According to the Wisdom Financial APP, Tianfeng Securities released research reports indicating that the RMB may still run stronger in the short term. However, considering that the US dollar may not weaken significantly after the Fed's interest rate cut, and domestic fundamental expectations have not been boosted, around 7.00 may be the resistance level for this round of appreciation. The Fed's interest rate cut may lead the market to partially realize some interest rate cut expectations, especially for institutions involved in left-hand trades. However, given that the fundamentals and policies determine the direction of interest rates have not changed, so even if domestic interest rate cuts take place, it seems unnecessary to take profit.

Tianfeng Securities' main points are as follows:

Why was there a 50 basis point rate cut at the September interest rate meeting?

From the market pricing, Federal Reserve materials, and officials' statements, the downward risk in the labor market is the key factor for the 50 basis point rate cut this time.

We determine that the Fed's consideration may be to avoid a rapid weakening of the labor market by cutting rates by 50 basis points, thereby guiding economic achievement.But after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.At the same time, guide the market through expected management to control the risk of secondary inflation.

How do you view the following actions of the Fed?

Along with the process of the USA soft landing economy, we tend to determine that the Fed may cut interest rates twice this year, totaling 75 basis points. However, the constraints on the Fed's interest rate cuts due to the risk of secondary inflation may be limited.

The pressure of economic and financial recession caused by a high interest rate environment should not be overlooked, and behind the resilience of the USA economy is supply-side stimulus policies, which help maintain relatively stable inflation expectations. For key areas such as housing inflation, the impact of interest rate cuts on housing supply and housing inflation actually contains uncertainty, and the Fed can guide the economy through expected management. In addition, the Fed has not yet finished shrinking its balance sheet.

How about the USA t-note and the USD? We determine that the central level of future USA t-note rates may continue to fluctuate downward, considering the Fed's expectation guidance on interest rates out of concern for inflation risks, the downward trend in USA t-note rates may be a gradual process. The 10-year USA t-note range may be around 3.2-3.7% in 2024.

As for the USD, judging from historical interest rate cycles and the current performance of the Eurozone and Japan, the US dollar index may still operate around 100 in the near future.

Will the domestic follow a rate cut?

The state of effective demand determines that the currency is in a loose cycle, and there is an inherent inevitability of a rate cut. However, the timing, pace, and specific methods of interest rate cuts need to take into account multiple targets, and there is a certain level of uncertainty.

How do you see the RMB exchange rates?

We determine that the RMB may continue to run relatively strong in the short term. However, considering that the US Dollar may not significantly weaken after the Fed rate cut, and domestic fundamental expectations have not been boosted, the vicinity of 7.00 could be a resistance level for this round of appreciation.

How do you see the domestic bond market?

As the Fed rate cut lands, the market may partially realize some rate cut expectations, especially for institutions engaged in left-hand trading. However, considering that the fundamentals and policy decisions determine the direction of interest rates have not changed, even if the domestic rate cut lands, profit-taking seems unnecessary.

Subsequent focus revolves around two aspects: first, further strengthening of bond market regulations; second, significant changes in macro expectations driven by robust growth-stabilizing policies. Perhaps these two major risk alerts will persist, while the market will continue to move in the direction of fundamentals.

Risk Warning: Unexpected domestic incremental policies, domestic inflation trends below expectations, overseas economic performance outperforming expectations.