The Fed Is No Longer Raising Interest Rates This Year.

The economist group of BNPP, Paris, has always believed that tightening of financial conditions and market chaos will ultimately prevent the fed from raising interest rates this year.

The specific points are as follows.

The repetition of good will trigger a revival in the market's concern over the Fed's interest rate hike. Since then, the recurrence of risk sentiment has increased the volatility of the exchange market and other financial markets, and recorded the prospect of the current account deficit country currencies, such as Australian dollar, Canadian dollar, pound sterling and US dollar.

The euro is more consistent with the US dollar against the real spreads.

At the end of the year, the euro was 1.14 against the US dollar and 110 against the US dollar.

Fed March

After the meeting, the expectations were further enhanced.

The stance of bearish commodity currencies is more challenging, but these currencies eventually weaken again.

It is premature to announce that there is a paradigm shift and that the US dollar no longer benefits from spreads.

But now

Some fundamental dynamics will limit the dollar's gains, even when the Fed's rate hikes are expected to be rebuilt.

1. feedback loop: as discussed in the past few weeks, the sensitivity of the market to the strength of the US dollar and the risk environment has increased.

The rise of the US dollar against the G10 currency will help to form the expectation of a further devaluation of the renminbi and vice versa.

The rise of the US dollar will also increase the pressure of commodity prices and will be pmitted to the market through various channels.

2. real interest rate: Although the Fed's interest rate rise was expected to boost the us front end interest rate at the end of February and early March, the rise in US bond yields and the warming of US inflation expectations, and the continued weakness of the financial market, made the market reluctant to calculate the radical easing of the Fed.

Therefore, the US dollar implies a drop in real interest rates.

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The offshore and offshore renminbi rose to an annual high against the US dollar. The US dollar (Fed) issued a dovish statement on the second day, and the US dollar continued to expand, leaving the US dollar out of the derivatives market.

Offshore renminbi rose more than 300 points against the US dollar. The New York session was near 6.4525 on the previous trading day.

London traders said they saw a sustained us dollar sell-off when the US dollar / offshore renminbi fell below 6.48.

At the same time, offshore and offshore RMB forward markets also had the same sell-off.

New York traders said investors who had bought the dollar before the Fed's resolution announced this week and expected the weaker central parity price would have to stop and withdraw.

On the shore, the yuan rose against the US dollar. The overnight trading strengthened further during the day. At 23:30 on Thursday, Beijing closed 6.4755 times, which was 0.75% higher than the end of the previous trading day.

Offshore renminbi forward points fell to 1340 at 12 months, close to last June's low of 1320.

In a report to customers, Dariusz Kowalcyzk, an orient strategist, pointed out that the downward pressure on the RMB has eased significantly.