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Edited by Iravan774 at 22-12-2023 11:53 AM
Macro Weekly Report by LD Capital: Decreasing Inflation Sparks Another Round of Buying the Dips, Deflation Concept Emerges.
U.S. stock indices have risen for three consecutive weeks, essentially recovering the losses of the past three months. The recent market response is reminiscent of the market reaction after the first cooling of inflation this summer. The main theme of this round is the market rebounding as it confirms the Federal Reserve has ended the current round of interest rate hikes. The supporting evidence is the Fed's indication of a reduced rate hike magnitude and unexpectedly declining inflation and employment data. The shift in policy expectations and actual market interest rates is favorable for stocks, bonds, non-U.S. currencies, and cryptocurrencies. On Friday, President Biden is expected to sign a temporary spending bill, formally averting a U.S. government shutdown this weekend, and the market has reacted calmly to this.
In the short term, market expectations for the timing and magnitude of interest rate cuts are likely to continue trading. However, the amplitude of the swings should not be too large. The timing is expected to fluctuate within 5 to 7 months (currently expected in May), and the magnitude is expected to fluctuate between 75 and 150 basis points (currently expected 100, which was around 70 a month ago, already quite exaggerated, as the Fed's own expectation is only 20). So, the timing of the first interest rate cut is only likely to be earlier than May and the magnitude is likely to exceed 100 basis points only in a relatively pessimistic background. Therefore, the pricing in the short-term interest rate market is basically completed, while the long-term situation is still uncertain due to issues such as supply, deficits, and the confusion of the ZZ problem.
The U.S. dollar has weakened recently as expectations of interest rate hikes have cooled. The U.S. dollar index recorded its largest weekly decline in four months. Non-U.S. currencies, including the Chinese yuan, experienced rapid appreciation last week, with CNH quickly advancing from around 7.30 to 7.25. Seasonal factors also support the tendency for the renminbi to strengthen in the last two months of the year, related to the habits of many enterprises to settle (sell foreign currency and buy renminbi) at the end of the year. Fundamentally, the relative return prospects of U.S. dollar competitors are also poor, so the attractiveness of the U.S. dollar is difficult to be significantly eroded at this stage. |
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Post time 25-11-2023 13:23:40