Original title: DKTrade: terrorist data and Federal Reserve resolution attack! Another source of sleepless nights: FX168

What the market needs to pay close attention to on Wednesday is the US retail sales data for August, as well as the Federal Reserve's upcoming interest rate decision, quarterly report, and economic expectations and interest rate expectations lattice chart, followed by Federal Reserve Chairman Colin Powell will also hold a press conference.

The last FOMC before the November election

Us stocks are emerging from a two-week roller coaster decline, while a series of mergers and acquisitions and signs of progress in COVID-19 's vaccine development are stoking investor optimism. From September 15 to 16, the Fed will hold its last interest rate meeting before the November election and release a summary of its economic forecasts.

The FOMC meeting in the early hours of tomorrow morning will be the last meeting before the November election in the United States, including the adjustment of interest rate policy statements, forward-looking guidelines on how to use them, and prospects for the economy and interest rates. Subsequently, Federal Reserve Chairman Colin Powell will hold a press conference.

Market analysts generally do not expect the Fed to raise interest rates on Wednesday, but if it does, it could be good for the dollar. GregAnderson, global head of foreign exchange strategy at BMOCapitalMarkets, said: "the next big news is that the bitmap is expected to raise interest rates in 2023. What we want to see is that the Fed does not expect to raise interest rates in 2023. If they expect interest rates to rise in 2023, stocks and commodities will be sold off and the dollar will rise. "

The Fed left interest rates unchanged until February 2023, when new average expectations were six months later than in the July survey because of a more optimistic view of the US economic recovery and higher inflation expectations.

"the Fed has adopted a flexible average inflation target, giving it considerable freedom to tolerate excessive inflation and keep interest rates low for several years," said JohnRyding, chief economic adviser to the BreanCapital.

The vast majority of the 37 respondents, including economists, fund managers and strategists, believe the Fed will reap the benefits if inflation is higher than its 2 per cent target. Forty-eight per cent of respondents said the Fed would tolerate higher-than-target inflation for six months to a year without raising interest rates, while 41 per cent thought the Fed would adhere to higher inflation for a year or more.

Some respondents worried that inflation could become a problem sooner than the Fed expected. Sixty-five percent of respondents now believe that actions by Congress and the Federal Reserve to crack down on the economic impact of health events will lead to inflation, up from 44 percent in the July survey.

On the market front, as the Federal Reserve releases its policy decisions and economic forecasts, the dollar index did not change much on Tuesday, but expectations of low interest rates supported gold prices, even though the upward momentum of gold prices on Tuesday was hampered by gains in US Treasuries and US stocks. still close slightly higher.

The goal of protecting employment is more clear.

The change in policy is determined by the change in the goal of the Fed's dovish decision.

In order to achieve the policy goal of maximizing employment and price stability, Federal Reserve Chairman JeromePowell announced at the 2020 annual meeting of the central bank to revise its long-term target framework, the biggest revision of the framework since it was proposed in 2012, with the following two core ideas, targeting inflation and employment, respectively.

The Fed will seek an average inflation rate of 2% over time. After a period when inflation remains below 2 per cent, appropriate monetary policy may be aimed at achieving inflation moderately above 2 per cent for some time.

The maximum level of employment will be defined as a multifaceted and inclusive indicator. Future policy will be based on the FOMC's estimate of a "shortfall" rather than a "deviation" between employment and the highest level.

The Fed's previous policy has been based on econometric models. Macroeconomists assume such a level of unemployment, at which the movement of capital and labor is balanced at the same time, that is, inflation and unemployment are stable at the same time, and this level of unemployment is the natural unemployment rate. According to econometric models, the natural unemployment rate in the United States may be around 5%. This is the meaning of "deviation". The actual unemployment rate is higher or lower than the natural unemployment rate.

RichardClarida, vice chairman of the Federal Reserve, said that the econometric model of the maximum employment level (natural unemployment rate) may have gone wrong and that it would be difficult to tighten policy based on the model alone. These comments suggest that the Fed may break through its own digital barriers and pursue more realistic employment maximization than economic employment maximization.

Summary of institutional views

JPMorgan Chase: the Fed's interest rate decision this week is expected to be adjusted, and no guidance based on inflation results is expected. In addition, the Fed is not expected to extend the maturity of Treasury purchases. UBS: the federal reserve will release policy decisions and quarterly economic forecasts on Wednesday local time, and the fed is expected to explicitly emphasize that until one-year inflation is expected to reach at least 2.25%, the current policy interest rate range of zero will remain unchanged, which is expected to put further pressure on the dollar index. QuincyKrosby, chief investment officer of Prudential Financial, said she doesn't think the Fed will continue to make a clearer statement on monetary policy, especially on how much Treasuries to buy, so the stock market may not perform too well. She believes the market is worried that the Fed will not provide a clear interpretation of the monetary policy plan. PeterBoockvar, chief investment officer of BleakleyAdvisoryGroup, believes that the Fed is unlikely to make significant changes to monetary policy and will continue to buy Treasuries at a rate of 80 billion a month. BofA strategists said the bond market was closely watching changes in the Fed's balance sheet and its forward guidance, particularly adjustments to inflation policy. At present, the Fed has changed its policy of focusing on the target rate of inflation to average interest rates, which means that if inflation exceeds 2%, the Fed may not tighten monetary policy. He also said the Fed's current policy changes could support higher back-end interest rates and steeper yield curves. This means that long-term bonds could be sold off if the Fed is not clear about its plan to buy Treasuries. GregAnderson, global head of foreign exchange strategy at BMOCapitalMarkets, said the big news will be that the bitmap is expected to raise interest rates in 2023. What we want to see is that the Fed does not expect to raise interest rates in 2023. If they expect interest rates to rise in 2023, stocks and commodities will be sold off and the dollar will rise. MarcChandler, chief market strategist at BannockburnGlobalForex, said he expected the Fed's statement to sound like a way to reassure the market, but would not discuss bond purchase targets or yield curve controls. "I think the Fed will continue to say that it is not worried about inflation., The bigger concern is the downside risk of the market. " The US stock market is likely to continue to fluctuate, but it is unlikely to fall sharply, while the dollar is likely to fall. Imperial Commercial Bank of Canada (CIBC) said that we believe the most likely outcome will be conservative, which means that it will not provide up-to-date information on QE. At the same time, we expect to improve the central trend forecast for the core PCE price index. This should help inflation-protected bonds (TIPS) reach balance at the long end of the curve and be the main catalyst for the steepening of the nominal curve. Now the dynamic of TIPS is that the correlation between the real rate of return and the equilibrium point has been broken. Real yields on 10-year Treasuries trade at historic lows, while the break-even point returns above pre-epidemic levels. 2 if our basic hypothetical scenario is determined, real yields will rise, which will have three consequences: 1. Strengthen the US dollar; 2. Weakening precious metals; 3. The nominal curve steepens. Bank of America Merrill Lynch: the interest rate market is likely to be affected by the Fed's forward guidance, which will support higher back-end interest rates and steeper bond yield curves. The bank said bond yields might pick up if the Fed did not clarify its bond purchases. The U. S. stock market wants the Fed to make a dovish statement. The market needs this because the stimulus has not improved much. United overseas Bank: the Fed's September interest rate resolution focuses on economic outlook. LeeSueAnn, an economist at United overseas Bank, assessed the upcoming Fed's September interest rate resolution, no longer expecting yield curve control to become the Fed's policy tool, following the announcement of average inflation targeting and emphasis on "broad and inclusive" employment. The Fed now wants to allow higher-than-normal inflation to support the job market and the wider economy, a landmark shift to an era of long-term low interest rates, and the focus of September's interest rate resolution will be the latest economic outlook.

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2020-09-16