Mini Program: Daily summary of investment bank/institutional views

1. Fanon Credit: Bank of Japan's rate hike is a "hasty" move

Analysts at Fanon Credit believe the Bank of Japan's rate hikes were somewhat hasty. They said the rate hikes could delay the recovery of domestic demand and weigh on economic growth, while a slowing U.S. economy and a stronger yen could also weigh on growth. Analysts expect core CPI, which excludes fresh food and energy, to rise less than 1% year-on-year in the next fiscal year ending March 2026, reflecting sluggish domestic demand. The central bank's policy committee said in its latest outlook report that it expects core inflation to be 1.9% next fiscal year.

2. Mizuho Securities: Japan may soon start to worry about the negative impact of high interest rates

Yusuke Matsuo, an economist at Mizuho Securities, said the Bank of Japan's recent rate hikes may be supported by lawmakers and the public because of concerns about the impact of a weak yen on import prices. However, he said that if the Federal Reserve starts cutting rates, the yen may strengthen against the dollar, causing public interest to shift to the negative impact of higher interest rates. He said the Bank of Japan could raise rates again as early as this year if it can confirm a recovery in private consumption and rising inflation in the services sector. But he added that the central bank may find it difficult to raise the policy rate above 0.5%.

3. Morgan Stanley Asset Management: A soft landing of the US economy is good for the bond market

Vishal Khanduja, co-head of the broad market fixed income team at Morgan Stanley Investment Management, said a soft landing for the U.S. economy is usually good news for fixed income securities. A soft landing for the U.S. economy refers to lower inflation, lower interest rates, and a growing economy. Bond investors are optimistic about future U.S. monetary policy. Obviously, U.S. bonds have rebounded, but despite the market optimism, the Fed remains cautious and continues to look for confirmation of this trend before its September meeting. Political uncertainty, including the recent French election, adds another layer of complexity to the bond market, and political issues can lead to significant changes in yields and spreads.

4. UniCredit Bank: The Federal Reserve will send a clear signal that a rate cut is coming

The dollar fell as investors bet that the Federal Reserve will lay the groundwork for an upcoming rate cut at tonight's meeting. Analysts at UniCredit Research said in a report that the Fed is likely to keep interest rates unchanged but send a clear signal that it is getting closer to a rate cut, possibly as early as September. They said the euro/dollar exchange rate EUR/USD could remain above 1.08, while the pound/dollar exchange rate GBP/USD could rise further above 1.28.

5. Bank of America: Commodity prices fall due to weak demand

"Commodities are falling because of demand issues, or lack of demand," said the head of commodities research at Bank of America. "The global industrial economy is doing pretty badly. Rising U.S. interest rates have exacerbated the hit to consumption, and that's weighing on economies in the rest of the world. One commodity bucking that trend is gold. Earlier this month, gold prices hit a record high as Asian investors stepped up demand for physical bars in the over-the-counter market, with gains also boosted by central bank buying."

6. Barclays: Trump's victory is expected to push up interest rate volatility, while Harris's is the opposite

Barclays' interest rate strategists are offering new ideas on the so-called "Trump trade" and also introducing a possible "Harris trade." Interest rate volatility typically rises in the three months after a challenger wins the presidential election, according to research published Tuesday by Amrut Nashikkar and Maria Chiara Russo. However, when the White House remains in the hands of the incumbent president's party, interest rate volatility falls. So far, Wall Street has focused on trades that might perform well after Republican Trump is re-elected, including bets that longer-term bond yields move higher in response to expected looser fiscal policy. Citing past market reactions to changes in the White House, the Barclays report expects "implied volatility to rise in bonds in the belly of the yield curve."

7. MUFG: The Fed may face many obstacles in suppressing the dollar

MUFG said the Fed faces a high bar to encourage markets to raise expectations for rate cuts at its meeting on Wednesday. With U.S. interest rate markets pricing in 28 basis points of rate cuts by September and around 150 basis points by July 2025, the bar for the Fed to signal more rate cuts will be higher than expected. For U.S. rates to continue to move lower in the near term, more evidence of slowing U.S. economic momentum, especially in the labor market, may be needed. Friday's nonfarm payrolls data will be watched for evidence of weakening labor demand, which would be necessary to reverse the dollar's recent rally.

8. ING: The interest rate decisions of the two major central banks of the United States and Japan will affect the trend of the yen

ING said that this week's interest rate meetings of the Bank of Japan and the Federal Reserve will determine whether the yen can continue its recent rise. Analyst Chris Turner said that the Bank of Japan is expected to raise interest rates by 15 basis points and the Federal Reserve will prepare the market for a rate cut in September, which may cause the dollar to fall to 150 yen. However, if the Bank of Japan maintains its policy unchanged and surprises us, USD/JPY may rebound sharply to 157, while crosses such as AUD/JPY may rebound sharply.

9. ING: Germany's GDP contraction highlights the difficulty of economic recovery

Carsten Brzeski, head of global macro research at ING, said the German economy contracted by 0.1% in the second quarter, indicating that it will not be easy for the economy to get out of its current stagnation, confirming that Germany is the laggard in eurozone economic growth. The specific details will not be announced until next month, but it looks like investment and construction are the biggest factors dragging down the economy. However, Brzeski believes that the economy is likely to rebound in the second half of this year, driven by the highest increase in real wages in more than a decade, but any possible recovery may not be too strong.

10. ING: The Bank of Japan is expected to raise interest rates by 15 basis points this week

Economists at ING Bank said in a research note that recent Japanese inflation and labor data continue to justify the Bank of Japan's policy normalization. The Bank of Japan is likely to raise its policy rate by 15 basis points on Wednesday, but the decision remains "up in the air." They added that the market currently expects a 60% chance of a rate hike by the Bank of Japan.

11. Pansen Macro: France's economic growth in Q2 was large, but domestic demand still seems weak

Claus Vistesen, chief eurozone economist at Penson Macro, said that despite relatively strong growth in the second quarter, domestic demand appeared weak. Data released on Tuesday showed that GDP grew 0.3% in the second quarter, slightly higher than expected and in line with the revised first quarter figure. However, household consumption growth was flat in the quarter, and overall domestic demand was below the overall growth rate (boosted by net trade). Vistesen said consumer spending was lagging behind the growth of real income. He said that given the weak consumer and business surveys this month, economic growth in the second half of the year was at risk. The bank estimates that the Olympics should boost economic growth in the third quarter, and then the French economy will slow down in the fourth quarter.

12. ING Group: If the eurozone GDP is higher than expected, the euro may be boosted

ING said the euro could rise modestly if the euro zone's second-quarter economic growth data released this afternoon exceeds expectations. Chris Turner, an analyst at the bank, said in a report that if the indicator is higher than the consensus forecast of 0.2% quarterly, it could break the view that growth faces "downside risks" and curb market expectations that the European Central Bank will further cut interest rates more than two times this year. He said that the euro weakened against the dollar on Monday, but may find some support on GDP data, and the euro may rise on Wednesday if the Federal Reserve is "clearly dovish" in hinting at a rate cut.

13. Montreal: After this week's interest rate decision, the Fed has two more opportunities to deliver information in August

BMO expects the Fed to hold its course this week, and questions remain about how much signal Powell is willing to provide this week. There is enough uncertainty to make us doubt that there will be a substantial price change in market pricing. Even if Powell does not convince the market that the FOMC has put a September rate cut on the agenda, the Fed still has the FOMC minutes to convey the message that "rate cuts are coming." And there is also the Jackson Hole Central Bank Annual Meeting on August 22-24, which is also an opportunity to provide a more comprehensive explanation of the change in policy outlook.

Article forwarded from: Jinshi Data