Focus on the annual rate of core CPI in the United States and Japan

This week, investors continued to wait for the signal that the Fed's rate hike cycle was over, but the latest indicators showed that inflation expectations unexpectedly rebounded, reigniting inflation fears. Coupled with the strong April employment report, these have pushed up the possibility of the Fed raising interest rates in June. At the same time, this week's Senior Loan Officer Opinion Survey (SLOOS) and initial jobless claims have strengthened the possibility of pausing interest rate hikes in the name of risk management.

The repeated changes in expectations of interest rate hikes and cuts are irritating the market! US stocks seem at a loss and continue to fluctuate in a range, with the S&P and Dow Jones falling for two consecutive weeks. The US dollar index has an accelerating upward momentum, standing firmly above 102 and hitting a one-month high, recording its best performance in three months this week.

In addition, continued problems at regional U.S. banks, the postponement of a meeting on Friday between U.S. President Biden and House Speaker McCarthy, which resulted in the loss of an opportunity to reach an agreement to avoid the U.S.'s first default, and heightened market concerns about a recession have all hit risk appetite.

Next week, a large number of Fed officials will come out to express their views on the economic situation. The US debt ceiling negotiations and banking events are expected to continue to dominate market sentiment. The United States will also release data such as retail sales and industrial production in April.

The following are the key points that the market will focus on in the new week (all in Beijing time)

Speech schedule of important Fed officials:

Monday 21:15: Kashkari, 2023 FOMC voting member and President of the Minneapolis Fed, delivered a speech;

Tuesday 20:15: 2025 FOMC voting member and Cleveland Fed President Mester delivers a speech; 22:00, Federal Reserve Board member Barr testifies before the House Financial Services Committee;

Wednesday 00:15: FOMC permanent voting member and New York Fed President Williams will speak on the economic outlook and monetary policy; 03:15, 2023 FOMC voting member and Dallas Fed President Logan will host a meeting; 07:00, 2024 FOMC voting member and Atlanta Fed President Bostic and 2023 FOMC voting member and Chicago Fed President Goolsbee will participate in a panel meeting on the economic outlook and monetary policy;

Thursday 21:05: Federal Reserve Board member Jefferson will speak on the economic outlook; 21:30, Federal Reserve Board member Barr will testify before the Senate Banking Committee; 22:00, 2023 FOMC voting member and Dallas Fed President Logan will speak at the Texas Bankers Association Conference;

At 20:45 on Friday, FOMC permanent voting member and New York Fed President Williams delivered a keynote speech at the Federal Reserve Board event; at 21:00, Federal Reserve Board Governor Bowman participated in the discussion session of the Bankers Conference; at 23:00, Federal Reserve Chairman Powell and former Chairman Ben Bernanke attended a panel discussion on monetary policy.

U.S. consumers' long-term inflation expectations in May, released on Friday, unexpectedly rose to a 12-year high, leading to renewed inflation fears. Over the weekend, several Federal Reserve officials delivered hawkish speeches, arguing that inflation was still high and further interest rate hikes "may be appropriate."

Jefferson, who was just nominated by Biden as the vice chairman of the Federal Reserve, said that the progress of core inflation is "disappointing". "Big Hawk" Bullard said that the anti-inflation outlook is good, but there is no guarantee that the current policy is at the low end of a sufficiently restrictive level. This year's voting committee member Goolsbee believes that the inflation rate is still too high, but at least it is declining, and the United States has no choice but to raise the debt ceiling. Federal Reserve Governor Bowman said that the inflation rate is still too high, and if the inflation rate remains high and the labor market remains tight, then further interest rate hikes "may be appropriate."

Most of the above officials will speak again next week. As inflation continues to rise and the job market remains tight, it is expected that they may continue to suppress the market's expectations of rate cuts. The current market is increasingly convinced that the Fed has completed the last rate hike. It is expected that the Fed will announce a pause in rate hikes at the June meeting. The Fed's next move is expected to be a rate cut in September, and it is expected to cut interest rates by 75 basis points by the end of this year. The U.S. interest rate market's expectations for rate cuts may be too optimistic.

I personally think that if there is any disappointment in the rate hike, risk assets will continue to be suppressed, and Bitcoin will show a downward trend to the 25,000 support level. If the market rises independently regardless of the news, it may stimulate technical buying. I personally think there will be a wave of decline. After all, the current market is not just about rate hikes, there are also black swans flying.

Important data: With recession looming, why is the U.S. stock market indifferent?

At 20:30 on Monday, the US New York Fed manufacturing index for May;

Tuesday 17:00: Eurozone first quarter GDP annual rate revised value, Eurozone May ZEW economic sentiment index; 20:30; US April retail sales monthly rate;

Wednesday 17:00: Eurozone April CPI monthly rate;

Thursday 20:30: US Philadelphia Fed Manufacturing Index for May;

At 07:30 on Friday, Japan’s April core CPI annual rate will be released.

The US retail sales data was -0.60% before and 0.70% expected for April. This data may be boosted by auto sales, but as for other sub-items, credit card data shows that the growth of most items will be very modest. At the same time, the manufacturing survey continues to show that the decline in energy prices has limited oil and gas extraction, resulting in lower output, which is also expected to drag down US industrial production. US home sales data will also be released next week, and given the decline in the number of residential mortgage applications, the data may be weaker. Finally, the number of initial jobless claims next week needs to be closely watched, as the data currently seems to be rising, which may be a delayed reaction to previous corporate layoffs.

“Trading has been muted because we know the risk of a recession is high, but the market is in no rush to act on hard data, which is why the sideways movement continues.”

Wall Street has been looking at 4,200 as a key resistance level for the S&P 500. Dawson said the risk is that it goes higher. "The technicals and sentiment positioning could take the S&P 500 above that level and make it a very painful trade."

A few words about the debt ceiling:

Many people already know the concept of the debt ceiling and the ins and outs of its establishment, but one thing that is easy to cause misunderstanding is that the debt ceiling does not authorize any new spending, but only allows the government to have money to fulfill previous spending plans. So logically speaking, it does not make much sense for fiscal constraints. Compared to a fiscal constraint tool, it exists more as a bargaining chip. After all, those so-called politicians will do anything to obtain concessions from the opposing party.

Because the US government has been running a deficit for many years, Congress has raised or suspended the debt ceiling 78 times. When this mechanism was first introduced in 1917, the US federal debt was about $5.7 billion. Today, it is $31 trillion, an increase of more than 5,000 times, forcing the government to continue to borrow new money to repay old debts. Once the US debt ceiling is triggered, the US Treasury will start taking so-called "extraordinary measures" as it did in January.

First, they will use the TGA account. Ideally, the balance of the TGA account should be maintained at around $500 billion, but it may drop to close to zero during the debt ceiling tug-of-war, so that spending can be maintained without issuing new debt for a few months. In addition, the Treasury Department will suspend the federal retirement account's investment in U.S. debt, which is equivalent to temporarily "writing IOUs" for its own people's future retirement investment, which will free up about $300 billion in funds for other government expenditures. Once these tricks are used up, the risk of actual default will occur.

Although there is uncertainty about how this crisis will eventually unfold, I personally believe that the debt ceiling will eventually be raised. At that time, the default problem will become a liquidity problem, and the tightening of liquidity will bring hope to the long-depressed US dollar!

The rise of the US dollar will logically attract funds from other markets. This is one of the reasons why the US dollar and non-US currencies are negatively correlated most of the time, including gold and Bitcoin.

Today's article is half excerpted and half written, not all original! I wish you all a fruitful new week.

Finally, I would like to remind you again that when we know that there are some fundamental and news events that are going to happen, we must trade cautiously and manage our positions well! #BTC #债务违约 #广场狂热挑战赛 #加息