After a lapse of one year, the Fed ended the 2016 year with a 25 basis point rate hike, and hinted that it may raise interest rates three times in 2017. The US dollar index was boosted by a 14-year high of 103.56, and the yuan fell to eight years against the US dollar. Used low. Gold plunge 2% hit a 10-month low, and US crude oil futures were also suppressed by a strong dollar.
[Feders raise interest rates as scheduled and hinted that the rate hike in 2017 will be three times]
The Fed decided to raise interest rates for the first time in a year at the Federal Reserve meeting. The Fed will raise the target interest rate target range by 25 basis points to 0.5%-0.75%, and hinted that the interest rate will increase three times in 2017.
The Fed pointed out in the statement that the committee decided to raise the target interest rate target range in view of the job market and inflation conditions that have been achieved and expected to be achieved. The Fed expects GDP growth to accelerate slightly in 2017, the unemployment rate will decline slightly, and long-term inflation expectations are basically the same as in September.
The median GDP growth forecast for 2016 is 1.9%, and is expected to be 1.8% in September; the median GDP growth forecast for 2017 is 2.1%, and September is expected to be 2.0%. The 2016 unemployment rate is expected to be 4.7%, and September is expected to be 4.8%; the 2017 unemployment rate is expected to be 4.5%, and September is expected to be 4.6%.
The median PCE inflation forecast for 2016 was 1.5%, and the September forecast was 1.3%. The median PCE inflation forecast for 2017 was 1.9%, the same as expected in September. The median core PCE inflation forecast for 2016 was 1.7%, and the median core PCE inflation forecast for 2017 was 1.8%, the same as expected in September.
The median Fed funds rate is expected to be 0.6% at the end of 2016, the same as expected in September; the median Fed funds rate is expected to be 1.4% at the end of 2017 and 1.1% in September. It is expected to raise interest rates three times in 2018, in line with September expectations.
FX678 quoted foreign media news, Fed Chair Janet Yellen pointed out at the press conference that the interest rate hike is slightly adjusted in the interest rate path. The median expectation of three interest rate hikes in 2017 is only driven by some participants. Fiscal policy is only one of several factors considered by the Fed's prospects. It is impossible to say how the Fed will respond to any policy changes and will not speculate before getting more specific details.
Yellen also said that she will not resign, she will continue to stay in the post of Fed chairman until the end of the 2018 term.
[Can 2017 pay interest promises can be redeemed]
The Fed raised interest rates by 25 basis points on Wednesday, but the dot matrix chart predicts that the Fed will raise interest rates three times in 2017, exceeding market expectations. However, the market has doubts about whether the Fed can raise interest rates three times in 2017.
Reuters survey, US primary market traders expect the Fed to raise interest rates next time in the second quarter of 2017, most US primary market traders expect that the Fed will not raise interest rates more than twice in 2017.
The US chief economist at Yuxin Bank said that the FOMC "three times to raise interest rates next year" may be interference information. Fed policymakers hinted that the rate of interest rate hikes next year is more than expected in September, which is a very correct direction; from the dot matrix, six of the 17 Fed members are expected to raise interest rates in 2017. 2 times.
However, we are very convinced that the truly influential members, including Chairman Yellen and Vice Chairman Dudley, are likely to support only two interest rate hikes next year; if this is the case, this dot map reveals that "most members support The message of raising interest rates three times next year may be difficult to shake the prospect of cautious monetary policy.
Huitong Financial Analysis pointed out that investors may overestimate the potential impact of Trump's fiscal stimulus policy on the Fed's monetary policy. At the same time, there is still a lot of uncertainty as to whether Trump can implement its fiscal policy.
JPMorgan Chase said that the US Congress will only approve some of its tax incentives and spending plans, so by 2018, Trump's economic stimulus will not significantly boost the US economy.
In 2017, many countries in the Eurozone will usher in general elections, especially in Italy and France. The political risk in the Eurozone will cast a shadow over the Fed’s interest rate hike. Just like the June Brexit referendum, the market once bet on the Union’s stockpile. The possibility of a rate cut.
[The US dollar index hits a 14-year high, and the future uptrend is still expected]
The US dollar index was boosted by the Fed’s resolution and hit a 14-year high of 103.56. This week, it rose 1.27%, and non-US currencies were hit hard. However, the market believes that there is a risk of adjustment in the short-term US dollar, but it is still bullish in the medium and long term.
The US dollar index has risen 1.27% since this week and has risen 5% since Trump won the election. In the short term, the market has already digested the Fed's interest rate hike, and it is expected that it will be adjusted in the next few days.
Looking back at the trend of the Fed's interest rate hike in 2015, it was found that the US dollar index opened up after a few days of interest rate hikes. The US dollar index fell more than 2% in the two months after the rate hike.
But the market is still bullish on the future direction of the dollar. Bank of America Merrill Lynch said that the strength of the dollar may continue until 2017, leading the direction of other currencies. The upward revision of the Fed's dot matrix chart in 2017, the potential fiscal stimulus policy and the acceleration of economic growth may support the strength of the US dollar into the new year.
The bank further pointed out that the sensitivity of interest rates makes the dollar's rise against the yen the most certain, although there may be room for a moderate correction in the near future; while the European Central Bank's easing policy runs counter to the Fed's tightening policy, policy differentiation will cause the euro against the dollar. pressure.
USD/JPY once hit a 10-month high of 118.66, as the spread of US and Japanese government bonds spread to suppress the yen. The Bank of Japan’s monetary policy framework targeting “yield curve control†has curbed the rise in its bond yields, which has caused the yen’s recent decline to be much larger than other non-US currencies.
The euro hit a new low of 1.0364 in nearly 14 years on Thursday and closed at 1.0440 on Friday. Despite the short-term risk of a rebound in the euro, the market is not optimistic about its future prospects.
The Dutch International Group said that the Fed announced that after the interest rate decision in December, the interest rate increase, the euro zone political worries and the exchange rate fell below the key technical level, the euro may still fall further against the dollar and the two currencies may have parity.
[The Bank of England stabilized as scheduled, saying that inflation has not been overdue as scheduled]
The Bank of England's (BoE) resolution released on Thursday (December 15) showed that the central bank's nine-member Monetary Policy Committee (MPC) decided to maintain the benchmark interest rate by 0-9-0 (rate hike-changing-reduction rate) votes. At 0.25%; and 9-0 (not expanded - expanded) decided to maintain the asset purchase size of 435 billion pounds; maintain corporate bond purchases of 10 billion pounds unchanged.
The Bank of England believes that inflation is still likely to exceed its target later in 2017; reaffirming that the rate of tolerable inflation exceeds the target is limited. The appreciation of the pound in the past month suggests that inflation did not overshoot as expected; the rise in the pound suggests that inflation is slightly above the standard. UK inflation may rise to 2% in the next six months.
The Bank of England also said that monthly volatility may change with the market's relationship with the EU and the UK; the rise in long-term bond yields is partly due to market expectations that US fiscal policy will be relaxed.
The pound against the dollar fell slightly after the Bank of England announced its resolution, but more shocks came from the Fed to raise interest rates. GBP/USD hit a three-week low of 1.2373 on Thursday and closed at 1.2478 this week.
[The renminbi against the US dollar hit an eight-and-a-half-year low, and the short-term depreciation pressure weakened
Affected by the Fed resolution, the spot and central parity of the RMB against the US dollar reached a new low of more than eight and a half years. The lowest against the US dollar on Friday was 6.9649 yuan, and the central parity of the RMB against the US dollar was 6.9508 yuan.
As the dollar faces the risk of adjustment in the short term, the pressure on the renminbi to depreciate in the next few weeks is weakening. However, the market is still not optimistic about the medium and long-term trend of the RMB. Goldman Sachs Gao Hua predicted in the latest report that the yuan against the dollar may fall to 7.3 at the end of next year.
The People’s Daily commentary said that in the long run, it is China’s economic fundamentals that determine the direction of the RMB exchange rate. To face up to the impact of the Fed’s rate hike, most of the depreciation pressure will be released before the rate hike, and the pressure will not be as big as before.
[Gold plunge 2% hit a 10-month low, and silver plummeted more than 4%]
Spot gold plunged 2% this week, hitting a 10-month low of $1122.93 per ounce on Thursday and closing at $1135.02 per ounce on Friday, as the Fed’s resolution boosted US bond yields and the dollar’s ​​higher, holding non-suffocation The opportunity cost of gold has risen.
"The Fed is more hawkish than expected, rekindling this round of dollar rally," analysts said. "The rise in US bond yields and the dollar's rise are probably the worst combination of gold."
Since Trump's victory, gold has fallen by nearly 12%, and since the July high of $1375.27, gold has fallen by 18%, which is in line with the definition of a bear market. As the Fed raises interest rates gradually, gold may look down to $1,100 in 2017.
The Fed raised interest rates by 25 basis points on Wednesday, but the dot matrix chart predicts that the Fed will raise interest rates three times in 2017, exceeding market expectations. However, the market has doubts about whether the Fed can raise interest rates three times in 2017.
After the spot gold announced a rate hike at the end of 2015, it was sold out, and the gold rebounded after a brief decline. At present, gold faces the risk of upward revision.
“The latest trend in US short-term bond yields suggests that gold can fall further,†said Caroline Bain, chief commodities analyst at Capital Economics, who warned that “nominal yields are not necessarily negative for gold, if they reflect rising Inflation expectations."
“Although the company maintains its expectation of raising interest rates twice next year, we acknowledge that there is a risk of accelerating interest rate hikes,†UBS Wealth Management Research said in the report. It also said that the company lowered its gold price estimate to three months later. At $1100-1250, the price of gold is estimated at $1,300 after 12 months, compared to $1,350.
In addition, spot silver plunged 4.43% this week, hitting a half-year low of $15.88 per ounce on Thursday and closing at $16.12 per ounce on Friday.
[The rise in oil prices has narrowed, and it has been dragged down by strong dollar and long profit-taking]
US crude oil futures fell after the skyrocketing at the beginning of the week. It closed up 1.07% this week and closed at $52.03 per barrel. It rose to a 16-month high of $54.51 per barrel at the beginning of the week. A strong dollar and long-term profit-taking have dragged down the oil price, which offset some of the positive effects of oil production cuts.
Brent crude oil futures closed up 1.78% this week, closing at 55.33 US dollars / barrel, and rose to a 16-month high of 57.89 US dollars / barrel at the beginning of the week.
The US dollar index was boosted by the Fed’s resolution and hit a 14-year high of 103.56, up 1.27% this week, putting pressure on dollar-denominated commodity prices.
The oil price has risen by more than 15% since the OPEC meeting on November 30 to December 12, and investors have questioned whether the oil-producing countries can actually implement the agreement, which triggered the long-term profit-taking.
The Organization of Petroleum Exporting Countries (OPEC) agreed on November 30 to reduce daily production by about 1.2 million barrels, or more than 3%, to 32.5 million barrels from January next year. Non-OPEC oil-producing countries agreed to cut production by 558,000 barrels per day on December 10, slightly below the original target of 600,000 barrels per day. However, it is still the biggest contribution that non-OPEC countries have ever made to reduce production.
In addition, Libya has reopened one of its largest oil fields and is preparing to complete its first shipment of crude oil at its largest export terminal, Es Sider, within two years.
The International Energy Agency (IEA) said that if OPEC members and non-OPEC oil producers can actively implement the production reduction agreement, the oil market will enter a state of short supply, and the oil market will have a shortage of 600,000 barrels per day in the first half of the year.
OPEC announced in its monthly report on December 14 that crude oil production will not be able to rebalance the market until the second half of next year. It is also expected that if OPEC crude oil production remains stable, the global oil market will have an oversupply of 1.24 million barrels per day in 2017.
However, the market is relatively optimistic about the overall trend of oil prices. Goldman Sachs expects Libya to increase production and US dollar appreciation or further limit recent oil price increases; the WTI crude oil price forecast for December is still $50/barrel; the WTI oil price forecast for the second quarter of 2017 is raised from the previous $55/barrel to $57.5/barrel.
OPEC is not expected to begin production until mid-January or at the end of January; the announced oil reduction plan is expected to be 84%. After the first half of 2017, the global market will continue to balance, the price of oil will be 55-60 US dollars / barrel; the average price of Brent crude oil in 2018 will be reduced from 63 US dollars / barrel to 58 US dollars / barrel.
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