Written by Jimmy McGiv
Orlando, Florida (Reuters) – Trading Day
Understand the forces that lead global markets
Written by Jimmy McGiv, a column writer on the market
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The dollar slide accelerated on Thursday, as more evidence was weighted on US price pressure on the treasury yield and withdrew Greenback to its lowest levels against a basket of major currencies that you have not seen for more than three years.
In the column today, I look forward to the Federal Reserve meeting next week. With the cooling of inflation, but the customs tariff that has not been operated yet, is the federal reserve policy still in a “good place” as President Jerome Powell said again and again last month? More about it below, but first, the main market round moves.
If you have more time to read, here are some of the articles I recommend to help you understand what happened in the market today.
1.
Main market movements today
* The dollar index reaches a three -year low of 97.60, and the euro expands $ 1.16 for the first time since November 2021. The return for 30 years has decreased by 7 BPSTO 4.84 %, on the right track of the largest weekly decrease since March. * Wall Street publishes modest gains, as the three main circles have gained 0.2-0.4 %, led by technology. * Oracle is the largest Advancer, an increase of 13 % to record HighSafter, the cloud service provider raises its annual expectations for revenue raising; Boeing is the largest waste, almost 5 % decreased after the deadly Air India plane crashes. * Precious metals rise strongly, again. Gold increases approximately 1 % to $ 3,400/ounces, platinum adds 3 % to the payment of $ 1,300/ounces and gains in the last eight sessions to 25 %.
The dollar despair deepens
The dollar grabbed highlighting the global market on Thursday, and again, for wrong reasons. If he fails to get any support when American bond yields, it will be more difficult when they fall. As was the case on Thursday.
After a series of recent publications of consumer enlargement, the transformation of producers’ prices to support the opinion that US prices are not hot as economists believed. Of course, the recognition of customs duties was not completely perceived, but inflation in all fields at the present time is greatly tame.
Prices traders have given time when they believe that the Federal Reserve will reduce interest rates to September of October, and they are also creative with a 30 -year bond auction, the return has decreased through the curve.
The dollar index has now decreased by 10 % so far, and the euro rose by 12 %. We are only in the middle of the road of the year, but it should be noted that the last time the dollar fell more than 10 % in the year of calendar was 2003.
Many of its weakness this year is due to the non -United States investors who convert their exposure to their American origins much more than they were previously. In fact, this is equivalent to selling dollars, pension funds and European insurance at its core.
“Our analysis indicates that there is still a lot that will come,” the analysts at BNP Paribas calculate, with investors recommending the purchase of the euro with a goal of $ 1.20.
They calculate that if the Dutch and Danish pension funds reduce exposure to the dollar for the 2015 levels as a share of the total management assets, then they have another $ 217 billion for sale. This is just Danish and Dutch boxes.
On the front of the tariff, investors still underestimate the United States of Chinese deal this week, which Washington set on Wednesday and confirmed by Beijing on Thursday. However, there is some ambiguity about the main elements of the deal, including rare land export licenses and definition details.
American economists in JPMorgan that the effective total customs tariff in the United States will be about 14 %. When imposed on $ 3.1 trillion of imported goods, this is equivalent to a tax on American companies and consumers over the age of $ 400 billion. It remains to see how this is divided, but history shows that consumers bear most of the burden.
They wrote on Thursday: “The upper motivation of the higher definitions has reduced the expectations of GDP growth for this year (fourth/fourth quarter) from 2.0 % at the beginning of the year to 1.3 % currently.”
On the other hand, Economists in Oxford raised the economy on Thursday their expectations in the United States for 2025 to 1.5 % of 1.3 % and said that the possibility of recession had decreased.
You pay your money, and take your choice.
Is the federal reserve still a “good place”?
At the meeting of the Federal Open Market Committee next week, investors will audit all contacts for any sign that the last softening in inflation in the United States may be sufficient to push policy makers to nearly to reduce interest rates.
The current economic data may tend in this direction, but policy from Washington can maintain President Jerome Powell and his colleagues in “Wait and See”.
Nobody expects the Federal Reserve to reduce prices next week, but companies, families and investors must have a better feeling of future policy makers plans from the revised quarterly economic expectations and the Powell’s press conference.
Powell was very clear at his press conference after preparing last month that the Federal Reserve Bank was ready to take its time in assessing the economic data received, especially the impact of definitions, before deciding on its next step.
He told reporters at least eight times that the policy is in a “good place” and said four times that the Federal Reserve “is in a good position” to face the upcoming challenges. Will he change his melody next Wednesday?
PCE’s annual inflation was in April 2.1 %, which is the lowest level in four years, and on the goal of the Federal Reserve by 2 %, while the consumer price index in May was also less than expected. The labor market is softened, economic activity slows down, and the expectations of inflation began in hot red load to decline.
In this light, it may be surprising that the markets are not fully priced in reducing the price of the quarter to October.
“The next meeting provides an opportunity (for Federal Reserve officials) to indicate that the last mixture of Tamer’s inflation and the most soft consumption growth guarantees the accurate” calibration “of the rates, while maintaining very careful about what will happen after that.
But there are two well -known barriers that can prevent the federal reserve from quickly joining the ranks of the central banks to reduce prices: American definitions and financial expectations.
Washington land card
Definitions have not yet appeared in consumer prices, especially in goods, and no one knows how inflation will be. It can simply lead to an increased price for one time, as it may lead to a longer prices, or the inflationary effect may end until companies are limited if many price increases are absorbed. In other words, everything is on the table.
It seems that the stock investors were optimistic about everything, as they moved the S&P 500 near its highest level ever. But Powell and his colleagues may be slower in lowering their guard, for a good reason.
Although import duties on goods from China will be less than fear a few months ago, Washington is expected to conclude more commercial deals in the coming weeks, the total customs duties will remain much higher than it was at the end of last year, and it may have been the highest in the thirties of the twentieth century.
Economists in Goldman Sachs believe that inflation in the United States will rise to approximately 4 % later this year, as the customs tariff represents about half that. This makes the United States a “important exception” between industrial economies, said the Organization for Economic Cooperation and Development last week.
Another main concern is the American public finance. It is expected that the “Great Grand law”, which is being discussed in congress, will add $ 2.4 trillion dollars for federal debts over the next decade, and many economists expect the budget deficit to hover about 7 % of GDP for years.
With a very loose fiscal policy, federal reserve officials may be reluctant to refer to the willingness to reduce monetary policy, especially if there is no urgent need to do so.
Last December, FOMC members changed their average expectations to know the price of the central bank policy, and walking long distances this year and next year from 50 huge basis points to 3.9 % and 3.4 %, respectively. They left expectations unchanged in March amid the fog of tariffs.
This means 50 basis points of price cuts this year and 50 other basis points next year, which is largely in line with future price markets at the present time. So the Federal Reserve Policy may still be in a “good place”, but as economic expectations change quickly, it is not clear how long this will be the case.
What can the markets move tomorrow?
* Industrial Production in Japan (April, Review) * Higher Activity Index in Japan (April).
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The views expressed are the views of the author. It does not reflect the opinions of Reuters news, which, according to the principles of confidence, is committed to integrity, independence and liberation from bias.
(Written by Jimmy McGiv; Edit Nia Williams)
