During this period, there were rumors in the international market that the Federal Reserve may form a new strategy and may cut interest rates early, which really caught people off guard. On the one hand, the uncertainty of US economic data gives some legitimacy to this speculation, and on the other hand, the volatility of some interest rate markets also increases the credibility of this conjecture. However, whether there are more complex factors behind such rumors needs to be further analyzed.
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Judging from the current economic trends, there are indeed three vague signals. Will the rumored scenario actually happen? This is not just a contest of monetary policy, but also a change in the global economic situation. The stability of the US dollar will affect the stability of the world monetary economy. The Fed's decision to cut interest rates early requires a complex consideration of various factors, and cannot simply be based on one or two signals.
Returning to the question posed in this article – is an early rate cut certain to happen? Not long ago, the Federal Reserve held a meeting to discuss the issue of interest, and after the meeting, the Fed representative Jerome Powell was a little vague about the interest rate policy on the dollar. It can be inferred that the expert is not fully sure about the reduction of interest rates, and if he does intend to implement this policy in advance, then this decision will not be readily acceptable.
The media camera keenly captured that Powell seemed to be in a trance at that important moment of speech. This is not his usual calmness, but more like being shrouded in the clouds of the future. Perhaps, before he took the stage, he had received some frowning news, which prevented him from gathering his mind on the original speech on the stage.
In other words, the previously prepared "no rate cut" plan may have made Powell hesitate. At that time, he may have received some bad news that affected the subsequent trend and made it difficult for him to make a choice easily.
The first downside is that there has been an unexpected decline in the U.S. job market. The latest data showed that the situation in the US labor market in April was not encouraging. The large number of unemployed people has sparked concerns in the market, which is far from market expectations. The deterioration of this trend is worrying and could have far-reaching implications for the economic situation.
At the same time, the unemployment rate in the United States unexpectedly increased above market expectations, casting a shadow over the market. The month-on-month increase in average hourly earnings was only half of what the market expected, which is also very worrying and has a negative impact on the economic outlook.
The market seems to have lost a shred of fear of inflation, as if to temporarily calm the anxiety in people's hearts. The sharp drop in growth in the U.S. economy to a record low is clear evidence that the economy is on the road to slowdown.
Perhaps, the subtle anxiety that Powell revealed in his speech stemmed from the decline in employment data. Inflationary pressures have eased and the employment situation has become a new hot topic, which may suggest that employment data is becoming more important and prominent in monetary policy decisions.
But is it really as expected that a rate cut is going to happen? The market changes like the rising tide of the sea, sometimes turbulent, sometimes calm. This series of events is like rolling waves, making it impossible to predict the next direction.
Secondly, the second unfavorable news, the intervention of the Bank of Japan, is like a violent storm, stirring up an economic turmoil. The turmoil in the yen, pointing directly at the stability of the dollar, is like a heavy blow. Although the Japanese government has not admitted it, the soaring exchange rate can no longer hide the suspicions of the outside world.
Japan's move can be described as a confrontation point between risks and challenges, and it is an economic wrestle that is completely unpredictable. Ignoring warnings from the United States, they boldly intervened in the exchange rate market and sent ominous signals as if they were a harbinger of a sudden change in the situation.
The yen's rally is a hint of an undercurrent that reveals a deeper economic strategy, which not only means that Japan may be selling US Treasuries and cutting back on its investment in the dollar, but also clouds the dollar index like a bird that has lost control and is about to fall into the abyss. For the dollar, this completely leaves it in the shadow of the unknown.
The third piece of bad news, like a thunderbolt, shocked the global financial markets. For three days in a row, the dollar index could not hold on, like a tired fortress, constantly collapsing down.
At the beginning of May, the dollar index began its endless downward journey, and as the yen soared, the dollar's position gradually weakened, as if it were inversely proportional. At this time, at a time when Japan is meddling in the exchange rate, the dollar index figure is hovering around 104.5, like a crumbling rope, and there is a danger of falling at any time.
The rise of the yen and the silence of the dollar are quietly unfolding market dialogues, which contain many untold truths. The United States' previous severe suppression of the yen was not a desperate gamble, but a well-thought-out strategic layout. However, the offshore renminbi has not been threatened by any depreciation, but has shown an upward trend, which has also become a key factor in the failure of the dollar.
Beginning in late April, the renminbi in overseas markets began a five-day surge, from $7.27 to $7.15 per dollar. This frenzy has undoubtedly aroused widespread attention and heated discussions. Under such circumstances, is it possible that the dollar will risk cutting interest rates? Undoubtedly, this is a moment when people dare not act rashly. So, what exactly is driving the dollar to exercise restraint?
The new adjustment seems to point in a clear direction - to maintain the strong position of the dollar while promoting a smooth transition of the US economy. However, to achieve this, two key preconditions must be met so that the US dollar rate cut can avoid catastrophic consequences.
The first priority is to restore the dominance of the dollar in the field of payments, and it is necessary to ensure that it regains at least half of its share. In addition, it is also necessary to actively strengthen the US dollar index. The fundamental reason for this series of measures is that if the dollar weakens, its share of the payments sector will inevitably be affected. If the dollar weakens, its share of payments will inevitably decrease. In order to avoid potential market disruptions, in particular the possibility of a rapid depreciation of the US dollar, it is important to meet the above dual preconditions to offset the potential adverse effects of a weaker US dollar, particularly on the US stock market and commercial real estate. That's where the strategy lies.
To achieve this, the United States must look to major currencies such as the yen, euro, pound sterling, and renminbi as support. The Japanese yen is naturally the first choice, and its attitude is firm and does not hesitate. The pound should also be able to help, although there may be some problems. As for the euro, they have made it clear that they will cut interest rates in June, but they no longer seem to want to intervene too much in the case of the dollar, and Macron has repeatedly stressed that Europe should not be seen as a follower of the United States.
As a result, U.S. Treasury Secretary Janet Yellen and Secretary of State Antony Blinken made successive trips to China in April, triggering numerous waves of speculation and speculation. Perhaps they have a special mission, or perhaps they have come with a mission that is difficult to guess. However, the current situation shows that our rejection of their proposals is not accidental, but has deep causes.
Some netizens pointed out an economic phenomenon: if the United States does not cut interest rates, it will not be able to bear the burden of interest, but if interest rates are cut, the loan channels will be narrowed. This creates a dilemma that is difficult to solve.
Some netizens also pointed out that the Fed's interest rate cuts and interest rate hikes do not require our consent. If they do not cooperate, their decision-making will be difficult to achieve their goals and may suffer losses.
Some netizens commented that the RMB bond issuance does not accept the US dollar, supports the US dollar interest rate cut, and strengthens the status of the RMB.
The reason why we cannot accept their proposal is that if we compromise, it will mean that we will be forced to actively weaken the value of the yuan and at the same time push the dollar index higher. Such a move will undoubtedly bring turbulence to the international financial market and great uncertainty to the domestic economic development. What is even more serious is that if international shorts take the opportunity to short the renminbi, it will inevitably have a serious impact on the mainland's economic stability and affect the country's financial security and economic stability.
Even more frighteningly, the situation would be even more dire if the United States did not seek our cooperation, but intended to conspire with international bears to take large-scale action to suppress the yuan. In this case, we will have to face tremendous pressure and challenges from the international market, and decisive measures must be taken to defend the country's financial sovereignty and economic security.
Indeed, we should not easily leave the fate of the renminbi in the hands of others, especially at such a critical moment. Americans' motives and schemes cannot be ignored, and their proposals may have hidden a deeper purpose. In this war without gunpowder, we must remain vigilant and constantly strengthen the country's financial strength and ability to withstand external risks.