The financial market continued to fluctuate in October. Although the US dollar index fell sharply from 114.80 to 110 at the end of September. But Fed officials maintained a hawkish stance on monetary policy. Coupled with the relatively stable economic data, the yield of US Treasury bonds rose to a new high in more than 14 years, and the US dollar index rose to 114. The uncertainties in the market continued which increases the volatility of the foreign exchange market. Estimated that the market conditions will be volatile before the end of the year, and the US dollar may enter a stage of rising but unstable. 

The war between Russia and Ukraine continues, and Ukraine has conquered a lot of lost territory with the support of weapons from Europe and the United States. However, Russia took a tough stance, threatening that the war would escalate uncontrollably, and even fired nearly 100 missiles into Kyiv. The deterioration of European-Russian relations and the unpredictable prospect of war will make the recovery of the European economy more and more difficult, and even affect the unity among EU member states. The euro has recently tried to counterattack, but the resistance at 0.99 (50-day SMA)/1.00 should be very large. If it loses 0.97, it may have to try 0.95 support again. Liz Truss made a political gamble after becoming the British Prime Minister and proposed a large-scale tax reduction plan, hoping to stimulate the economy through tax reduction to promote corporate investment and consumption of the rich. But the market did not accept it. The British pound sterling fell sharply to 1.03 and the bond yield rose to a 20-year high. The Bank of England was forced to buy bonds to stabilize confidence in market. Although Liz Truss finally significantly revised the tax reduction plan and gave up the wealth minister to protect herself, she still could not escape the fate of resignation and became the shortest-lived British Prime Minister for 45 days. The British pound sterling rebounded sharply but still failed to return to the 50-day moving average, and it is estimated that the resistance is very large at 1.14/1.15. 

The US dollar approached 146 against the yen in late September, triggering another Bank of Japan intervention since 1998, but failed to reverse the yen's weakness. US inflation is not under control and Fed officials reiterated that they would continue to raise interest rates. The Bank of Japan insisted on loose monetary policy, the interest rate spread between the two countries will only further widen, and the US dollar rose nearly 152 before ushering in another wave of suspected intervention by the Bank of Japan. However, the Ministry of Finance Officer, Kanda Masato declined to comment on this, but reiterated that he would continue to deal with excessive market behavior and was trying to fight against market speculators. However, he pointed out that the yen is too weak to do more harm than good. Without the coordination of monetary policy changes, it is believed that the central bank alone will not be able to prevent the yen from falling. Recently, some media in the United States pointed out that the Federal Reserve is preparing to raise interest rates in November while discussing whether to slow down the pace of future interest rate hikes, or to give some help to the Bank of Japan's intervention.

Patrick Law

General Manager of Hantec Group