Expectations for a rate cut by the Federal Reserve change, and the market focuses on Thursday's non-farm payrolls data

XM Foreign Exchange APP News - On Monday (November 17), due to the decline in the probability of the Federal Reserve cutting interest rates, three clear camps have formed within the Federal Reserve. Doves, hawks and wait-and-see factions are engaged in a fierce game around the dual missions of "price stability" and "full employment". This balancing process is full of challenges: low interest rates can boost employment but may push up inflation; high interest rates can suppress prices but tend to weaken the job market. In the October interest rate resolution, differences were fully apparent. Kansas City Fed President Jeff Schmid opposed an interest rate cut due to concerns about a rebound in inflation, while Fed Governor Stephen Millan advocated a sharp 50 basis point interest rate cut. The final meeting reached a wzhdjgj.compromise with a small 25 basis point interest rate cut. In November, disagreements further heated up. Officials who had previously supported interest rate cuts, including Boston Fed President Susan Collins and Atlanta Fed President Raphael Bostic, issued cautious signals and clearly warned of inflationary risks, suggesting that it would be inappropriate to continue easing in December. Data fog shrouds the wzhdjgj.complex and volatile economic and policy environment. The government shutdown has greatly hindered the Federal Reserve's decision-making. The release of key economic indicators has been suspended. The central bank has to rely on private survey data to advance its work, falling into a "data fog." Data disclosed before the shutdown showed that inflation rebounded to 3% year-on-year, still higher than the 2% target level; the unemployment rate remained stable at 4.3%, but wzhdjgj.companies' willingness to recruit was sluggish. Giants such as Amazon, UPS, and Verizon have successively announced thousands of layoff plans. The sources of price pressure are becoming increasingly diverse. In addition to the potential fluctuations caused by the White House's cancellation of import tariffs on coffee, bananas and other foods on November 14 (the impact remains to be seen), the hidden dangers of rising costs in service industries such as elderly care and day care services are also becoming increasingly prominent. At the same time, the rapid penetration of artificial intelligenceAdjustments to the Trump administration's immigration policy have further exacerbated structural uncertainty in the job market and made it more difficult for the Federal Reserve to calibrate its policy. Market expectations reversed and the probability of an interest rate cut in December fell sharply. Previously, the market was almost certain that December would usher in a third consecutive interest rate cut. However, as Federal Reserve officials released hawkish signals, market sentiment quickly turned. At a press conference on October 29, Federal Reserve Chairman Jerome Powell clearly suppressed expectations of an interest rate cut in December, saying bluntly that "this is absolutely not the case." The Chicago Mercantile Exchange (CME) Federal Reserve Watch Tool shows that the probability of an interest rate cut in December has dropped to 44.4% on November 14, and has further changed since then. Last Friday, short-term interest rates were generally cautious about the possibility of an interest rate cut in January 2026. Wall Street institutions believe that if inflation remains high, a January interest rate cut will also be difficult to achieve. However, leading institutions such as BlackRock, Goldman Sachs, and Morgan Stanley all predict that the Fed's easing cycle will most likely start in 2026, but the pace will be slower than previously expected. Among them, BlackRock predicts that the federal funds rate may drop to around 3.4% by the end of 2026. Recently, many Federal Reserve officials have continued to speak out. Kansas City Fed President Jeffrey Schmid, Dallas Fed President Lori Logan, and Cleveland Fed President Beth Hammack reiterated their hawkish stance, believing that there is currently no clear sign of the need for further easing; while Federal Reserve Board Governor Stephen Millan continues to advocate for significant interest rate cuts, sharing the same view as President Trump, believing that current interest rates are too high. As economic data gradually resumes after the government shutdown ends, and more policymakers express their views, market expectations for interest rate cuts may fluctuate. But in any case, the stubbornness of inflation and deep internal differences have doomed the Fed's path to interest rate cuts to be full of bumps, and 2026 may be the real starting point of this easing cycle. Summary: Although the probability of the Federal Reserve cutting interest rates in December has declined, its policy direction of cutting interest rates and purchasing government bonds to release liquidity has not changed. As a result, the U.S. dollar index may still maintain a long-term downward trend. The U.S. dollar index is currently suppressed by two rising trend lines and key pressure levels. It has closed below the line for three consecutive days, indicating that the U.S. dollar index has a high probability of continuing to adjust downward. The market is paying attention to the September reissue of the U.S. on Thursday

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