The minutes of the June Federal Reserve meeting, which has attracted much market attention this week, are about to be released. Judging from the interest rate hike of 75 basis points in mid-June, there is a high probability that the June meeting minutes will be more hawkish and will continue to emphasize curbing inflation. determination to increase. What investors want more is to find out from the minutes of this meeting the possible path of future interest rate hikes and whether the Fed has evaluated the impact of continued interest rate hikes on the economy. This will also further guide the subsequent trend of the US dollar and US stocks.
Since this year, the Federal Reserve has raised its benchmark interest rate by 150 basis points. The market is generally worried that the US economy has actually begun to enter a recession. However, judging from Powell's recent speech, he has not changed his determination to deal with inflation, and said that he must persist even if the process may be "painful".
Federal Reserve Chairman Jerome Powell pointed out in a previous speech that he is more worried about the risk of being unable to curb high inflation than the possibility of raising interest rates too high and pushing the economy into recession. He believes the Fed must raise interest rates quickly, even if doing so would increase the risk of a recession, to avoid the more serious economic risk of rising inflation becoming entrenched. As for the extent of raising interest rates, he said that the Fed does not have the capital to gradually raise interest rates due to concerns that high inflation in the recent period may lead consumers and price setters to expect prices to continue to rise.
Powell's words still did not change the main tone of the Fed's hawkish stance on raising interest rates, but they also reflected the Fed's desire to find a balance between mitigating economic recession and effectively curbing inflation. Judging from market reaction, it is generally believed that interest rate hikes will continue. According to CME Group's "Fed Watch" tool, the market currently predicts that the probability of the Fed raising interest rates by 75 basis points in July is 85.6%, and the probability of raising interest rates by 50 basis points. That’s 14.4%.
These remarks continue to support the short-term trend of the US dollar. However, there have been opinions that interest rate hike expectations have been lowered earlier. The current market is still waiting for the June CPI data to be released by the United States on July 13 to judge the latest economic situation. If the economic downturn is too severe, it will affect the upward momentum of the US dollar. In addition, the European Central Bank started its interest rate hike plan in July and is expected to have more interest rate hikes after September. It does not rule out the possibility of continued interest rate hikes. This has caused the euro to start to strengthen recently, which will have some consequences for the future trend of the US dollar. rising limit.
U.S. dollar index trend chart
It can be seen that although the U.S. dollar has performed very well in the first half of this year, if we look at the Wall Street Journal U.S. dollar index, this index, which tracks the U.S. dollar against 16 currencies, has risen by 8% this year, a record The best performance in the same period since 2010, but the trend of the US dollar in the second half of the year has added a lot of downward and restrictive factors, and may not be as good as the sharp rise in the first half of the year. Unless there is downward pressure on the global economy, funds will move into the U.S. dollar for safe haven, and the U.S. dollar may regain momentum.
On the surface, the outlook for the U.S. stock market is still not optimistic. In particular, the market is worried that the U.S. economy and even the world's major economies will fall into recession. At the same time, high prices are still sweeping the markets of various countries. The minutes of the June Federal Reserve meeting will most likely emphasize the urgency of controlling inflation and explain the measures to raise interest rates in June. It is not expected to be beneficial to the trend of the U.S. stock market. A hawkish stance may push up the trend of the U.S. dollar and may also weaken the U.S. dollar. The U.S. dollar has fluctuated at high levels, and correspondingly, gold prices, which have been hovering above the $1,800 mark recently, may be under pressure.
Risk warning and disclaimer: The above analysis is provided by analysts. The author will not be responsible for any profits or losses that may arise directly or indirectly from the use of or reliance on this information.
