FXT foreign exchange analysis, the current US index high correction, the British economy is stagnant, limiting the rebound of the pound

On August 29, Beijing time, the Asian market morning, the US dollar index (104.0178, 0.0143, 0.01%) fluctuated narrowly, and is currently trading around 109.90. On Monday, the US dollar index retreated from a high level and finally closed down 0.18% at 104.01.

The dollar has strengthened in recent weeks as the US economy remains resilient and markets expect the Federal Reserve to maintain higher interest rates for a longer period of time. Investors have also raised their bets on the possibility of another rate hike this year after Federal Reserve Chairperson Jerome Powell said on Friday that further rate hikes may be needed to cool still-high inflation, while also pledging caution at an upcoming meeting.

According to CME Group's FedWatch tool, the market sees a 79% chance that the Fed will hold its ground in September, but the probability of a 25 or 50 basis point rate hike in November is now 62%, compared to 43% a week ago.

Monday's market volatility was relatively muted ahead of this week's high-profile data, which included European inflation and U.S. personal consumption spending data on Thursday, as well as Friday's U.S. employment report for August.

The dollar briefly touched a nine-month high against the yen (146.38, -0.1400, -0.10%) on Monday, falling against a basket of currencies as investors awaited key data to be released later in the week and closely watched for possible intervention to support the struggling yen. The dollar hit 146.74 against the yen on Monday, its highest level since Nov. 9, before closing 0.06% higher at 146.52.

As the yen weakens, traders are watching for any sign of intervention by Japanese authorities.

Kazuo Ueda, governor of the Bank of Japan, said on Saturday that the central bank would maintain its current monetary policy approach as core inflation remained "slightly below" its 2 per cent target.

The euro (1.0812, -0.0007, -0.06%) has weakened against the dollar over the past month on divergent economic prospects in Europe and the United States. The euro closed up 0.23% against the dollar on Monday at 1.0818. "The European economy is stagnating," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. Not only is the European Central Bank talking about further monetary tightening, but government budgets look set to be cut next year, he added. The Australian dollar (0.6446, 0.0019, 0.30%) closed up 0.39% at 0.6428 against the dollar on Monday. The Australian dollar has been hit hard this month as fears of a sluggish recovery in Asia following the pandemic weigh on sentiment.

Tommy Wu, senior economist at Commerzbank, said: "Market confidence is unlikely to improve much until there are signs that the weak economic momentum in Asia is turning around."

Sterling (1.2618, 0.0018, 0.14%) rallied against the dollar on Monday, closing up 0.19% at 1.2600. The Bank of England sent hawkish signals to stimulate the pound's rebound. However, the British economy was clouded, limiting the extent of the pound's rebound.

Bank of England Deputy Governor David Broadbent said on Saturday that monetary policy will likely have to remain in restrictive territory for some time, as the knock-on effects of price spikes are unlikely to fade quickly.

"The knock-on effects of rising prices - such as pressure on employers to raise wages, which led to record wage increases - are unlikely to subside as quickly as they did," Mr. Broadbent said at the annual meeting.

The policymaker said he expected energy and core commodity prices to soften in the coming months, but he also cautioned against caution in the face of rising wages.

Market participants appear convinced that the Bank of England does not need to raise interest rates as high as previously thought to bring inflation down to its target amid mounting recession fears. Indeed, after a widely expected 25 basis point hike at its September meeting, money markets are now pricing in little chance of further rate rises.

The UK economy is stagnating as the government fails to meet its goal of "raising levels and reducing inequality across regions of the country". Output is unlikely to return to pre-epidemic levels before 2024, meaning the economy will grow at zero for several years between 2020 and 2024. The economy is forecast to grow by 0.4 per cent this year and 0.3 per cent next, below the Bank of England's forecast of 0.5 per cent and 0.4 per cent. In addition, strikes in the UK have clouded the economic outlook. Health chiefs estimate that repeated strikes have cost the publicly funded health service £1 billion.

FXTForex brings you together to pay attention to the key data and major events on Tuesday

Institutional Perspectives Summary

1. Analysts are bearish on the pound;

Market analyst Sagar Dua said that the pound has rebounded after hitting a new 14-week low, but the British economy may face a recession due to the Bank of England's aggressive interest rate tightening cycle, so the overall bias remains bearish.

2. United Overseas Bank: The Australian dollar is still in the consolidation range against the US dollar;

According to UOB Group economist Lee Sue Ann and market strategist Quek Ser Leang, the Australian dollar is likely to trade between 0.6365 and 0.6500 in the coming weeks.

3. United Overseas Bank: USD/JPY may rise to 147.00 in the near future;

According to UOB economist Lee Sue Ann and market strategist Quek Ser Leang, continued upward momentum could prompt the USD/JPY to challenge 147.00 or even higher in the coming weeks.

4. UniCredit Bank: Investors still favor the US dollar.

Analysts at UniCredit in Italy said in a note that investors continue to be bullish on the dollar over other major currencies because they believe economic weakness outside the US is more severe than at home. Yield differentials could further favour the dollar. Federal Reserve Chairperson Jerome Powell said in Jackson Hole on Friday that interest rates could rise further but that the central bank would be cautious enough to give the dollar broad strength;

5. UBS: Prefer the euro over the dollar as the Federal Reserve is closer to ending interest rate hikes.

UBS Global Wealth Management believes the Federal Reserve is closer to ending interest rate hikes than the European Central Bank and is therefore more bullish on the euro than the dollar. Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note: "We continue to believe that the Fed is likely to be closer to ending the tightening cycle than the ECB, which is why we prefer the euro over the dollar." The underlying view at UBS Global Wealth Management is that the Fed has reached the peak of interest rates, although perceptions of the Fed are likely to change as the data changes in the coming weeks.