A collection of good and bad news affecting the foreign exchange market

On December 8, 2025, the foreign exchange market showed a long-short intertwined pattern amid the policy differentiation of global central banks and the game of economic data. The Federal Reserve's interest rate meeting is approaching, and expectations of interest rate cuts dominate the direction of the U.S. dollar; European currencies are supported by the central bank's hawkish signals, expectations of Japanese yen interest rate hikes are rising, and the RMB continues to have strong momentum. The following summarizes the core influencing factors of each major currency to provide reference for traders.

USD: Interest rate cut expectations suppress the market, and employment data temporarily supports the market. On the positive side, the U.S. dollar index initially stopped nine consecutive losses, rising slightly by 0.12% to 99.15 on December 7, avoiding an extreme unilateral decline. The number of people applying for unemployment benefits for the first time in the United States fell to a more than three-year low in the latest week. The solid performance of the job market eased concerns about a cooling economy. At the same time, the differentiation of U.S. technology stocks led to a slight return of funds, which indirectly stabilized the attractiveness of U.S. dollar assets.

But the negative factors are more persistent: CME Group’s FedWatch tool shows that the probability of a 25 basis point rate cut at the Federal Reserve’s interest rate meeting on December 9th and 10th has reached 85%. Speculations that White House economic adviser Hassett may take over as chairman of the Federal Reserve have been growing, and his dovish stance has led to market expectations that the pace of easing will accelerate. The www.xmtrade.orgbined debt of the U.S. Treasury has exceeded the $30 trillion mark, weakening the credit foundation of the U.S. dollar in the long term.

European currencies: policy strength supports the bottom line, but economic worries remain. The positive signals for the euro are clear. European Central Bank President Christine Lagarde emphasized that the current interest rate level is appropriate. Several Governing Council members stated that "it is too early to discuss interest rate cuts," confirming that the easing cycle is over. On December 7, the European Stoxx 600 index rose 0.6%, and the German DAX index led the increase of 0.9%, as economic recovery expectations increased. The British pound benefited from the Bank of England's first reduction in bank capital requirements in a decade, releasing credit vitality.

On the negative side, core inflation in the euro zone is still at 2.4%, higher than the 2% target, and price pressures have not disappeared. The EURUSD reported at 1.1638 on December 7, suppressed by the short-term rebound of the US dollar; the UK's service industry PMI in November was less than expected, and the resilience of economic growth is in doubt. The market predicts that the probability of the Bank of England cutting interest rates on December 18 is 88%, restricting the rise of the pound.

Japanese yen and www.xmtrade.orgmodity currencies: The benefits are concentrated, but the risk of volatility still exists. The yen has received clear positive news, as market expectations for the Bank of Japan to raise interest rates in December continue to rise, pushing the dollar against the yen to fall to 154.82, a new low since mid-November. Among www.xmtrade.orgmodity currencies, the Australian dollar rose to 4.6612 against the renminbi, and the New Zealand dollar against the renminbi regained the 4.08 mark, benefiting from the linkage effect of the rebound in www.xmtrade.orgmodity prices and the strengthening of the renminbi.

However, Bank of Japan review member Nakamura Toyaki warned that wage growth is not sustainable enough, raising doubts about the implementation of interest rate hikes; the Canadian dollar was affected by the Bank of Canada's interest rate cut bets and uncertainty about U.S. tariffs, and the U.S. dollar remained high and volatile against the Canadian dollar.

RMB: Unilateral strength is highlighted, external fluctuations arouse vigilance. On December 8, the onshore price of the US dollar against the RMB was reported at 7.0645, an increase of 32 points from the previous trading day, and showed an appreciation trend against the euro, pound and other currencies. The narrowing of interest rate differentials between China and the United States, foreign trade data in November exceeding expectations, and macroeconomic policy support have jointly supported the momentum of the yuan.

The potential risk is that the offshore RMB fell 142 points on the previous trading day, and external market fluctuations may be transmitted to the onshore market. Global trade protectionist measures still exist. If they affect the recovery of imports and exports, they will cause indirect disturbances to the RMB.

Generally speaking, the core focus of today’s foreign exchange market is the forward guidance of the Federal Reserve’s interest rate meeting. The US dollar may maintain a range of 98.8-99.3 in the short term. Operationally, it is recommended to focus on trading in the 1.162-1.168 range of the EURUSD, while also paying attention to expectations of Japanese yen interest rate hikes and the continuation of momentum after the RMB exchange rate breaks through the key level of 7.06.

The above content is all about "[XM official website]: Collection of good and bad news affecting the foreign exchange market". It is carefully www.xmtrade.orgpiled and edited by the XM foreign exchange editor. I hope it will be helpful to your trading! Thanks for the support!

Due to the author's limited ability and time constraints, some contents in the article still need to be discussed and studied in depth. Therefore, in the future, the author will conduct extended research and discussion on the following issues: