To The Moon

In the latest market change, the safe-haven US dollar $Invesco DB US Dollar Index Bullish Fund(UUP)$ rose to a 20-year high against a basket of currencies on Monday, boosted by concerns about the global economic slowdown and bets on the US Federal Reserve to raise interest rates substantially.

Global financial markets continued to be affected by the hotter than expected US inflation data on Friday, which led to a widespread rise in risk aversion, fuelling bets on more aggressive tightening policies. On Monday, US Treasury bonds were sold off and global stock markets suffered.

The US dollar index, which tracks the performance of the US dollar against the other six major currencies, rose 0.9% to close at 105.21, hitting an intraday high of 105.29, the highest since december 2002.

Global financial markets continued to be affected by the hotter than expected US inflation data on Friday, which led to a widespread rise in risk aversion, fuelling bets on more aggressive tightening policies.

The Federal Reserve will announce its interest rate decision, and the 75 basis points interest rate increase is being priced

At 2 PM on June 15, Newyork time, the FED will release its interest rate resolution, policy statement and economic expectations, which will be the focus of the market. It is widely expected that the Federal Reserve will raise interest rates by 50 basis points this time. Some institutions, including Barclays and Frey finance, expect that the Federal Reserve will raise interest rates by 75 basis points.

The 75 basis points rate hike will certainly be an accident for some people who insist on 50 basis points. Such an action may lead to the rise of the US dollar index.

Last Friday, the CPI released by the United States rose by 8.6% year-on-year, prompting the money market to expect the Federal Reserve to raise interest rates by 175 basis points in September. Chris Turner, an economist at NLI, predicts that the Federal Reserve will raise interest rates by at least 175 basis points this year, which is not good news for global economic growth. "

On Monday, the pound fell to a one month low of 1.2106 against the US dollar. After data showed that the UK economy contracted unexpectedly in April, the pound faced selling pressure. Tensions between Britain and the European Union over trade with Northern Ireland after brexit also weighed on the pound. Sterling fell 1.47% to 1.2108 against the US dollar on Monday.

This Week You Should Pay Attention to:

Traders have a lot to focus on this week, including the policy meetings of the Federal Reserve, the Bank of England and the Swiss central bank.

Summary of Institutional Views

1. NLI: the US dollar is expected to remain strong after the Fed's interest rate decision

① Facts have proved that the prospect of a substantial interest rate hike by the Federal Reserve and the market turmoil have prompted investors to turn to safe haven assets, which is an ideal combination of the strength of the US dollar. In view of the rapid decline of risk assets in the past few trading days, risk assets may rebound in the next few days, and the US dollar may soon face a correction. At the same time, we believe that the FOMC interest rate statement on Wednesday will support the US dollar to a great extent;

② NLI believes that the Federal Reserve may raise interest rates by 50 basis points on Wednesday and raise interest rate guidelines

2. Mizuho Bank: USD has not lost its "throne"

Mizuho bank said that the US inflation data burst again in May, which rekindled the risk aversion in the market and pushed the US dollar up sharply. Vishnu varathan, the bank's head of economics and strategy, said that the bank has long believed that the "throne" of the US dollar has not been shaken and is far from being replaced. The US dollar is firmly in the dominant position, and the intensity and speed of the Fed's interest rate hike are expected to increase in the future.

The focus in the first half of this week will be mainly on the pressure on G10 and emerging Asian currencies caused by the strength of the US dollar. The next major event is the FOMC interest rate decision, and the market's hawkish expectations of the Federal Reserve are likely to come true.

3. Bank of France: the market is worried that the Federal Reserve has to accelerate the tightening of monetary policy, which is beneficial to the US dollar

Kit Jukes, chief foreign exchange strategist of Societe Generale, said that generally speaking, the market is worried that energy prices are beneficial to the US dollar, that the Federal Reserve may have to tighten monetary policy faster (beneficial to the US dollar), and that the bond spreads of peripheral European countries are widening

4. Mitsubishi UFJ: the financial situation has tightened again and will continues to support the US dollar

Derek Halpenny, head of global market, Europe, Middle East, Africa and international securities research at Mitsubishi UFG, said: "the soaring short-term yield is driving the financial situation to tighten again, which may continue to provide support for the US dollar this week. This week's fed interest rate resolution is the focus."

5. The Bank of England's decision came on June 19, with different views on the impact of sterling institutions

① The Bank of England will hold a meeting June 20 UK time. The market is expected to raise interest rates. The extent of the interest rate increase may determine the performance of sterling that day;

② Asmara jamaleh, economist at Intesa Sanpaolo, said: "there are signs that the path of interest rate hike will be slightly increased, which will support the pound."

③ "We expect the Bank of England to raise interest rates moderately and continue to be bearish on sterling," said Ebrahim Rahbari, an analyst at Citigroup.