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Hello everyone, today Avatrade Aihua Foreign Exchange will bring you "[Aihua Foreign Exchange Market Review]: Super Central Bank is avatradescn.coming! The foreign exchange market has become the focus, and Morgan Stanley Fanon is bearish on the US dollar." Hope it will be helpful to you! The original content is as follows:
Asian Market Review
Last Friday, the US dollar index rose and fell, and was still hovering at a low level of more than four months. As of now, the US dollar is quoted at 103.77.
The initial value of the U.S. consumer confidence index in March fell from 64.7 a month ago to 57.9, the third consecutive month of decline, the lowest level since November 2022. Consumers expect annual inflation rate to be 3.9% in the next 5-10 years, up 0.4 percentage points from the forecast last month, the highest level in more than 30 years. Consumers expect annual inflation to be 4.9% in the next year, the highest level since 2022.
Trump signed a government spending bill to avoid a government "shutdown".
Trump signed an executive order seeking to reduce more federal agencies. The US government cut funding and all VOA employees were "off the go".
US media: The United States is considering imposing visa restrictions on more than 40 countries.
U.S. Vice President Vance bluntly stated that Musk "makes mistakes" in federal layoffs.
Market news: The German CDU, SPD and the Green Party reached an agreement on the fiscal plan; Prime Minister-elect Merz: Legislators will vote on a new debt agreement next Tuesday; Germany announced a 500 billion euro fiscal draft fund to relax debt restrictions.
The first round of wage increases in Japan's largest trade union exceeded 5% for two consecutive years, but it was not as good as previous demands.
UK's GDP fell unexpectedly in January, economic concerns have intensified, and the market has raised expectations of the Bank of England's interest rate cut.
Canadian new Prime Minister Carney and his new cabinet were sworn in. Carney: I hope to speak Mandarin with Trump, but there is no plan at the moment; Canada will never become a part of the United States in any way or form.
U.S. Secretary of State: The United States will conduct bilateral negotiations with trading partners after imposing tariffs.
The U.S. avatradescn.commerce Secretary said tariffs on imported cars may be imposed next month.
U.S. officials: Trump and Putin are expected to have a conversation this week. ;The statement shows that EU countries extend sanctions on Russia for six months. The British Prime Minister held an online meeting with several leaders, calling for pressure on Russia.
Trump ordered the US military to take military action against the Houthi armed forces, and the attack on the Houthi armed forces will last for days or even weeks; US officials: they will continue to attack the Houthi armed forces, and there is no need to carry out ground operations;
Serbian armed forces: attack US aircraft carriers to escalate and respond to escalation, and the "maritime shipping ban" in the Red Sea will include US ships.
The Director of the Israeli State Security Administration will be dismissed.
A summary of institutional views
Barclays: Risks tend to be that the Fed will postpone interest rate cuts this year
The Fed is expected to keep policy interest rates unchanged this week, but Barclays economists warn that the impact of the tariff shock may be more severe than what FOMC shows in its Summary of Economic Forecasts (SEP). "We believe that risks this year tend to delay rate cuts." Barclays expects the Federal Reserve's SEP to show that inflation and unemployment expectations will rise and GDP growth decline, but Barclays economists expect GDP slowdown and inflation to rise greater than SEP. They added: "While we expect the SEP will show that the benchmark interest rate will be cut once this year, we still believe that the avatradescn.committee will eventually cut interest rates twice in June and September this year, at 25 basis points each time."
Deutsche Bank: Inflation data limits the Federal Reserve's ability to take action to support the economy
The indicator of long-term inflation expectations in the United States climbed to a high in more than 30 years for the third straight month. Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said such data limits the Federal Reserve's ability to take action to support the economy until weakness begins to appear more directly in the labor market. He said this could be manifested as slowing employment growth, rising unemployment rates or surge in layoffs. "There is a lot of uncertainty that could penetrate into hard data, but the Fed will take some kind of wait-and-see pattern to see if that happens." Luzzetti does not expect the Fed to cut interest rates this year. “At the same time, I think they’re seeing more evidence that they’re inflationThe work has not been avatradescn.completed yet. ”
Fanon Credit: The dollar is no longer a safe-haven currency
Trump trading is cold: Investors quickly lose confidence in the "Trump trading" due to growing concerns about whether spending cuts promoted by the US president and the relevant factors of the Musk-led Department of Efficiency (DOGE) will drag the U.S. economy into recession. Trump's obvious indifference to the weakening of the U.S. stock market is particularly uneasy. They originally believed that Trump's tariff threat was just a negotiating strategy, and that weakening of the stock market would make him restrain those extreme policies. At present, neither of these assumptions seem to hold true.
The dollar no longer has risk-haven: This emotional shift has led to a related foreign exchange market The dollar is no longer a safe-haven currency, and it is now included in the risk currency basket along with the Australian dollar and New Zealand dollars. European currencies benefit from it as investors look for other places to withdraw funds from the United States. European stock markets, which had previously been unpopular and undervalued, have proven to be popular with funds. Germany's potential to relax debt restrictions, thereby increasing spending on defense and infrastructure, coupled with a possible peaceful agreement between Ukraine and Russia, has strengthened the attractiveness of European currencies. The vote on amending debt restrictions at a special meeting of the German Bundestag this week is crucial to the euro's trend.
The short-term break may be available: However, the dollar may get some respite in the avatradescn.coming week. As the market generally expects the Federal Reserve to maintain Keep interest rates unchanged and may oppose the market expected 25 basis points in 2025 pricing, especially as inflation remains high. We expect the Federal Open Market avatradescn.committee to show that it is not in a hurry to cut interest rates, although the economic outlook becomes more uncertain.
Forex Investment Strategy: The Bank of England should keep interest rates unchanged next week while reaffirming its view on further easing in the future. The impact of this policy meeting on the pound may be overshadowed by the Federal Reserve meeting, tariff-related news, and the overall trend of the US dollar. The Swiss National Bank may push interest rates further to zero, which will enhance the attractiveness of the Swiss franc as a financing currency. Next week, we will be longing a basket avatradescn.combination of the US dollar against the Japanese yen and Swiss francs, while passing options Continue to go long against the euro.
Morbis Morgan Stanley looks forward to Fed rate resolution: continue betting on the Fed's interest rate cut in X month
Overall estimate: We expect the Fed to keep interest rates unchanged in March, and when and how it will act next will depend on the current unknown policy outcome. Therefore, Fed Chairman Powell is likely to reiterate that they are not in a hurry to take action. Our strategists continue to hold 5-year bond long positions in 2-year, 5-year and 30-year butterfly arbitrage in U.S. Treasury bonds and remain neutral on housing mortgages.
Interest rate path: The latest data released shows that economic growth has slowed down, and there are some signs of continued inflation falling. However,Some data are not as important as the data to be released. We expect the policy rate path to remain unchanged: 3.9% this year and 3.4% next year. We believe that the Federal Open Market avatradescn.committee's view on the risks to GDP growth will clearly turn negative, and the chart below is our forecast for the March economic forecast summary.
Investment advice: ① Our interest rate strategists recommend investors to lay out through 2-year, 5-year and 30-year butterfly arbitrage in U.S. Treasury bonds to face a downward trend in receiving yields, and continue to bet on a 25 basis point rate cut at the Federal Open Market avatradescn.committee meeting in May. (Butterfly arbitrage is to make profits by buying and selling U.S. Treasuries of different maturities (2-year, 5-year and 30-year) at the same time, using changes in the yield difference between them.) ② Our Forex strategists continue to recommend shorting the US dollar and longing the euro, yen and pound. ③For mortgage-backed securities (MBS) issued by government-supported enterprises, our strategists remain neutral in terms of interest rate spreads and prefer housing mortgage products with less negative convexity.
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