The Bank of Japan releases the strongest interest rate signal! Super cycle preview begins?

In the past week, as U.S. economic data such as "small non-farm payrolls" and PCE generally supported expectations of the Federal Reserve cutting interest rates next week, panic on Wall Street came and went in a hurry, and investors returned to low-volatility, high-confidence bets on risky assets.

The three major U.S. stock indexes all rose, with all recording increases of 0.3% or more throughout the week. The S&P 500 is just one step away from its all-time high in October and has posted four consecutive days of gains along with the Nasdaq. The Russell 2000 small-cap index retreated from Thursday's record closing price.

The 10-year U.S. bond experienced its worst weekly performance since June, rising 12 basis points for the week to close at 4.138%. Nonetheless, the U.S. dollar index traded cautiously amid expectations of a rate cut from the Federal Reserve, hovering near the 99 mark at the end of the week.

As the Fed’s preferred inflation indicator remained below 3% in September, it is unlikely to prevent the Fed from cutting interest rates at next week’s meeting. International spot gold rose in the short term on Friday, once approaching the 4260 mark, but then fell back from the high, giving up all the gains during the day, closing below the 4200 integer mark, recording a weekly decline of 0.5%. International spot silver historically stood above the 59 mark, setting a new record high for the second consecutive day, closing up 3.32% for the whole week.

The Federal Reserve’s interest rate decision will be the focus next week. After recent weak U.S. employment data, the market is generally expected to cut interest rates. The Reserve Bank of Australia, the Bank of Canada and the Swiss National Bank will also announce interest rate decisions.

Foreign exchange market: The U.S. dollar index fluctuated and weakened throughout the week. It fell for three consecutive days at the beginning of the week. The market continued to increase its bets on the Federal Reserve cutting interest rates next week. Initial jobless claims ThursdayGold data was significantly better than expected, allowing the dollar to rebound slightly, but overall it was still near a five-week low. On Friday, the U.S. index closed at 99, falling for the second consecutive week. In terms of non-U.S. currencies, the euro, pound, and Australian dollar all showed varying degrees of gains against the U.S. dollar this week against the backdrop of general pressure on the U.S. dollar. Among them, the Australian dollar and pound performed relatively strongly, and the euro also rose steadily. As the Bank of Japan raises the probability of raising interest rates in December, the U.S. dollar is expected to post its biggest weekly decline against the yen since the end of September.

Gold market: In terms of precious metals, overall, gold prices are consolidating at a high level, while silver is more volatile but has a stronger trend. At the beginning of the week, gold rose to a six-week high, supported by a weak U.S. dollar and expectations of interest rate cuts, while silver approached $59, a record high, mainly due to supply shortages and soaring industrial demand. But then, affected by factors such as profit-taking and employment data, gold and silver fell into shock. On Friday, spot gold and silver closed at 4196.14 and 58.25 US dollars per ounce respectively, down 0.5% and up 3.32% respectively. Since the beginning of this year, silver has increased by more than 100%, far exceeding the increase of spot gold.

Crude oil market: The core driving force of international oil prices cn.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.comes from geopolitics. Damage to oil pipelines and the situation in Venezuela pushed up risk premiums on Monday, sending oil prices sharply higher. Subsequently, the market fluctuated violently, and profit-taking led to a brief correction in oil prices. However, as the market judged that the Russia-Ukraine peace talks would not lead to the relaxation of sanctions in the short term, oil prices rebounded again.

Review of Weekly News

1. Hassett may be appointed chairman of the Federal Reserve. How likely is it to cut interest rates next week?

Trump canceled the interview for the Federal Reserve chairman candidate scheduled for this week and plans to announce the new chairman in early 2026, hinting that he may nominate Hassett, director of the National Economic Council. But the market is worried that it will cut interest rates aggressively to please Trump, and Hassett needs to be approved by the Senate. Trump said Hassett was not his first choice and originally wanted Treasury Secretary Bessant to take over but was rejected. Trump's staff discussed that if Hassett is appointed, Bessent may also serve as director of the White House National Economic Council. Bessent also plans to promote reform of the Federal Reserve.

The number of people filing for unemployment benefits in the United States fell to 191,000 this week, a three-year low. The market believes that this provides room for the Federal Reserve to cut interest rates. The probability of an interest rate cut in December has greatly increased. Traders are betting that the probability of a 25 basis point interest rate cut next week is over 90%. Hassett also said that the Federal Reserve has reached a consensus on cutting interest rates by 25 basis points next week. Powell's speech on Tuesday did not touch on monetary policy. The Federal Reserve will announce its December interest rate decision at 3 a.m. next Thursday. In addition, after Powell ends his term, he may remain in office until January 2028 to defend the independence of the Federal Reserve.

2. The Bank of Japan releases the strongest signal to raise interest rates, which may be acquiesced by Sanae in the high market

Bank of Japan Governor Kazuo Ueda issued the clearest signal to raise interest rates this week. The bank’s monetary policy meeting on December 18th and 19th may achieve the first interest rate increase since January this year. The policy interest rate was raised from 0.5% to 0.75%, reaching the highest level in 30 years. Ueda Kazuo said that he will make timely decisions after weighing the pros and cons, and the possibility of realizing the economic outlook has increased.Financial conditions remain loose after raising interest rates. He also mentioned that cn.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.communication with Prime Minister Takaichi Sanae was smooth, suggesting that the government acquiesces to the austerity policy. The pressure on the yen to depreciate increased at the end of the year. Takaichi Sanae's adviser did not oppose an interest rate increase. Nagahama Toshihiro said that if the yen continues to weaken, the prime minister may accept an interest rate increase in December.

Strong signals of interest rate hikes triggered a wave of selling in the Japanese stock and bond markets. The bond market was sensitive to interest rate hikes, and the government bond yield curve moved significantly upward. The yield on newly issued 10-year government bonds rose to the highest level since July 2007. The market is worried about the reversal of the Japanese yen carry trade, but analysts believe that the impact of this round is less than last year, because carry trade positions have been reduced, expectations of interest rate hikes have been partially digested, and global market spillover risks are controllable.

3. Global copper prices have soared to new highs, and the LME has seen the largest cancellation of warehouse receipts in ten years

Recently, global copper prices have been driven by multiple factors to soar to record highs. Strong demand for refined copper in the United States has caused global inventory mismatches, with LME inventories falling below 100,000 tons and spot premiums intensifying.

The main reasons for the increase in copper prices are: first, the global copper supply is tightening, and the collapse of the Chilean mine has caused Glencore to lower its copper production forecast for this year and 2026; second, the market predicts that the Trump administration may impose tariffs on copper next year, and a large amount of metal will be shipped to the United States, and global inventories may fall to critical lows; third, global demand for copper is strong, and the development of AI has driven explosive growth in demand for power grid and power infrastructure upgrades. The International Energy Agency said that the global copper supply gap will reach 20% by 2035.

High physical withdrawals and falling inventories have exacerbated concerns about supply shortages, driving up copper prices and spot premiums. The volume of canceled warehouse receipts in Asian warehouses on the London Metal Exchange surged to a ten-year high, and Mercuria Energy Group withdrew approximately 50,000 tons of copper, worth approximately US$500 million, pushing LME copper prices closer to historical highs of over US$11,500 per ton. JPMorgan Chase believes that as long as the threat of U.S. tariffs on refined copper exists, the downward trend in LME inventories will be difficult to reverse, and copper prices will enter a stage of greater volatility and a clearer upward trend.

4. Five hours of secret talks between the United States and Russia yielded no results, and Putin visited India to challenge U.S. pressure

This week, Putin met with U.S. Special Envoy Witkov and Trump’s son-in-law Kushner in the Kremlin. The meeting lasted nearly five hours to discuss a peaceful solution to the Russia-Ukraine conflict. The Kremlin called the talks "useful and constructive" but said the two sides had not cn.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.compromised on Ukraine's territorial issues. Trump said the talks were good but did not know the outcome. The U.S. delegation discussed the revised peace plan this time. The previous "28-point" draft was criticized by Ukraine and its allies for favoring Russia. Putin rejected some contents and warned that if attacks on Russian oil tankers increase, Russia may attack ships supporting Ukraine.

Zelensky said that the new version of the peace plan is better than the original one and will discuss key issues with Trump. The Ukrainian special envoy went to the United States to participate in a new round of talks. The European Union warned the United States not to put pressure on Ukraine. In addition, Putin visited India this week to challenge U.S. pressure on India to purchase Russian oil, saying that India should enjoy the same rights when the U.S. imports Russian nuclear fuel. This visit aims to strengthen relations between Russia and India. India’s share of oil imports from Russia has increased to 36%, making it the second largest buyer. The two sides plan to promote cooperation in multiple fields..

5. Trump News: Tightening immigration, deploying robots, or withdrawing from the U.S.-Canada-Mexico Agreement

The Trump administration plans to expand the travel ban to about 30 countries and restrict immigration due to the attack on two National Guard members in Washington. Trump once said that he would "permanently suspend immigration from all third world countries." The US Citizenship and Immigration Services has suspended the acceptance of immigration applications from 19 restricted countries and will review the approval of immigrants after the Biden administration takes office. The new list is to be announced. At the same time, immigration work visas are tightened, and work permits for asylum seekers and others are reduced from five years to 18 months, affecting hundreds of thousands of industries and causing concern among immigration advocates and employers.

Five months after laying out AI, the Trump administration turned to robotics. Secretary of cn.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.commerce Lutnick met with industry executives to promote development, and relevant executive orders may be issued next year. The U.S. Department of Transportation will establish a robotics working group and Congress will advance relevant legislation.

U.S. Trade Representative Greer said that Trump may withdraw from or split up the United States-Mexico-Canada Agreement (USMCA) next year. Because of his pursuit of a "good deal," he once considered tearing up the North American Free Trade Agreement (NAFTA) and proposed that the United States negotiate with Canada and Mexico separately. The reason is that the economic relations between the three countries are very different.

The above content is all about "[XM Foreign Exchange Market cn.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.commentary]: The Bank of Japan releases the strongest interest rate signal! Super cycle preview starts?" It is carefully cn.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.com.xmxyly.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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