statement of events

The speeches of Federal Reserve officials early this morning and the minutes of the Federal Reserve’s June meeting strengthened the market’s expectations for the Federal Reserve to raise interest rates in July, causing the U.S. dollar index to rise, closing up 0.25% at 103.35, rising for three consecutive trading days. On the current trading day, this week Four is oscillating around the 103 price position. The U.S. dollar climbed against other major currencies on Wednesday, and U.S. bond yields hit a new high in nearly four months. The 10-year Treasury bond yield rose 7.9 basis points to 3.938% on Wednesday. It extended its gains on Thursday and once hit a new high since March 10. Near the 3.957% position. The two-year U.S. Treasury yield, which typically moves in tandem with interest rate expectations, rose 0.2 basis points on Wednesday to 4.942%, close to Monday’s high of 4.963%, the highest since October March. The strength of the US dollar has significantly suppressed the price of gold. The price of gold closed back to around US$1,915 on Wednesday and is currently around the price of 1,918 on Thursday.

event analysis

Federal Reserve policymakers unanimously agreed to keep interest rates steady at their June meeting to allow time to assess whether the current U.S. economic conditions and economic outlook warrant further interest rate increases, but the vast majority of participants expected they would eventually raise interest rates, according to meeting minutes released on Wednesday. Further tightening of policies is needed. The minutes showed that most policymakers at the meeting believed that uncertainty about the economic and inflation outlook remained high and that more information would be valuable in considering the appropriate stance of monetary policy.

Forecasts released after the June meeting showed that 16 of 18 policymakers still expected that policy rates would need to rise by at least another 25 basis points by the end of the year. Although some policymakers at the meeting hope to continue raising interest rates in June because of the slow progress in cooling inflation, almost all policymakers at the meeting believe that it is appropriate or acceptable to maintain the federal funds rate target range at the current 5%-5.25% . The Fed said their goal remains to push inflation back toward 2% from more than twice its current target. The minutes added detail to the policy statement and economic forecasts released after the June 13-14 meeting, when the Fed ended a streak of 10 consecutive rate hikes and decided to keep rates on hold.

Federal Reserve Chairman Jerome Powell said at a press conference after the release of the minutes of the June meeting that the decision marked a shift in strategy, with the Fed focusing more on how much further policy tightening may be needed rather than maintaining a stable pace of interest rate increases. He says it’s appropriate to slow down to a more moderate pace to give you time to make judgments.

Tai Wong, an independent metals trader in New York, said, “Gold prices fell to session lows after the Fed meeting minutes showed that a ‘pause’ in June was only the path of least dissent, with almost the entire committee expected to eventually raise interest rates. The upcoming JOLTS report and Nonfarm payrolls will have a bigger impact, especially if they are weaker than expected.”

New York Fed President Williams said on Wednesday that the Fed made the right decision by keeping interest rates unchanged three weeks ago, while signaling that the Fed could raise rates again at some point as the economy continues to show strength. “We have more work to do” to balance supply and demand and reduce inflation, Williams said at an event at the New York Fed. He said he would “make decisions based on the data” when considering the Fed’s future actions, but added that the data supported the idea that the Fed may need to raise interest rates further at some point. Williams said that while he acknowledged that price pressures had eased, inflation was still too high for his comfort. “I’m not happy with the price pressure right now,” Williams said. He also said demand for labor remained high and the economy was handling the interest rate hike “pretty well.” The gap between the Fed’s view that further interest rate hikes are needed and the market’s view that a rate cut is imminent has narrowed recently, noting that the market “has heard the message from the Fed.” He added that the market’s pricing in an interest rate cut next year may to some extent simply reflect the view that inflation will fall, so in real terms, lower market interest rates still mean that monetary policy has the same impact on the economy. Influence. 

Fed staff still expect a “mild recession” later this year, and they now see the likelihood of avoiding a downturn as only slightly lower than their baseline forecast. Meanwhile, policymakers are digesting data showing continued tightness in the job market and only modest moderation in inflation. Policymakers are also trying to weigh headline data showing strength in the economy against some clues of underlying weakness, including a household employment gauge that suggests the labor market is weaker than the jobs data indicates, or national income data that appears to It was weaker than the more closely watched GDP data.

After the incident, market expectations for the Federal Reserve to raise interest rates increased. Futures traders, who are closely related to the Federal Reserve’s policy interest rates, continue to predict that interest rates will be raised in July. They also predict that the possibility of another interest rate hike before the end of the year is about one-third. The Federal Reserve is extremely likely to do so. The target range for the benchmark interest rate may be raised by 25 basis points to 5.25%-5.50% at the July 25-26 meeting. Traders are pricing in an 89% chance of a 25 basis point rate hike from the Fed at its July meeting, according to CME’s Fedwatch tool.

On the news, foreign exchange strategists surveyed by Reuters said that the U.S. dollar will remain strong against most major currencies for the rest of the year due to the resilience of the U.S. economy in terms of data. Several Fed officials, including Chairman Jerome Powell, have advocated at least two more rate hikes, one more than the market expected, which also helped support the dollar. From a technical point of view, the price trend of gold fell after being suppressed by the resistance of the 21-day moving average. The short-term downward risk has increased, the short-term bullish signal has weakened, and it may once again test the support near the 1900 mark.

Jeffrey Roach, chief economist at LPL Financial, said that after a hawkish pause in June, the Fed may raise interest rates in July if there are no surprises. He said Friday’s jobs report will be carefully analyzed for any signs that the labor market is weakening.

This trading day will usher in U.S. June ADP data, U.S. initial jobless claims changes, U.S. JOLTs job vacancies in May, and U.S. June ISM non-manufacturing PMI data, which investors need to focus on. In addition, it is also necessary to pay attention to the speeches of Federal Reserve officials and news related to the international trade situation. The current international trade situation still provides some safe-haven support for gold prices.