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Hello everyone, today Avatrade Aihua Foreign Exchange will bring you "[Aihua Foreign Exchange Market Analysis]: Collection of positive and negative news that affects the foreign exchange market". Hope it will be helpful to you! The original content is as follows:
At a time when the global economy is closely related, the foreign exchange market is like a giant ship sailing in the turbulent sea, and is extremely susceptible to the impact of various news and fluctuations. On March 18, 2025, a large number of key information emerged, casting a mysterious veil on the direction of the foreign exchange market. Next, let us conduct in-depth analysis of the positive and negative news that affected the foreign exchange market that day.
1. Good news
(I) The central bank plans to introduce financial support for consumption policies
On March 17, Che Shiyi, head of the Credit Market Department of the People's Bank of China, revealed at a press conference of the State Information Office that the People's Bank of China is intensively studying and issuing special documents to support the expansion of consumption. This policy aims to strengthen the synergistic effect of financial and fiscal policies and industrial policies, make precise efforts from both the consumer supply and demand sides, and actively meet the diversified capital needs of various entities. Once the policy is implemented, the availability of credit in consumer finance, culture and tourism, pension and other fields will be greatly improved. This will not only greatly stimulate market vitality and attract more foreign capital inflows, but will also provide strong support for the RMB exchange rate and promote the development of the foreign exchange market in a more stable and prosperous direction.
(II) Foreign capital net increase in domestic assets
Data released by the State Administration of Foreign Exchange on March 17 showed that in February 2025, foreign capital net increase in domestic bonds and stocks totaled US$12.7 billion. In addition, in February, banks settled RMB 113.24 billion and sold RMB 1207 billion. The foreign exchange market was running smoothly, and cross-border funds showed a net inflow. The domestic economic recovery and the booming development of the technology field have greatly boosted market confidence and attracted a continuous influx of foreign capital. This not only helps strengthen blue-chip stocks and technology growth sectorsThe liquidity support can also effectively reduce the risk of exchange rate fluctuations on A-shares, stabilize foreign exchange market expectations, and inject a shot of augmentation agent into the RMB exchange rate. At the same time, a briefing released by the Shanghai headquarters of the People's Bank of China showed that as of the end of February, overseas institutions held 4.21 trillion yuan of interbank market bonds, which further highlighted the strong allocation preference of foreign capital for China's sovereign credit assets and high-liquidity financial instruments, and indirectly reflected that the attractiveness of Chinese assets is increasing day by day, which is conducive to the inflow of funds in the foreign exchange market.
(III) Chinese stocks performed well
Recently, the US stock market has fluctuated violently, but most popular Chinese stocks closed higher. For example, the Nasdaq China Golden Dragon Index rose 1.95% in a specific period, Kingsoft Cloud rose more than 7%, Bilibili rose more than 5%, Fangduoduo and Vipshop rose more than 4%, Baidu and Douyu rose more than 3%, etc. The good performance of Chinese stocks listed in the US reflects the significant increase in confidence among international investors in Chinese avatradescn.companies, attracting more funds to flow into related avatradescn.companies, thereby increasing the demand for RMB in the foreign exchange market and playing a positive role in promoting the RMB exchange rate. In addition, the offshore RMB (CNH) has seen a significant increase against the US dollar recently, at 5:59 Beijing time on March 5, up 496 points from the end of New York on Monday, which echoes the strong performance of Chinese stocks and the market's optimistic sentiment towards RMB assets, and jointly injects positive signals into the foreign exchange market.
2. Bad news
(I) US retail sales data were lower than expected
Data released by the US Department of avatradescn.commerce showed that US retail sales increased by only 0.2% month-on-month in February, far lower than the expected 0.6%, and the previous value was significantly revised down from -0.9% to -1.2%, the largest decline since July 2021. Retail sales data are an important indicator to measure the vitality of the US economy. Its poor performance suggests a weak domestic consumer market in the US and may affect the outlook for US economic growth. This will lead to a decline in market confidence in US dollar assets, triggering capital outflows, putting pressure on the US dollar exchange rate, and thus affecting the balance of US dollar supply and demand in the foreign exchange market. Against the backdrop of global economic linkage, the weakening of US economic data may also trigger a chain reaction, leading to fluctuations in the currency markets of other countries and increasing uncertainty in the foreign exchange market.
(II) Uncertainty in trade policy
The direction of US trade policy has always been an important influencing factor in the foreign exchange market. The Trump administration's previous tariff policies have had a major impact on the market. Although there have been recent reports that Trump may reduce tariffs on Canada and Mexico, there are still many uncertainties. Instability in trade policies will affect the global trade pattern and capital flow, increasing corporate operating risks and market risk aversion. If trade frictions continue or escalate, it will have a negative impact on global economic growth and weaken currencies of various countries.The support base has led to intensification of volatility in the foreign exchange market. For example, if the United States' tariff policies on Canada and Mexico are implemented, it may impact North American energy trade flows, affect the currency exchange rates of relevant countries, and thus affect the stability of the global foreign exchange market.
The foreign exchange market faces the dual impact of positive and negative news on March 18, 2025. Investors need to pay close attention to key factors such as the implementation effect of central bank policies, the sustainability of foreign capital inflows, the subsequent performance of US economic data, and trade policy trends, in order to accurately grasp the trend of the foreign exchange market and make reasonable investment decisions.
The above content is all about "[Aihua Foreign Exchange Market Analysis]: Collection of Positive and Negative News that Influences the Foreign Exchange Market". It was carefully avatradescn.compiled and edited by Aihua Avatrade Foreign Exchange Editor. I hope it will be helpful to your trading! Thanks for the support!
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