Market tensions rise as the dollar falls, with Fed policies and inflation data in focus.

As the Thanksgiving holiday approaches,Foreign exchange swap transaction global market sentiment remains tense. The final trading session of the US financial markets before the holiday is particularly crucial, with investors closely monitoring important upcoming economic data and signals from the Federal Reserve.

Dollar Index Declines, Minutes Release Mild Signals
In the past two days, the dollar index has seen a considerable decline, recently quoted at 106.14, primarily influenced by the Federal Reserve's November meeting minutes. The minutes indicate that while some officials support gradual rate cuts, they remain cautious about potential future decisions on rate reductions.
Minneapolis Fed President Kashkari stated that further rate cuts in the December policy meeting remain "an appropriate choice," while San Francisco Fed President Daly emphasized avoiding deterioration in the labor market. These statements have strengthened market expectations of a shift in Fed policy. At the same time, interpretations from the "New Fed Newsletter" caution that if progress in lowering inflation stalls, the Fed may slow or even pause rate cuts.

This suggests that market bets on rate cuts may be overestimated, prompting traders to readjust dollar positions.

Key Economic Data Will Set Market Direction
The October PCE inflation data, to be released tonight, is considered the Fed's most closely watched inflation indicator. The market generally expects the overall PCE year-on-year increase to rise from 2.1% to 2.3%, with the core PCE increase possibly climbing from 2.7% to 2.8%. If the data exceeds market expectations, it could trigger significant dollar fluctuations.

Additionally, the initial jobless claims data from last week will also be announced tonight. This data is particularly noteworthy, as the Fed's policy focus gradually shifts towards economic growth goals, making the labor market performance crucial.

Analysts point out that these data will provide crucial guidance for the market trend after the Thanksgiving holiday. If surprises emerge, they could quickly establish a new trend for the dollar.

Policy and Trade Risks Intertwine, Market Caution Grows
Besides Fed policy, the market is closely monitoring the Trump administration's remarks on tariffs and their potential impact on risk assets. Although the first wave of tariff threats failed to bolster the dollar, the market remains highly vigilant about sudden shifts in US policy direction. If comprehensive tariff discussions arise, it could shock global risk assets, with investors' appetite for safe-haven assets possibly reversing at any moment.

Volatility May Intensify Amid Tensions
Confronted with multiple uncertainties, the market retains a tense atmosphere. Traders commonly adopt a "sell first, ask questions later" strategy to avoid potential risks. Although the remaining market trading time this week is limited, the performance of the dollar index, risk assets, and key economic data will be in the spotlight.

Investors need to closely watch tonight's economic data and further Fed policy statements while being alert to potential significant market fluctuations triggered by geopolitical risks and trade policies.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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