More than a month has passed since the Federal Reserve’s interest rate resolution on September 22, and the next interest rate resolution will be on November 3 (2:00 am Beijing time). The fundamental driving force behind the rise of the US dollar index comes from the Fed rate hike . In the period when there was no shortage of resolution in November, the market's buying enthusiasm declined significantly. The US dollar index broke through the 114 mark in September. After experiencing a continuous decline this month, the latest price was 110.22 and is expected to fall below the 110 integer mark this week. Taking advantage of the weak US dollar index, EURUSD and gold rebounded rapidly, with the former returning to above the parity line, while the latter price exceeded $1,670 per ounce.
Next Thursday, the Federal Reserve will hold an interest rate decision. The probability of hiking interest rates at is extremely high, and the US dollar index may be boosted again. The US CPI growth rate in September was 8.2%, which has been declining for the fourth consecutive month, but the market still believes that the Fed will maintain its aggressive interest rate hike policy, because the growth rate of core CPI is still at a high level. The core CPI growth rate in September was 6.6%, surpassing the 6.5% in March, setting a record high of the year. Only when the growth rate of core CPI declines every other month can the market's expectations for the Fed's aggressive interest rate hikes. In fact, the rise in core CPI is based on the chain reaction after the rise in energy and food prices. As long as the growth rate of comprehensive CPI is effectively controlled, the core CPI can decline after lag for several months. The key factor in the continuous decline in the overall CPI growth rate comes from how international oil prices fluctuate.
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WTI crude oil price latest value is US$85 per barrel, which has dropped significantly compared with the year's high of US$129 per barrel. However, the decline in oil prices is not because the supply side returns to sufficient state, but because the growth rate of the global economy of has weakened and the total volume on the demand side has dropped significantly. The Russian-Ukraine conflict continues, and the export sanctions imposed by Western countries on Russian oil and natural gas by the United States have not changed. On October 5, the ministerial meeting of OPEC+ announced a 2 million barrels per day cut in order to prevent further declines in international oil prices. It can be foreseen that if WTI prices fall again, OPEC will also introduce greater production cut measures. Under the game between supply and demand, international oil prices are likely to fluctuate in the range of US$80 to US$90 for quite a long time.
The overall CPI growth rate in the United States in July, August and September fell, but it was only reflecting that the price fluctuations of , which fell from the 129 high to 85 US dollars. If WTI continues to fluctuate in the future, it will be difficult for the comprehensive CPI growth rate to further decline. Based on this, it is difficult for the Fed to end aggressively rate hikes in the short term. At least 75 basis points each rate hike in November and December this year is close to a "confirm" sure. EURUSD's return to parity and gold's $1,670 are both reactions to the temporary weakness of the US dollar index. When the comprehensive CPI growth rate bottoms out, the two are likely to return to a downward trend. Comprehensive view of the analyst team of
ATFX: Although the US dollar index will continue to rise in the long run, the temporary weakness cannot be ignored. The rebound in EURUSD and gold may continue ahead of the Federal Reserve's interest rate decision next Thursday.
ATFX risk warning and disclaimer: The market is risky, and investment should be cautious. The above content only represents the view of the analyst and does not constitute any operational suggestions.
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