After the non-agricultural Powell has to bring big news? Four key points to grasp the lifeline of the US

Following the non-agricultural report on Friday, this week, a series of speeches from Fed officials will be ushered in. The most notable one is the speech of Chairman Powell on Tuesday (May 8). In addition to the outlook on the US economy and expectations of inflation, he may also mention the impact of the global economy and trade situation on the Fed's monetary policy. In addition, this week should also pay attention to other important economic indicators of the United States, which are expected to be US dollars. The index's rise again provides an opportunity.

Non-agricultural review

Last Friday (May 4), the US Department of Labor announced the April non-farm payrolls report, which showed that the US employment situation was mixed. Although wage growth has not increased compared to last month, and even the labor force has declined, the unemployment rate has fallen to 3.9%, the lowest since 17 years and a half.

Since the market was generally too optimistic about non-agricultural reports, the wage growth rate that actually reflected inflation expectations did not increase, the US dollar index fell from a high level, but then hit a recent high of 92.8. One of the reasons for this is that the unemployment rate is maintained in a historical position, making people believe that the moderate growth of wages may be only a temporary phenomenon. On the other hand, wage growth is less than expected, which may alleviate the inflationary pressure that is accumulating rapidly, but the Fed will not change on the track of gradually tightening monetary policy.

Last weekend, two other Fed officials commented

In addition to heavy non-agricultural data, last week's two voting Fed officials San Francisco Fed President John Williams and Atlanta Fed President Raphael Bostic also delivered speeches, raising interest rates this year. The number of times is in optimistic expectations and unanimously mentions inflation-related issues.

In June, he will be promoted to New York Fed President Williams (Fed's second person in the future) said: "Given the continuous improvement of the economy, this year's rate hike three or four times is still a basic trend."

Another official, Bostik, also expressed a consensus that the tax cuts and the upside potential of the government's new spending, as well as the bright economic prospects, may prompt the Fed to raise interest rates faster.

Regarding inflation, they also said that although inflation data has accelerated and the core inflation is even close to 2% of the target, it believes that the future will not rise rapidly and there is no fear that the inflation rate will rise above this level.

The relatively hawkish signal released by the wording brought new impetus to the rise of the US dollar index, which may be another factor that supported the dollar to hit a new high.

However, the good times did not last long. After hitting a recent high of 92.8 to the Asian market this Monday (May 7), the US dollar index fell slightly. This aspect is a reversal of the market profit-taking. On the one hand, the market is also waiting for an opportunity to wait for the next rise, that is, whether the speech of Fed Chairman Powell’s speech on Tuesday will have new highlights to support the further strengthening of the US dollar and the second half. Whether the three inflation-related indicators can be maintained on Wednesday.

Powell speaks

On Tuesday, Federal Reserve Chairman Jerome Powell’s speech at the Swiss National Bank in Zurich is expected, because there was no press conference after the monetary policy meeting in May, so this is the first time Powell has communicated with the market since the monetary policy meeting in March. . And too many things happened between March and May, including the US economy and the changes in the trade situation, which are bound to be mentioned in his speech.

1 inflation

Based on the tone of the previous monetary policy statement, Fed officials are optimistic that inflation will only slightly exceed the 2% target. Therefore, Powell is expected to reiterate that their inflation target is "symmetric" and there is no upper limit. This may imply that policymakers have not changed the path of gradual rate hikes due to recent price pressures, so it is expected that the inflation aspect will be biased. neutral.

2 The impact of tightening monetary policy on the global financial situation

In addition, he may also mention the impact of the Fed's tight monetary policy on the global financial situation. The implementation of stimulus policies will lead to an increase in global borrowing costs, which will put pressure on corporate costs, which in turn will affect the US stock market and the real economy. Recently, US stocks have indeed The fluctuations are huge.

If the recent stock market volatility mentioned in his speech does not stress the economy, the US economy will continue to grow rapidly due to tax relief. This means that Fed officials believe that the current rate hike is still within the market acceptable range. It is expected to boost the market's expectation of raising interest rates four times during the year.

3 US economy

As the non-agricultural unemployment rate has dropped to 3.9%, the US economy is facing certain overheating risks. Powell’s attitude is particularly important. As the chairman’s remarks must be cautious, Powell is expected to stick to the middle ground, which is optimistic about the economic outlook, but will not make his speech sound too radical.

He is likely to continue to emphasize that there is no indication that the US economy will usher in hyperinflation and will maintain a "wait and see" stance. However, it is still necessary to beware of exceeding expectations. For example, he mentioned that the fear of the US economy is too fast, it will tighten the contraction of monetary policy, and thus make the US dollar index stronger.

4 International situation

There have been many changes in the international situation from March to May, although the smooth resolution of North Korea’s denuclearization and the fight against Syria have come to an end. However, the trade negotiations between the United States and other countries, including (EU, Canada, China) steel and aluminum tariffs remain unresolved. On the other hand, the US withdrawal from the Iranian nuclear agreement is also a "bomb" that may be detonated in the near future.

These will bring uncertainty to the growth of the US economy, the price of imported goods in the United States will rise, and the rise of raw materials such as crude oil will accelerate the rebound of inflation. Powell is bound to talk about the impact of these uncertainties on the US policy economy. If he reveals concerns about the international situation, it may slow down the pace of interest rate hikes, because it takes more time to observe the impact on the US economy and the performance of corporate data for a period of time, which may be detrimental to the rise of the US dollar index. .

Important economic data for the second half of the week

In addition to Powell's speech, there will be three important US data in the second half of the week, the producer price index PP I on Wednesday (May 8), the CPI on Thursday (May 9), and Friday ( The consumer confidence index of May 10, all three are closely linked to inflation expectations.

Previous PMI survey data hinted at the rebound in inflation, and the market currently expects the inflation rate to rise to 2.5%. Core inflation to eliminate food and energy price volatility will reach 2.2%. If the market expects, both results will be the highest readings in 14 months.

CFTC position

The US dollar index has experienced a three-week surge since the short-covering, and there may be some technical corrections, but there seems to be a bullish future. According to the US Commodity Futures Trading Commission's positioning data, as of May 1, large speculators are still partially headroom US dollar index futures. This provides plenty of room for rebalancing risk exposure and provides room for subsequent increases.

(US dollar index position)

technical analysis

The US dollar index is now up to the pressure range of 92.70 to 94.03, which is the box from the beginning of July to the end of December last year. It is difficult to quickly pass the short-term, and there must be repeated. At present, Brin is still in the open, and the red pillar of MACD continues to enlarge, showing an acceleration. However, the recent upside momentum has slowed down, with a high sideways trading of nearly 4 trading days above 109. According to the quantitative statistics, there is still room for a high probability, and it will not end the rise simply. The maximum resistance on the upside is near the 94 integer mark, and the lower support is 92.4 for the near four trading day lows.

(Dollar Chart Daily Chart)

Huitong Finance and Economics Huihui market software shows that at 13:26 Beijing time, the US dollar index was 92.63.