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European and American central banks parted ways, gold prices rebound faces a key test
2022-04-21
1051
What it means for U.S. bond yields to turn positive
Recently, the IMF lowered its global economic growth forecast and the Fed Bullard's earlier remarks on raising interest rates by 75 basis points caused severe volatility in the global market. The U.S. 10-year inflation-protected bond (TIPS) yield broke below negative territory for the first time since March 2020, when the Federal Reserve announced unprecedented stimulus in response to the coronavirus pandemic.
Positive inflation-protected bond yields mean that investors will still be able to make ends meet on Treasuries 10 years from now after factoring in expected inflation, and the market expects the Fed to continue to tighten policy, and these expectations will push Treasury yields higher. pushed to a 3-year high. Spot gold fell more than $30 from the daily high, hitting a new one-week low.
Should we take the first 75 basis point rate hike since 1994? The Fed's most hawkish official, St. Louis Fed President Bullard, opened the debate with a bang. Bullard recently praised former Federal Reserve Chairman Alan Greenspan's decision to raise interest rates by 75 basis points that year, saying it "sets the foundation for the good performance of the U.S. economy in the second half of the 1990s, a record in U.S. macroeconomic history. One of the best times".
Greenspan raised the benchmark interest rate by 75 basis points in November 1994, bringing the benchmark rate to 5.5%, which was nearing the end of the rate hike cycle. That round of rate hikes totaled 3 percentage points, and there was no rate change at the previous meeting. Next, the Fed cut interest rates several times starting in July 1995.
Bullard has been the most vocal voice on the Federal Open Market Committee (FOMC) calling for tighter policy. He also became an influential voice, and his recent advice was eventually followed by other committee members. But so far, the 75-basis-point rate hike does not appear to have been embraced by other Fed officials.
The situation in Russia and Ukraine has entered a "white-hot"
Russia's fighting in Ukraine has been going on for nearly two months since Russia announced a "special military operation" against Ukraine on February 24. Russian Foreign Minister Sergei Lavrov said in an interview with "India Today" on April 19 that Russia's "special military operation" in Ukraine has begun a new phase. According to previous Reuters news, the Russian Ministry of Defense announced as early as March 25 that its first phase of military operations in Ukraine had been basically completed, and then it would focus on the complete "liberation" of the Donbas region in eastern Ukraine.
The most fierce battle was still in Mariupol. According to the Russian side, Mariupol was the last stronghold left. There are more than 1,000 Ukrainian militants who are stubbornly resisting in the steel factory.
But precisely because of this, the Russian army in Mariupol has faced firm resistance from the Ukrainian side, and the Ukrainian troops stationed in Mariupol have been able to resist by retreating to the city's sprawling Azov steel plant. The steel plant has underground bunkers that can withstand a nuclear explosion, electricity supplies and a network of tunnels. The fortified structures allow Ukrainian fighters to move around and provide cover in the event of a clash between Ukrainian and Russian forces.
Western countries have expressed that they will increase aid to Ukraine. Leaders of the United States, European countries, Canada and Japan have recently reiterated their commitment to continue to provide security, economic and humanitarian assistance to Ukraine through video calls. Ukraine is equipped with anti-ship missiles and anti-tank missiles, including the installation of British Brimstone missiles on vehicles. With the support of Western countries "fearing that the world will not be in chaos", the Russian-Ukrainian war provided continuous and obvious support.
U.S. dollar soars to dominate markets
Recently, the Fed executives made hawkish remarks, and the market's expectations for the Fed to raise interest rates by 50 basis points in May have increased, which supported the volatility of the dollar. The dovish tone of the European Central Bank led to the euro continued to be pressured lower.
In the monetary policy decision announced by the European Central Bank, the European Central Bank confirmed that the possibility of ending net asset purchases in the third quarter has further increased, but has not yet made a clear statement on the timetable for interest rate hikes thereafter. The decision underscores the impact and uncertainty that the Russian-Ukrainian conflict has brought to the euro zone economy. At present, the market and the entire economy are worried about the possible stagflation of the European economy.
From the perspective of economic fundamentals, the U.S. CPI and PPI continued to rise in March, and inflation reached a new high. Under the influence of inflationary pressure, corporate investment weakened, household consumption expenditures diverged, discretionary consumption was suppressed, and the superimposed yield curve inverted. It will further raise fears of an economic recession. Ahead of the FOMC interest rate decision in May, the price of gold may continue to range and part ways" Gold prices face a key test
What does U.S. bond yields mean
Recently, the IMF lowered its global economic growth forecast and the Fed Bullard's earlier remarks on raising interest rates by 75 basis points caused severe volatility in the global market. The U.S. 10-year inflation-protected bond (TIPS) yield broke below negative territory for the first time since March 2020, when the Federal Reserve announced unprecedented stimulus in response to the coronavirus pandemic.
Positive inflation-protected bond yields mean that investors will still be able to make ends meet on Treasuries 10 years from now after factoring in expected inflation, and the market expects the Fed to continue to tighten policy, and these expectations will push Treasury yields higher. pushed to a 3-year high. Spot gold fell more than $30 from the daily high, hitting a new one-week low.
Should we take the first 75 basis point rate hike since 1994? The Fed's most hawkish official, St. Louis Fed President Bullard, opened the debate with a bang. Bullard recently praised former Federal Reserve Chairman Alan Greenspan's decision to raise interest rates by 75 basis points that year, saying it "sets the foundation for the good performance of the U.S. economy in the second half of the 1990s, a record in U.S. macroeconomic history. One of the best times".
Greenspan raised the benchmark interest rate by 75 basis points in November 1994, bringing the benchmark rate to 5.5%, which was nearing the end of the rate hike cycle. That round of rate hikes totaled 3 percentage points, and there was no rate change at the previous meeting. Next, the Fed cut interest rates several times starting in July 1995.
Bullard has been the most vocal voice on the Federal Open Market Committee (FOMC) calling for tighter policy. He also became an influential voice, and his recent advice was eventually followed by other committee members. But so far, the 75-basis-point rate hike does not appear to have been embraced by other Fed officials.
The situation in Russia and Ukraine has entered a "white-hot"
Russia's fighting in Ukraine has been going on for nearly two months since Russia announced a "special military operation" against Ukraine on February 24. Russian Foreign Minister Sergei Lavrov said in an interview with "India Today" on April 19 that Russia's "special military operation" in Ukraine has begun a new phase. According to previous Reuters news, the Russian Ministry of Defense announced as early as March 25 that its first phase of military operations in Ukraine had been basically completed, and then it would focus on the complete "liberation" of the Donbas region in eastern Ukraine.
The most fierce battle was still in Mariupol. According to the Russian side, Mariupol was the last stronghold left. There are more than 1,000 Ukrainian militants who are stubbornly resisting in the steel factory.
But precisely because of this, the Russian army in Mariupol has faced firm resistance from the Ukrainian side, and the Ukrainian troops stationed in Mariupol have been able to resist by retreating to the city's sprawling Azov steel plant. The steel plant has underground bunkers that can withstand a nuclear explosion, electricity supplies and a network of tunnels. The fortified structures allow Ukrainian fighters to move around and provide cover in the event of a clash between Ukrainian and Russian forces.
Western countries have expressed that they will increase aid to Ukraine. Leaders of the United States, European countries, Canada and Japan have recently reiterated their commitment to continue to provide security, economic and humanitarian assistance to Ukraine through video calls. Ukraine is equipped with anti-ship missiles and anti-tank missiles, including the installation of British Brimstone missiles on vehicles. With the support of Western countries "fearing that the world will not be in chaos", the Russian-Ukrainian war provided continuous and obvious support.
U.S. dollar soars to dominate markets
Recently, the Fed executives made hawkish remarks, and the market's expectations for the Fed to raise interest rates by 50 basis points in May have increased, which supported the volatility of the dollar. The dovish tone of the European Central Bank led to the euro continued to be pressured lower.
In the monetary policy decision announced by the European Central Bank, the European Central Bank confirmed that the possibility of ending net asset purchases in the third quarter has further increased, but has not yet made a clear statement on the timetable for interest rate hikes thereafter. The decision underscores the impact and uncertainty that the Russian-Ukrainian conflict has brought to the euro zone economy. At present, the market and the entire economy are worried about the possible stagflation of the European economy.
From the perspective of economic fundamentals, the U.S. CPI and PPI continued to rise in March, and inflation reached a new high. Under the influence of inflationary pressure, corporate investment weakened, household consumption expenditures diverged, discretionary consumption was suppressed, and the superimposed yield curve inverted. It will further raise fears of an economic recession. Before the FOMC interest rate decision in May, the price of gold may continue to be range-bound.
The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.
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