To The Moon

The most important event this week, the minutes of the November meeting of the Federal Reserve, were released.

Look at the market impact first:

-The US dollar and US bond yields fell hand in hand;

-Gold, US stock market rallied.

Many media take it for granted that it is influenced by "the doves' voice in the minutes is strong".

Let's talk about our conclusion:

There is no major accident-this is a meeting minute that "there is no surprising hawkish argument" but is misread (there are no more hawkish voices).

Looking at the details, there are three key sentences:

1. Most officials believe that it is expected to slow down the pace of interest rate increase "soon" (this is a news that has been hyped several times);

Many analysts believe that this sentence has affected the market, which is really misleading. This sentence has been heard for more than a month, and the market has already priced in

2. Many Fed officials expect the peak interest rate to be higher (this sentence is not the first time I have heard it);

This is the most concerned issue for traders. How the Fed views the relationship between recent inflation data and terminal interest rates is a crucial question for investors. Futures pricing shows that the market expects the policy interest rate to peak around 5% around the middle of next year.

3. Economists inside the Federal Reserve told the Committee members at the meeting that the possibility of economic recession will rise to about 50% next year.

This is the key to affecting the market. This is the first time that similar warnings have appeared since the Federal Reserve began to raise interest rates in March. Because the Federal Reserve "warned the economic recession" for the first time, it triggered the market's expectation of cutting interest rates. In other words, the market is affected by "bad news becomes good news", not by the doves of the Fed.

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Other points:

4. Several Fed officials mentioned that slowing down the pace of raising interest rates will enable officials to judge how much progress they have made towards achieving their goals. One reason such assessments are important is that there is uncertainty about the effect and extent of the lag associated with the impact of monetary policy actions on economic activity and inflation (how long the lag is not mentioned).

5. Some officials believe that the risk of Fed policy tightening more than necessary is higher (start discussing the risk of tightening policy).

6. Policymakers at the meeting observed that despite increased interest rate volatility and signs of tight liquidity, the operation of the national debt market has been orderly (if the bond market is in trouble, the Fed may have to take measures, which now seems to be no problem).

7. Several Fed officials said that there is great uncertainty about the end rate needed to achieve the target (the Fed shifted its focus from a single interest rate hike to trying to accurately estimate the end rate).

On the whole, the message of the meeting minutes is consistent with the statement issued by the Federal Reserve in November, that is, to raise the interest rate at least a little more, and the end rate is higher than previously expected.

But that's not the key point.

Compared with the minutes of the meeting, I think the economic data released on Wednesday night is more important. The intraday trend of the US dollar index is a good reference-the decline of the US dollar caused by the publication of the minutes of the meeting is not as big as the economic data, which should arouse our attention.

Last night, a modest piece of economic data sparked market disruption as the number of jobless claims rose more than expected last week to a three-month high, suggesting a cooling in the labour market.

(21:30 Beijing time) Data released by the US Department of Labor on Wednesday showed that in the week ending November 19, the number of initial jobless claims increased by 17,000 to 240,000, which was higher than the 225,000 expected by economists.

This is a data released every week, so traders pay less attention to it. However, it unexpectedly exceeded economists' expectations and moved in the direction that the Fed hoped, so it had a great impact on the market-bad news was regarded as good news.

Much like the minutes, bad news is seen as good news, and formal hype about the recession may really be near.

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