnmodity currencies such as the Canadian dollar and Australian dollar are directly impacted. If oil prices continue to weaken, they may further drag down the relevant currencies.

Supply and demand fundamentals deteriorated: OPEC+ has continuously increased production (411,000 barrels per day per month from May to July), coupled with the increase in supply of non-OPEC+ countries, the market's concerns about crude oil surplus have intensified. EIA predicts that global crude oil demand may shrink by 1.3% in 2025, the first negative growth since 2009, and weak demand signals suppress the rebound space of oil prices.

(II) U.S. technology stocks under pressure and risk aversion sentiment heats up

Nasdaq Index fell: U.S. technology stocks (such as Intel fell 6% in a single day) led the market, the Nasdaq Index fell, the Dow Jones Index fluctuated extremely small, and the S&P 500 Index fell. A decline in risk appetite may prompt funds to flow into safe-haven assets, which is beneficial to the yen and Swiss francs.

Gold safe-haven demand rebounded: xmmarkets.cnEX gold futures hit $3343/ounce during trading, and physical gold ETF positions increased by 8.2 tons, showing geopolitical risks and market uncertainty drive risk aversion demand. The negative correlation between gold and the US dollar (-0.83) may limit the dollar's gains, but if the Fed's expectation of a rate cut in interest rates heats up, the room for gold's upward rise will be further opened.

5. Operational suggestions: Strategic choices under the long-short game

(I) Analysis of major currency pairs

Euro/USD (EUR/USD): The weak economic data in the euro zone coupled with the ECB's easing position, the euro will still be under pressure in the short term. If Germany's IFO business prosperity index is lower than expected, the euro may fall below the 1.08 mark; otherwise, if the data exceeds expectations, it may rebound to 1.10.

GBP/USD: Improved industrial orders in the UK support the pound, but Brexit uncertainty limits gains. Pay attention to the breakthrough situation in the 1.25-1.27 range. If you stand firm at 1.27, you may open upward space.

Dollar vs. Japanese Yen (USD/JPY): Geographical risks are heating up to support the yen, but the Fed's expectation of interest rate cuts may suppress the US dollar. If the US dollar index falls below 99, USD/JPY may fall below 135; conversely, if geopolitical risks are alleviated, it may rebound to 140.

U.S. dollar against Canadian dollar (USD/CAD): The plummeting crude oil drags down the Canadian dollar. If WTI crude oil falls below US$67, USD/CAD may rise to 1.35; if oil prices rebound, it may fall back to 1.32.

(II) Risk warning

Data risk: Focus on the release of data such as Germany's IFO business prosperity index, Canada's May CPI monthly rate, and the United States Consultative Conference Consumer Confidence Index. If the data deviates greatly from expectations, it may cause severe market fluctuations.

Geopolitical risks: Events such as the escalation of the Middle East conflict and the breakdown of NATO summit negotiations may trigger a surge in risk aversion sentiment. We need to be wary of the pulsed rise of safe-haven assets such as gold and the Japanese yen.

Central Bank Policy Risks: Speeches by Federal Reserve Chairman Powell and European Central Bank President Lagarde may send out policy signals beyond expectations, and it is necessary to pay close attention to changes in their wording.

(III) Strategy Suggestions

Short-term trading: Euro and the US dollar can sell high and buy low in the range of 1.0850-1.0950, stop loss at 30 points each; GBP and the US dollar focus on breaking through the range of 1.2550-1.2650, chase orders after breaking through, stop loss at 40 points.

Middle-line layout: If the Fed releases a dovish signal, it can short the US dollar against the yen at highs, with a target of 135 and a stop loss of 142; if the crude oil price rebounds to US $75, it can long the US dollar against the Canadian dollar, with a target of 1.32 and a stop loss of 1.36.

Hedging strategy: Gold ETFs (such as ICBC Gold ETF Link E) can be used as georisk hedging tools. It is recommended that the allocation ratio shall not exceed 10% of the total position.

Summary: On June 24, 2025, the foreign exchange market faced a cross-border factor, weak economic data, central bank policy differences, geopolitical risks and crude oil price fluctuations constitute the main driving factors. Investors need to be cautious, pay close attention to key data and events, flexibly adjust positions, and use a xmmarkets.cnbination of technical analysis and fundamental analysis to seize potential trading opportunities.

The above content is all about "【XM Forex Official Website】: Collection of Positive and Negative News that Influence the Foreign Exchange Market". It was carefully xmmarkets.cnpiled and edited by the XM Forex editor. I hope it will be helpful to your trading! Thanks for the support!

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