The Federal Reserve expects a sharp increase in interest rates, a continuous collapse in the dollar, a rapid rise in the yuan, and a general rebound in metals.

SMM News: on June 20, the dollar index weakened and fell behind the 97 mark, with the RMB midpoint at 6.8805, up 88 points, compared with 6.8893 on the previous day and 6.9040 on the previous trading day for the onshore renminbi. On June 20, the onshore offshore RMB both rose sharply, and the onshore RMB appreciation recovered the 6.87 mark. The central bank carries out a 14-day reverse repo operation of 30 billion yuan on the open market, with no reverse repo due.

Benefiting from the collapse in the US dollar, basic metals generally rebounded today, with Shanghai Copper 1908 up 0.26 per cent, Shanghai Aluminum 1908 up 0.29 per cent, Shanghai Zinc 1908 down 1.05 per cent, Shanghai lead 1908 falling to 0.8 per cent, Shanghai nickel up 0.34 per cent and Shanghai Tin falling 0.1 per cent as of 14:17.

Early Thursday morning Beijing time, the Federal Open Market Committee (FOMC) issued an interest rate resolution and policy statement, the Federal Reserve announced that the federal funds rate target range of 2.25% to 2.5% unchanged. Markets had widely expected the Fed to stand still in June. In the early hours of March 21, the Federal Reserve released the minutes of its January FOMC meeting and decided not to raise interest rates for the time being. On June 20, the Fed again announced that it would leave the target range for the federal funds rate unchanged between 2.25% and 2.5%.

On interest rate expectations, Powell said the fall in inflation-protected bonds was also one of the reasons for future interest rate cuts. But the Fed has not really discussed the scale of future rate cuts, which will depend on future data and risk prospects. "the Fed will only act on real, sustained trends, not a single event," Powell said. " Powell pointed out that if it is necessary to cut interest rates to support confidence in economic growth, the contraction policy may also be adjusted at that time.

At present, the probability of rapid tightening of China's monetary policy is not high, and there are still downside risks to the global economy. In 2019, monetary policy will still play a vital role in stabilizing growth, social financing and credit loans still need to maintain reasonable growth, commercial banks "wide credit" also need the central bank to provide appropriate liquidity support. In the near future, the liquidity of the monetary authorities has increased, the Ministry of Finance and other relevant departments issued the "Special debt New regulations", macro policy to re-increase the intensity of counter-cyclical adjustment, give play to the role of economic growth.

Jiang Xingchun, director of the Soochow Futures Research Institute, said that since the beginning of this year, the US economic recovery has weakened, and US stocks have also fluctuated and dropped at one point in the face of intensified trade frictions between China and the United States. This has led to a great change in the Fed's monetary policy, which will not continue to raise interest rates. On the contrary, the probability of cutting interest rates once a year has greatly increased, and even entered the interest rate reduction cycle from this year. Therefore, the US dollar index has shown a concussion and decline. If Trump wants to be re-elected, he also needs to maintain better stock market performance, and the Fed also needs to cooperate with and make a decision to cut interest rates, otherwise it will remove Powell from his post as chairman of the Federal Reserve, and in the future, the probability of the Fed cooperating with interest rate cuts will greatly increase.

Expectations of the Fed cutting interest rates are getting higher and higher. Market participants now believe the Fed is as likely to cut interest rates as high as 80% at its regular meeting at the end of July and nearly 100% this year, according to the latest Fed Watch survey. If the Fed turns to cut interest rates, the strong dollar pattern will undoubtedly be difficult to maintain, and the external pressure on the RMB exchange rate will be greatly reduced.

With the relief of external pressure, China's monetary policy will be more likely to maintain "tightness and moderation", and the RMB exchange rate will further stabilize.

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