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Waller's new policy measures are in the works! How should investors respond?
真灼财经
joined discussion · Jun 18 11:25

Hawkish Fed fuels bets on rate hike; US and Iran sign agreement

The Federal Reserve held rates steady but signaled a hawkish stance through its dot plot, while new Chair Waller unveiled institutional reforms, prompting traders to firmly price in a rate hike in October. Trump signed a temporary peace agreement between the US and Iran. China plans to establish a mechanism to assess the impact of artificial intelligence on the labor market. The State Administration for Market Regulation is regulating subsidy practices by food delivery platforms.
Overnight Highlights
– Spooked by the Fed’s hawkish dot plot and weakening tech stocks, investor concerns over rate hikes surged, triggering risk-off selling that sent all three major US equity indexes sharply lower. Heightened expectations of monetary tightening led traders to widely bet on an October rate hike, with capital outflows driving yields higher across all maturities of US Treasuries. The Fed’s firm policy stance accelerated capital repatriation, propelling the dollar index sharply higher, while the yen slid to its weakest level against the dollar since July 2024. Although the US and Iran successfully signed a temporary peace agreement, dwindling crude inventories at Cushing sparked supply concerns, fueling buying interest that pushed international oil prices modestly higher. Under pressure from both a strong dollar and elevated rate expectations, bullish sentiment weakened, dragging both spot and futures gold prices significantly lower.
The Federal Reserve held rates steady but signaled a hawkish stance through its dot plot, while new Chair Waller unveiled institutional reforms, prompting traders to firmly price in a rate hike in October. Trump signed a temporary peace agreement between the US and Iran. China plans to establish a mechanism to assess the impact of artificial intelligence on the labor market. The State Administration for Market Regulation is regulating subsidy practices by food delivery platforms. Overnight Highlights – Spooked by the Fed’s hawkish dot plot and weakening tech stocks, investor concerns over rate hikes surged, triggering risk-off selling that sent all three major US equity indexes sharply lower. Heightened expectations of monetary tightening led traders to widely bet on an October rate hike, with capital outflows driving yields higher across all maturities of US Treasuries. The Fed’s firm policy stance accelerated capital repatriation, propelling the dollar index sharply higher, while the yen slid to its weakest level against the dollar since July 2024. Although the US and Iran successfully signed a temporary peace agreement, dwindling crude inventories at Cushing sparked supply concerns, fueling buying interest that pushed international oil prices modestly higher. Under pressure from both a strong dollar and elevated rate expectations, bullish sentiment weakened, dragging both spot and futures gold prices significantly lower. International News – As expected, the Federal Reserve kept rates unchanged, but raised its inflation forecast for this year. The dot plot showed that roughly half of policymakers expect at least one rate hike this year. Swap market traders now firmly anticipate a rate hike in October. – New Chair Waller downplayed the importance of forward guidance, announcing a series of adjustments, including the formation of a special task force to review the Fed’s $6.7 trillion balance sheet. – Hawkish signals from the Fed drove Bloomberg US...
The Federal Reserve held rates steady but signaled a hawkish stance through its dot plot, while new Chair Waller unveiled institutional reforms, prompting traders to firmly price in a rate hike in October. Trump signed a temporary peace agreement between the US and Iran. China plans to establish a mechanism to assess the impact of artificial intelligence on the labor market. The State Administration for Market Regulation is regulating subsidy practices by food delivery platforms. Overnight Highlights – Spooked by the Fed’s hawkish dot plot and weakening tech stocks, investor concerns over rate hikes surged, triggering risk-off selling that sent all three major US equity indexes sharply lower. Heightened expectations of monetary tightening led traders to widely bet on an October rate hike, with capital outflows driving yields higher across all maturities of US Treasuries. The Fed’s firm policy stance accelerated capital repatriation, propelling the dollar index sharply higher, while the yen slid to its weakest level against the dollar since July 2024. Although the US and Iran successfully signed a temporary peace agreement, dwindling crude inventories at Cushing sparked supply concerns, fueling buying interest that pushed international oil prices modestly higher. Under pressure from both a strong dollar and elevated rate expectations, bullish sentiment weakened, dragging both spot and futures gold prices significantly lower. International News – As expected, the Federal Reserve kept rates unchanged, but raised its inflation forecast for this year. The dot plot showed that roughly half of policymakers expect at least one rate hike this year. Swap market traders now firmly anticipate a rate hike in October. – New Chair Waller downplayed the importance of forward guidance, announcing a series of adjustments, including the formation of a special task force to review the Fed’s $6.7 trillion balance sheet. – Hawkish signals from the Fed drove Bloomberg US...
International News
– As expected, the Federal Reserve kept rates unchanged, but raised its inflation forecast for this year. The dot plot showed that roughly half of policymakers expect at least one rate hike this year. Swap market traders now firmly anticipate a rate hike in October.
– New Fed Chair Wallsh downplayed the importance of forward guidance, announcing a series of adjustments including the appointment of a special task force to review the Federal Reserve's $6.7 trillion balance sheet.
– Hawkish signals from the Federal Reserve drove the Bloomberg Dollar Index to its largest gain in three months. The yen weakened to its lowest level against the dollar since July 2024, heightening the risk of official intervention.
– Trump signed a temporary U.S.-Iran peace agreement on Wednesday. According to a draft seen by Bloomberg and versions outlined by Washington officials, the Strait of Hormuz will reopen swiftly. Trump stated that the 60-day negotiation deadline between the U.S. and Iran is not a hard cutoff.
– Israel rejected U.S. demands to withdraw its forces from southern Lebanon, citing the continued presence of Hezbollah, an Iran-backed armed group.
– U.S. retail sales broadly rose in May, indicating resilient consumer spending. Pending home sales for existing homes posted their biggest monthly increase since September 2024, surpassing forecasts from all economists surveyed by Bloomberg.
– Crude oil inventories at Cushing, the largest U.S. commercial storage hub, fell to their lowest level since 2014. The International Energy Agency said the impact of the Iran conflict on global oil demand is likely to be far more severe than expected, forecasting a return to surplus conditions in the market next year.
Greater China News
– China unveiled its employment-first strategy under the '15th Five-Year Plan,' proposing to establish an AI employment impact assessment mechanism, highlighting Beijing's growing concern over the potential disruption this technology could pose to people's livelihoods.
– China issued guidelines regulating subsidy practices by food delivery platforms, stating that platforms must not compel merchants operating on their platforms to participate in subsidy programs or bear subsidy costs.
– China’s Ministry of Finance plans to issue euro-denominated bonds next week with maturities of 5, 8, and 12 years, totaling no more than EUR 5 billion.
– On June 17, the People’s Bank of China conducted CNY 420.3 billion in 7-day reverse repos. With CNY 159 billion in 7-day reverse repos maturing the same day, this resulted in a net liquidity injection of CNY 261.3 billion.
– CSRC Chairman Wu Qing stated that the commission will issue guidelines on the standardized development of artificial intelligence in capital markets at an appropriate time, and is working with the People's Bank of China to advance a pilot program for RMB foreign exchange futures.
– SAFE Director Zhu Hexin indicated that a new package of incremental policies will be introduced soon, comprehensively reforming cross-border FDI policies, further simplifying foreign exchange management for ODI and external debt, optimizing regulations on foreign exchange loans and cross-border equity incentives, and allocating a new round of QDII quotas.
Commodity and foreign exchange markets
– The Bloomberg Dollar Spot Index posted its largest gain in three months as the Fed’s dot plot sent a hawkish signal. Offshore renminbi recorded its steepest decline in one month.
– Cushing crude oil inventories hit a decade-low, intensifying supply concerns and supporting a modest rebound in oil prices despite broader headwinds. A strong dollar and tightening expectations weighed heavily on non-yielding assets, dragging gold prices lower across the board.
Earnings and economic data highlights
– US Initial Jobless Claims for the week ended June 13 (in ten thousands) (prior: 229, forecast: 225)
– Philadelphia Fed Manufacturing Index for June (prior: -0.4, forecast: 10)
The Federal Reserve held rates steady but signaled a hawkish stance through its dot plot, while new Chair Waller unveiled institutional reforms, prompting traders to firmly price in a rate hike in October. Trump signed a temporary peace agreement between the US and Iran. China plans to establish a mechanism to assess the impact of artificial intelligence on the labor market. The State Administration for Market Regulation is regulating subsidy practices by food delivery platforms. Overnight Highlights – Spooked by the Fed’s hawkish dot plot and weakening tech stocks, investor concerns over rate hikes surged, triggering risk-off selling that sent all three major US equity indexes sharply lower. Heightened expectations of monetary tightening led traders to widely bet on an October rate hike, with capital outflows driving yields higher across all maturities of US Treasuries. The Fed’s firm policy stance accelerated capital repatriation, propelling the dollar index sharply higher, while the yen slid to its weakest level against the dollar since July 2024. Although the US and Iran successfully signed a temporary peace agreement, dwindling crude inventories at Cushing sparked supply concerns, fueling buying interest that pushed international oil prices modestly higher. Under pressure from both a strong dollar and elevated rate expectations, bullish sentiment weakened, dragging both spot and futures gold prices significantly lower. International News – As expected, the Federal Reserve kept rates unchanged, but raised its inflation forecast for this year. The dot plot showed that roughly half of policymakers expect at least one rate hike this year. Swap market traders now firmly anticipate a rate hike in October. – New Chair Waller downplayed the importance of forward guidance, announcing a series of adjustments, including the formation of a special task force to review the Fed’s $6.7 trillion balance sheet. – Hawkish signals from the Fed drove Bloomberg US...
Source: Jinqiu Capital Management (Hong Kong) Co., Ltd.
Author: Terry Chow
Proofread by: Ella Song
Risk Disclaimer: The above content only represents the author's view. It does not represent any position or investment advice of Futu. Futu makes no representation or warranty.Read more
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