Super week is expected to raise interest rates or support the dollar, but still need to be vigilant

SMM6, 11 Feb / PRNewswire-FirstCall-Asianet /

This week can be called "Super week", with big events and data pouring in. After Tuesday's "special funds meeting", the Federal Reserve resolution, the European Central Bank resolution has come one after another. In addition, a number of data will be released this week, such as the United States, the euro zone CPI and so on. The dollar is likely to gain support this week in the face of firm expectations of a rate rise, but there is still a need to be wary of risk events.

Experts are bullish on the long-term trend of the dollar

Jiang Xingchun, director of the Soochow Futures Institute, told the SMM that the dollar's decline was short-lived and more of a concern for the US economy during the trade war. But the fundamentals of the US economy are good, a second interest rate rise this year is imminent, and rising inflation expectations have made the rate rise cycle faster, so the dollar remains volatile in the medium term.

Zhongda futures deputy general Jingchuan said the dollar peaked back in the short term, but the dollar will continue to strengthen in the long run. The recent fall in the dollar needs to be seen in two dimensions, one is the further strengthening of US trade protection policy, and the other is the continued improvement in the European economy to boost the euro, he said. But economic growth in Europe depends on growth in the United States, while trade disputes are limited to a certain extent through trade to enhance Europe's ability to recover. At present, there are no major variables for these two factors. the dollar has fallen back in the short term, and the trend of long-term strength has not changed.

Review: the US dollar's "lone defeat" trade war in May shrouded the "failure" of the US index in early June.

The dollar had previously been "left alone" in May, and after June it was weak, but overall it was still running at a relatively high level.

The US monthly line rose 2.33 per cent in May and was in an upward phase throughout May. At the end of the month, it broke through the 95 mark, reaching a high of 95.025 since November last year.

Overall, the Fed's firm expectations of a rate rise, coupled with the easing of trade disputes between China and the US, as well as the decline in non-US currencies such as the euro, have been the main factors contributing to the dollar's rise.

However, the United States index suddenly reversed at the end of May, falling all the way from high. Mainly by the United States blatantly launched a trade war against many countries, trade clouds once again shrouded, the dollar under pressure. On May 31, US Commerce Secretary Ross announced a 25% tariff on EU and Canadian steel and a 10% tariff on aluminum, which will take effect at midnight Washington time on May 31. Subsequently, countries have announced that they will take corresponding measures against the United States.

The G7 summit broke up last weekend, and the dollar continued to fall under pressure. Trump left the G7 summit early over the weekend and refused to sign a joint G7 statement. The G7 joint communiqu é stated that trade agreements based on openness, transparency, inclusiveness and compliance with WTO rules were important and that free, fair and mutually beneficial trade was an important engine of economic and employment growth. The G7 also stressed the importance of a rules-based trading system and would continue to combat protectionism. However, Trump has tweeted refusing to sign the communiqu é. In a tweet, he said that because of the "false statement" made by Canadian Prime Minister Trudeau at a news conference and the fact that Canada imposes high tariffs on American farmers, workers, and companies, The representative of the United States has been instructed not to sign the G7 joint communiqu é. More worryingly, before leaving for the G7 summit, Mr Trump harshly said the US would withdraw from the current North American Free Trade Agreement (NAFTA) if a good deal was not reached.

The dollar is expected to raise interest rates firmly, or support the dollar's rise this week

But throughout last week, the dollar as a whole showed a weak downward, but still at a relative high. But as expectations of a Fed rate rise continue to strengthen, the dollar is likely to begin a new round of gains this week.

The US non-farm payrolls report for May, released earlier this month, was extremely beautiful, significantly better than market expectations, making the market firm for the Fed to raise interest rates four times this year.

According to specific data, the number of non-farm payrolls in the United States increased by 223000 in May, well above expectations of 188000, and the unemployment rate also recorded 3.8%, the lowest in 18 years. In addition, the average hourly wage in the United States recorded an annual rate of 2.7 per cent in May, the same as expected. The average hourly wage rate in May was 0.3 per cent, higher than expected at 0.2 per cent. Gold fell below $1290 after the data were released. In the medium term, the results of the non-farm report remain far-reaching, as it is likely to mean that pressure is building on the Fed to accelerate interest rate hikes. Zero hedge, a prominent financial blog, argues that non-farm data provided a guarantee for the Fed to raise interest rates in June.

This week's Fed rate resolution is expected to raise interest rates by 25 basis points to 1.75% and 2.0%. The FOMC had previously hinted that it might raise interest rates twice this year in addition to the March rate rise. The Fed had expected to raise interest rates three times this year and next.

According to Nomura, US aggregate demand remains strong, the labour market continues to tighten and inflation is close to the symmetrical target of 2 per cent. we expect the Fed to raise interest rates four times in 2018 and twice in 2019. The Fed's downsizing will continue to put upward pressure on long-term interest rates, while the federal deficit will rise sharply. On the inflation side, most of the temporary factors that led to weak inflation in 2017 have been eliminated. Core inflation in the US is expected to rise gradually in 2018 and 2019 as the labour market continues to tighten and the economy continues to grow faster than potential. By the fourth quarter of 2019, core PCE inflation in the United States is expected to reach 2.2 per cent.

Pay close attention to the "special gold meeting", the market nerve is tight, need to beware of the risk

At a time when expectations of a rise in interest rates are firm or will support a higher dollar, close attention needs to be paid to the uncertainty of the US-North Korean summit.

A summit between US President Donald Trump and North Korean supreme leader Kim Jong-un will be held in Singapore at 9 am Singapore time on June 12. In response to the US-DPRK summit, the White House wants North Korean leader Kim Jong-un to make a commitment to a timetable for abandoning nuclear force when he meets with US President Donald Trump. U. S. Secretary of State Pompeo said Thursday that the United States will step up sanctions aimed at forcing North Korea to denuclearize if diplomatic efforts do not move in the right direction.

This week's summit between the United States and North Korea has attracted the attention of the world. if a certain agreement is reached between the United States and North Korea, it will affect market sentiment, further reduce risk aversion, and will benefit the dollar. But if the "special fund" does not have any positive developments, the dollar may come under further pressure.