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Market News Forex Trading Reminder: Traders scale back Fed tightening bets, UK imposes 25% crude oil windfall profits tax, sterling rises to three-week high
Forex Trading Reminder: Traders scale back Fed tightening bets, UK imposes 25% crude oil windfall profits tax, sterling rises to three-week high
In early Asian trading on May 27, the US dollar index was now at 101.72; the dollar fell slightly on Thursday as the market considered whether the Federal Reserve may slow down or even suspend its tightening cycle in the second half of this year, which will weaken the safe-haven appeal of the dollar.
2022-05-27
8871
In early Asian trading on Friday (May 27), the US dollar index was now at 101.72; the dollar fell slightly on Thursday as the market considered whether the Federal Reserve may slow down or even suspend its tightening cycle in the second half of this year, which will weaken the dollar's safe-haven attractive.
Minutes of the Fed's May meeting released on Wednesday showed that most participants believed that raising interest rates by 50 basis points at both the June and July policy meetings may be appropriate to fight inflation. They argue that inflation has emerged as a key threat to the performance of the U.S. economy. Minutes of the meeting showed that many participants believed that a quick rate hike would allow the Fed to assess the effect of tightening policy later this year.
Ed Moya, senior market analyst at Oanda, said, "The market has become more optimistic that the Fed will not tighten monetary policy too aggressively, and the sell-off we have seen in some risk assets may be overdone, especially equities."
"That's driving a slight uptick in risk assets, which is very good for risk trades, which is actually bad for the dollar," he said.
"While this is not the base view of our economics team, we think the Fed will likely think that reaching a rate level of 1.75%-2% allows for policy to normalize and then has a chance," strategists at JPMorgan said in a note to clients. Pause and assess its impact on employment and inflation,"
“The dollar is currently range bound,” said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, as data on Thursday confirmed that the U.S. economy shrank in the first quarter, hurt by a record trade deficit and inventories rising faster than in the fourth quarter. slightly slower effect. A separate report showed that the number of Americans filing for unemployment benefits fell last week, a sign of continued labor market tension.
Sterling rose to a three-week high of 1.2620 against the dollar on Thursday as Britain announced a 25% windfall tax on profits from oil and gas producers, while providing 15 billion pounds ($18.9 billion) for households struggling to pay soaring energy bills package support.
The yen pared back gains sparked by comments from Bank of Japan Governor Haruhiko Kuroda, who said further U.S. interest rate hikes would not necessarily lead to a weaker yen, and the dollar fell over 0.4 percent against the yen at one point to an intraday low of 126.55 . David Forrester, a currency strategist at AUM in Hong Kong, said the dollar has fallen below support near 127.13, the 23.6% retracement of the year-to-date rise to 131.35, which kicked off a decline towards support at the 55-day moving average. 125.66 of space.
The euro led gains among G10 currencies; euro-dollar rose 0.4% to $1.0722, with hedge fund buying around $1.0640-1.0650 helping the euro hold above session lows of $1.0663, two European traders said.
Bank of America: The Fed may pause rate hikes later, which means medium and long-term yields have peaked
Bank of America Ralph Axel and Bruno Braizinha said in a report that the latest policy remarks from Fed officials offered traders an opportunity to bet on a pause in rate hikes after July. Speeches by Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic over the past two weeks have raised awareness that financial market conditions could push the Fed to slow or even halt the pace of rate hikes in September. This has implications for both the overnight index swap rate and the 5-year rate.
"We believe that market expectations for a pause in the Fed's tightening pace may increase over the next two months, and if that happens, medium- and long-term yields may have peaked," they wrote.
Investors can prepare for this in several ways, strategists said. One is to be the receiver of the overnight index swap rate in September at the 2.13% level. If the Fed keeps interest rates unchanged for the month, the overnight swap rate is expected to be around 1.83%. The target is 1.96%, which is between two hypothetical scenarios of keeping rates unchanged and raising them by 25 basis points. Another possibility, Axel and Braizinha wrote, is to sell longer-dated bonds, especially 5-year maturities.
ACM: If U.S. economic data is firm and signals a soft landing, the attractiveness of U.S. assets will weigh on the yen
David Forrester, FX strategist at AUM in Hong Kong: Given the risk of U.S. rate hikes pushing the economy into recession, it does make U.S. assets less attractive relative to yen assets, so we agree with Kuroda on this. However, if U.S. economic data is firm and signals a soft landing, the attractiveness of U.S. assets will weigh on the yen.
Well-known investor Kyle Bass: The Fed needs to cut interest rates in 2023 because the economy will stagflate
Kyle Bass, chief investment officer of Hayman Capital, said in an interview with CNBC that although the Fed's "knee-conscious response" to the epidemic is necessary in our opinion, it is a difficult problem for the Fed to recover 40% of the extra liquidity.
Also, we will see food and energy prices rise while the economy cools due to "decades of bad policy." He expects a mild recession by the end of this year or early next year.
Kyle BassBass expects the Fed will eventually experience stagflation and will have to cut interest rates as a result. It does not think the Fed will raise interest rates by far more than 200 basis points this round.
Referring to the minutes of this week's meeting, he noted that Fed researchers still expect the economy to grow 2.8% in 2022, meaning growth would need to hit 4% to hit the target after GDP contracted in the first quarter.
BlackRock, the world's largest asset manager: bond ETFs will exceed $5 trillion by 2030
BlackRock recently released a research report predicting that in 2023, the scale of bond ETFs will exceed 2 trillion US dollars, and in 2030, bond ETFs will exceed 5 trillion US dollars. In BlackRock's view, bond ETFs are a track that asset management institutions should not miss. At the same time, through bond ETFs, individual investors can also tap into the bond market, which was originally only available to institutional investors. Bond ETFs offer hope of easing liquidity pressures at a time when bond markets are tight. BlackRock said that as Asian institutional investors, including China, become more sophisticated, Chinese bond ETFs have huge room for imagination.
Minutes of the Fed's May meeting released on Wednesday showed that most participants believed that raising interest rates by 50 basis points at both the June and July policy meetings may be appropriate to fight inflation. They argue that inflation has emerged as a key threat to the performance of the U.S. economy. Minutes of the meeting showed that many participants believed that a quick rate hike would allow the Fed to assess the effect of tightening policy later this year.
Ed Moya, senior market analyst at Oanda, said, "The market has become more optimistic that the Fed will not tighten monetary policy too aggressively, and the sell-off we have seen in some risk assets may be overdone, especially equities."
"That's driving a slight uptick in risk assets, which is very good for risk trades, which is actually bad for the dollar," he said.
"While this is not the base view of our economics team, we think the Fed will likely think that reaching a rate level of 1.75%-2% allows for policy to normalize and then has a chance," strategists at JPMorgan said in a note to clients. Pause and assess its impact on employment and inflation,"
“The dollar is currently range bound,” said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, as data on Thursday confirmed that the U.S. economy shrank in the first quarter, hurt by a record trade deficit and inventories rising faster than in the fourth quarter. slightly slower effect. A separate report showed that the number of Americans filing for unemployment benefits fell last week, a sign of continued labor market tension.
Sterling rose to a three-week high of 1.2620 against the dollar on Thursday as Britain announced a 25% windfall tax on profits from oil and gas producers, while providing 15 billion pounds ($18.9 billion) for households struggling to pay soaring energy bills package support.
The yen pared back gains sparked by comments from Bank of Japan Governor Haruhiko Kuroda, who said further U.S. interest rate hikes would not necessarily lead to a weaker yen, and the dollar fell over 0.4 percent against the yen at one point to an intraday low of 126.55 . David Forrester, a currency strategist at AUM in Hong Kong, said the dollar has fallen below support near 127.13, the 23.6% retracement of the year-to-date rise to 131.35, which kicked off a decline towards support at the 55-day moving average. 125.66 of space.
The euro led gains among G10 currencies; euro-dollar rose 0.4% to $1.0722, with hedge fund buying around $1.0640-1.0650 helping the euro hold above session lows of $1.0663, two European traders said.
Friday ahead
Institutional view
Bank of America: The Fed may pause rate hikes later, which means medium and long-term yields have peaked
Bank of America Ralph Axel and Bruno Braizinha said in a report that the latest policy remarks from Fed officials offered traders an opportunity to bet on a pause in rate hikes after July. Speeches by Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic over the past two weeks have raised awareness that financial market conditions could push the Fed to slow or even halt the pace of rate hikes in September. This has implications for both the overnight index swap rate and the 5-year rate.
"We believe that market expectations for a pause in the Fed's tightening pace may increase over the next two months, and if that happens, medium- and long-term yields may have peaked," they wrote.
Investors can prepare for this in several ways, strategists said. One is to be the receiver of the overnight index swap rate in September at the 2.13% level. If the Fed keeps interest rates unchanged for the month, the overnight swap rate is expected to be around 1.83%. The target is 1.96%, which is between two hypothetical scenarios of keeping rates unchanged and raising them by 25 basis points. Another possibility, Axel and Braizinha wrote, is to sell longer-dated bonds, especially 5-year maturities.
ACM: If U.S. economic data is firm and signals a soft landing, the attractiveness of U.S. assets will weigh on the yen
David Forrester, FX strategist at AUM in Hong Kong: Given the risk of U.S. rate hikes pushing the economy into recession, it does make U.S. assets less attractive relative to yen assets, so we agree with Kuroda on this. However, if U.S. economic data is firm and signals a soft landing, the attractiveness of U.S. assets will weigh on the yen.
Well-known investor Kyle Bass: The Fed needs to cut interest rates in 2023 because the economy will stagflate
Kyle Bass, chief investment officer of Hayman Capital, said in an interview with CNBC that although the Fed's "knee-conscious response" to the epidemic is necessary in our opinion, it is a difficult problem for the Fed to recover 40% of the extra liquidity.
Also, we will see food and energy prices rise while the economy cools due to "decades of bad policy." He expects a mild recession by the end of this year or early next year.
Kyle BassBass expects the Fed will eventually experience stagflation and will have to cut interest rates as a result. It does not think the Fed will raise interest rates by far more than 200 basis points this round.
Referring to the minutes of this week's meeting, he noted that Fed researchers still expect the economy to grow 2.8% in 2022, meaning growth would need to hit 4% to hit the target after GDP contracted in the first quarter.
BlackRock, the world's largest asset manager: bond ETFs will exceed $5 trillion by 2030
BlackRock recently released a research report predicting that in 2023, the scale of bond ETFs will exceed 2 trillion US dollars, and in 2030, bond ETFs will exceed 5 trillion US dollars. In BlackRock's view, bond ETFs are a track that asset management institutions should not miss. At the same time, through bond ETFs, individual investors can also tap into the bond market, which was originally only available to institutional investors. Bond ETFs offer hope of easing liquidity pressures at a time when bond markets are tight. BlackRock said that as Asian institutional investors, including China, become more sophisticated, Chinese bond ETFs have huge room for imagination.
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