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Non-agricultural aftershocks! The 10-year U.S. Treasury yield is on the verge of breaking, and the U.S. dollar index may face a deep correction
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: Non-agricultural aftershock! The 10-year U.S. Treasury yield is on the verge of breaking, and the US dollar index may face a deep pullback." Hope it will be helpful to you! The original content is as follows:
Asian market market
On Monday, the US dollar index fluctuated sideways and finally closed slightly higher by 0.05% at 98.708. U.S. Treasury yields fluctuated and fell, with the benchmark 10-year U.S. Treasury yields closing at 4.197%, and the 2-year U.S. Treasury yields closing at 3.679%. As of now, the US dollar is priced at 98.87.
1. Tariffs
① The EU will suspend trade countermeasures against the United States for 6 months. The EU awaits Trump's action on auto tariffs and exemptions this week.
②Trump said it would significantly increase India's tariff rates as the country buys Russian crude oil. India responded that the accusation was unreasonable.
③The Swiss government plans to continue talks with the United States after August 7, and is determined to make a more attractive proposal to the United States.
Federal Daly: The time for a rate cut is approaching, and the number of interest rate cuts this year is more likely to be greater than two.
Goldman Sachs: It is expected that the Federal Reserve will cut interest rates by 25 basis points three consecutive times starting in September; if the unemployment rate rises further, it may cut interest rates by 50 basis points.
Trump: A candidate will be announced in the xm-forex.coming days to fill the vacant Fed's position as director.
Institutional ViewPoint summary
UBS: The next rate cut in the ECB is postponed to October, but it still keeps in mind the euro's goal of 1.XX at the end of the year
So far, we have been expecting the ECB to cut further interest rates at its September meeting, but due to the unusually high impact of data on policy decisions, the possibility of interest rate cuts in September is unlikely. However, we still believe that the fundamentals of weak economic growth and weakened price pressures will ultimately force the ECB to cut further interest rates to prevent medium-term inflation from continuing to fall below expectations. We believe that the next rate cut by the ECB will be postponed to the October meeting.
In addition, we expect the ECB to suspend interest rate cuts as the economy begins to recover under more supportive fiscal policies. While the US-EU trade agreement is not good for Europe, it should reduce uncertainty among European xm-forex.companies and may lead to higher investment in the xm-forex.coming quarters. The ECB has cut interest rates by 200 basis points in the past five quarters, as well as expected fiscal stimulus measures in Europe (particularly Germany), should further support investment. As the ECB approaches or may have ended its easing cycle and the Federal Reserve may restart interest rate cuts in the xm-forex.coming months, we expect the euro to continue to rise against the dollar until the end of the year. The euro has recently consolidated from 1.18 to below 1.15. We recommend adding US dollar hedging or directly longing the pair, and keeping in mind the forecast of 1.21 euro at the end of the year.
Yicun Bank: Inflation lessons reshape policy, Powell may return to this wording at the central bank's annual meeting
Feder Chairman Powell is expected to outline the conclusions of the central bank's "framework review" at the Jackson Hall Economic Seminar from August 21 to 23. In the last review in 2020, the Fed made significant adjustments, including: 1. Turning to an average inflation target; 2. The policy statement will be based on the "gap" between employment and the highest level rather than "bias"; 3. Defining full employment as a "broad-based and inclusive" goal. These changes reflect experience in the previous decade, when inflation was below target and interest rates were subject to effective lower limits. Things have changed a lot since then: inflation is too high and valuations of equilibrium interest rates have risen. We expect the Fed to return to its pre-2020 wording. On the surface, this move is a bit hawkish, but the message it conveys is very clear.
Goldman Sachs: The Bank of England's interest rate cut this week is very likely, but this type of vote will appear.
The recent UK GDP data released is weaker than expected, while the unemployment rate is higher than the Bank of England's forecast. Although the private sector's regular wage growth exceeded expectations in May, it could still be significantly lower than the Bank of England's second-quarter forecast. However, inflation has risen unexpectedly again, with the service industry inflation rate 15 basis points higher than the Bank of England's May forecast. Since June, the Bank of England's xm-forex.comments have reiterated a "gradual and cautious" rate cut strategy. Therefore, the possibility of another 25 basis points cut this week is high. We believe that the most likely result will be 6 votes in favor, 1 vote against, 2 votes against - Bank of England xm-forex.commissioner DingGrae favors a sharp cut, while BoE chief economist Peel and Bank of England monetary policy xm-forex.committee member Mann opposed keeping interest rates unchanged. The Monetary Policy xm-forex.committee may maintain its “gradual and cautious” wording and reiterate that the policy will remain “restrictive”.
Bank of America: The tone of this week's Bank of England meeting will be..., the risk lies in Ramsden's key vote?
We expect the Bank of England to lower interest rates by 25 basis points this week, but there will be differences of opinions within the Bank of England, and the vote will be 2-5-2. Given the persistent risks of inflation, Mann and Peel may vote to keep interest rates unchanged; and in light of the labor market and the need for an early cut, Taylor and Dingra may vote for a 50 basis point cut. The risk is that Ramsden may also vote for a 50 basis point cut, but we think he is more likely to vote for a gradual rate cut than a 50 basis point cut.
We expect the Bank of England to maintain cautious, gradual guidance to balance inflation (which may remain higher than expected in the xm-forex.coming months, and we expect inflation to peak at 3.7% in September) with weak but not collapsed growth/labor market dynamics. We currently expect the Bank of England to cut interest rates to 3.5% in quarterly (August, November and February). We also expect the Bank of England to emphasize the need to maintain austerity policies.
The risk is that as inflation remains high, the Bank of England emphasizes the continued risks of inflation and rising inflation expectations in the xm-forex.coming months, so its position tends to be hawkish. The Monetary Policy xm-forex.committee may also remain selective, pointing out that “monetary policy does not operate according to preset paths.” But the Bank of England may say interest rate paths are falling as current policies may be tighter.
In light of inflation uncertainty, weak growth/labor market dynamics, we don’t think the Bank of England has any reason to signal a suspension or end the rate cut cycle. We believe that the downside risks of growth after the fall budget announcement, continued labor market weakness, reduced wage incentives and expected inflation to fall after the September peak, and the Bank of England can cut interest rates again in November as long as the second round of effects remain moderate. Finally, we also expect that the Bank of England will reduce the scale of quantitative easing from the current £100 billion to £60 billion in the 2025-26 quantitative easing year starting from October.
The above content is all about "[XM Foreign Exchange]: Non-agricultural aftershock! The 10-year US Treasury yield is on the verge of breaking, and the US dollar index may face a deep pullback". It is carefully xm-forex.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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