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Hello everyone, today Avatrade Aihua Foreign Exchange will bring you "[Aihua Ava Foreign Exchange Market Analysis]: Collection of positive and negative news that affects the foreign exchange market". Hope it will be helpful to you! The original content is as follows:
In the foreign exchange market, various news always affects the trend of the currency. For investors, accurately grasping these news is the key to formulating trading strategies. On March 11, many positive news and negative news were intertwined, affecting the pattern of the foreign exchange market.
1. Good news
(I) Related positive RMB
The RMB exchange rate mid-price increase: The People's Bank of China authorized the China Foreign Exchange Trading Center to announce that the RMB exchange rate mid-price in the interbank foreign exchange market on March 5, 2025 was RMB 1 USD to RMB 7.1714, up 25 points from the previous trading day. This increase hit its largest since January 21, 2025, showing the positive adjustment of the RMB exchange rate at the official pricing level, which will help enhance market confidence in the RMB.
Offshore RMB rose sharply against the US dollar: On March 5, the offshore RMB (CNH) against the US dollar was 7.2533 yuan at 5:59 Beijing time, up 496 points from the late New York trading on Monday. There have been constant positive news about the RMB recently. Previously, the Financial Secretary of the Hong Kong Special Administrative Region Government, Chan Mo-po, said that the Mainland and Hong Kong are making technical preparations for the implementation of the inclusion of RMB trading counters into the Hong Kong Stock Connect at full speed, which will promote more stocks to trade in RMB, improve market liquidity, and support the RMB exchange rate from the side. At the same time, on February 19, the Ministry of Finance of China successfully issued RMB 12.5 billion in treasury bonds to institutional investors in Hong Kong, with the subscription multiple reaching 2.86 times, indicating that global capital's enthusiasm for the allocation of RMB assets has been high, and it injected stronger support for the stabilization and rebound of the RMB exchange rate. Some overseas investment institutions believe that relevant Chinese departments have attracted more overseas capital to subscribe to offshore Chinese government bonds by moderately raising the issuance rate of offshore government bonds, further increasing theGlobal capital's enthusiasm for offshore Chinese government bonds has rapidly reduced offshore RMB short positions in some overseas hedge funds. As China's policy of stabilizing growth continues to increase its efforts and takes effect, China's economic fundamentals continue to stabilize and rebound. In addition, relevant Chinese departments have sent clear signals to stabilize the exchange rate, the foreign exchange market's expectations for the RMB are expected to continue to improve in the future.
(II) The scale of foreign exchange reserves increased
As of the end of February 2025, my country's foreign exchange reserves were US$322.72 billion, an increase of US$18.2 billion from the end of January, an increase of 0.57%. The State Administration of Foreign Exchange stated that in February, affected by macro policies and economic data of major economies, monetary policy expectations of major central banks, the US dollar index fell, global financial asset prices rose and fell, and the aihuaforex.combined effect of factors such as exchange rate conversion and asset price changes, foreign exchange reserve scale rose that month. The increase in foreign exchange reserves means that the country's intervention ability in the foreign exchange market has enhanced, which can stabilize the local currency exchange rate to a certain extent, plays a positive role in the stability of the RMB exchange rate, and also enhances international investors' confidence in RMB assets.
(III) Gold reserves continued to increase their holdings
At the end of February, the People's Bank of China's holdings in gold were 73.61 million ounces (about 2289.53 tons), an increase of 160,000 ounces (about 4.98 tons) month-on-month, increasing its holdings of gold for the fourth consecutive month. From the perspective of optimizing the international reserve structure, the demand for the central bank to increase its holdings of gold has increased. As an important international reserve asset, gold's holdings increase behavior reflects to a certain extent the country's considerations in stabilizing the foreign exchange reserve structure and enhancing its risk resistance. Against the backdrop of uncertainty in the global economic and political situation, the increase in gold reserves will help improve the stability of the country's financial system and will also have an indirect support for the country's currencies.
2. Negative news
(I) Risk of escalation of trade frictions
The Tariff aihuaforex.commission of the State Council announced that from March 20, 2025, tariffs will be imposed on some imported goods originating in Canada. Among them, 100% tariffs will be imposed on rapeseed oil, oil residue cakes and peas; 25% tariffs will be imposed on aquatic products and pork. The escalation of trade frictions often affects the exchange rate performance of currencies in relevant countries. The imposition of tariffs may lead to a decline in bilateral trade volume and impact on economic growth expectations, which in turn triggers changes in the market's currency demand for related countries. As an important trading country, Canada's move may put some downward pressure on the foreign exchange market, and will also have an indirect impact on other currencies that have close trade relations with Canada. For investors holding Canadian dollars or related currency assets, they need to pay close attention to the subsequent development of trade frictions and their impact on the exchange rate.
(II) Global economic data and inflation data are poor
U.S. non-agricultural data is lower than expected: The employment situation report released by the U.S. Bureau of Labor Statistics on March 7 showed that non-agricultural data in February was slightly lower than market expectations, and the unemployment rate unexpectedly rose to 4.1%. Specific data shows that the United States will be non-agricultural after the seasonal adjustment in FebruaryThe industry population increased by 151,000, lower than the market expectations of 160,000. The data in January fell from 143,000 to 125,000. As an important indicator for measuring the health of the US economy, its poor performance may affect market confidence in US economic growth, and in turn affect the trend of the US dollar. The weaker job market may lead to a decline in consumption capacity, affecting the economic recovery process, and causing the US dollar to face certain selling pressure in the foreign exchange market.
China's CPI and PPI data are not ideal: Data from the National Bureau of Statistics showed that China's CPI fell by 0.7% year-on-year in February (the previous value was 0.5%, the estimated -0.5%), and the PPI fell by 2.2% year-on-year (the previous value was -2.3%, the estimated -2.1%). The main reasons for the year-on-year CPI turn from rising to falling in February include the mismatched month of the Spring Festival, the relatively high aihuaforex.comparison base in the same period last year, the weather in February this year is conducive to the growth and transportation of fresh vegetables, and the price reduction and promotion of automobiles and other aihuaforex.commodities. Although the CPI continued to rise year-on-year after deducting the impact of the Spring Festival mismatch, the overall data performed poorly. CPI and PPI data reflect domestic price levels and industrial production prices. The unsatisfactory data may imply that there is insufficient momentum for economic growth, weakening support for the RMB exchange rate, and may trigger concerns about the RMB exchange rate in the foreign exchange market.
(III) The Federal Reserve maintains interest rates unchanged expectations
Feder Chairman Powell said the Federal Reserve is ready to maintain interest rates unchanged. Against the backdrop of uncertainty in global economic growth, the market originally had certain expectations for the Federal Reserve's interest rate cut, and the statement of maintaining interest rates unchanged may disrupt market expectations. Interest rates are one of the important factors affecting the currency exchange rate. Higher interest rates usually attract foreign capital inflows and increase the value of the currency. The Federal Reserve's interest rate remains unchanged, which may make the interest rate advantage of the US dollar no longer obvious, reducing the attractiveness of the US dollar in the foreign exchange market, thus posing a certain downward pressure on the US dollar exchange rate, and also affecting the exchange rate relationship between other currencies and the US dollar.
The foreign exchange market faced aihuaforex.complex news on March 11, with positive and negative factors playing against each other. Investors need to pay close attention to the subsequent development of these news, and carefully formulate foreign exchange trading strategies based on their own investment goals and risk tolerance.
The above content is all about "[Ava Ava Foreign Exchange Market Analysis]: Collection of Positive and Negative News that Influences the Foreign Exchange Market". It was carefully aihuaforex.compiled and edited by the Avatrade Foreign Exchange Editor. I hope it will be helpful to your trading! Thanks for the support!
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