Gold, crude oil, stocks and cryptocurrency markets sold off amid fears of an economic slowdown, investors still see the Fed accelerating tightening. After a round of decline, the market will focus on the US CPI data in March, which will guide the next market trend.
1. The Fed released dovish language in its interest rate decision in May, but investors did not agree with it. The market still believes that the Fed has the possibility of sharply raising interest rates in the future. The dollar and U.S. Treasury yields continued to rise.
2. With the stalemate of the situation in Russia and Ukraine and the continued sanctions against Russia by the United States and Europe, the market’s concerns about the supply and price of raw materials in Europe and the world, inflation and economic slowdown have been strengthened, and the dollar trend has been boosted by risk aversion.
3. Risk assets represented by U.S. stocks have increased volatility, which has greatly affected the already fragile market sentiment. The Fed rate hike cycle has suppressed the performance of U.S. stocks, and now worries about stagnant inflation (stagflation) and even economic slowdown have erupted, and the VIX panic index is approaching the 36-38 area, which is the high since September 2020, showing that the stock market Sentiment is poor and active selling increases.
4. On the one hand, the Federal Reserve continues to “receive water”, and on the other hand, the international political and economic prospects are full of uncertainties, and investors’ cautious mood erupted, so they accelerated the selling of all assets such as US stocks, gold, crude oil, and cryptocurrencies, increasing the demand for US dollar cash.
5. Whether the Fed continues to accelerate tightening is closely related to the trend of inflation. Inflation data has become the top priority. At the same time, both the Fed and the market need inflation data in the next few months to determine whether U.S. inflation has truly peaked. The first to bear the brunt is the US April CPI on Wednesday. The gold and oil stocks stopped falling before the data, reflecting that the short-term risk aversion has been released, and the trend urgently needs further guidance. CPI will be the key to affecting the trend.
If the U.S. CPI continues to hit highs, the market will again bet on the Fed’s aggressive interest rate hike expectations, the dollar will continue to rise, and gold and oil stocks will face a new round of selling; if the CPI continues to fall, the dollar may start talks, gold and oil stocks There is an opportunity to initiate a rebound of a certain size.
The Fed’s CPI data will be broadcast live on Wednesday, and witness the history together!
Judging from the overall market situation, the bull market of the US dollar has not yet ended, and the scope of the pullback may be limited. The pullback is a buying point; the selling pressure faced by US stocks and cryptocurrencies is still very large, and there is still room for adjustment in gold and crude oil, but it should not be too bearish. .
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