Interest Rate Hikes Are Expected To Rise, And Global Liquidity Will Shrink.

Although the recent major global monetary policy is loosely accommodating, we need to be vigilant against changes in the Fed's expectation of raising interest rates, and continue to maintain a short-term two-way volatility in the RMB exchange rate.

The Fed's monetary policy has a strong positive correlation with global liquidity.

Although the probability of US interest rate hike in April is very small, the possibility of raising interest rates in the second half of this year is still high.

Under the crawling exchange rate system,

The trend is more determined by the attitude of the central bank.

The central bank has US $3 trillion and 200 billion in foreign exchange reserves, both offshore and offshore.

Recently, the US dollar index has descended, and the RMB exchange rate has appreciated slightly.

In the long run, the RMB exchange rate depends on whether it can successfully promote reform and improve China's economic prospects.

Comment:

1) the core point: speech is slightly lower than market expectations, pigeon pie.

After Yellen's speech, the US dollar index fell by 0.5%; offshore renminbi rose sharply from 200BP to 6.49; oil and gold bulk rose slightly; the US 10 year treasury bond fell 6 BP to 1.83%; the S & P jumped 0.9%, hitting a new high in 2016.

The current global economic situation has posed a continuing risk to the United States. The US interest rate increase needs to be cautious and the path is uncertain. In the future, we should pay close attention to the changes in US prices.

Continue to maintain

The period is peaked, and the RMB's short-term volatility is small.

2) the main contents of Yellen's speech are: first,

Although there are fluctuations, they are still relatively stable and are moving forward in a satisfactory way.

Second, the data in 2016 were mixed.

The employment market is further consolidated, but the unemployment rate under full employment may be less than 4.8%. Despite the recent rise in core PCE prices, it remains to be seen whether sustainability can be sustained.

Third, the global economic situation has continued to pose a risk to the US economy. The future uncertainty is whether the Chinese economy can make a soft landing.

3) in recent years, prices in the US have basically remained stable, the economy has improved slightly and its sustainability has been enhanced.

In February, the core PCE price index increased by 1.7% over the same period last year, which is consistent with the previous value, but lower than expected 0.1 percentage points. The core PCE price index based on market survey increased by 1.6% over the same period last year, which is 0.1 percentage points higher than the previous value.

In February, the US contracted sales index rose to 109.1, a 7 month high. In February, the actual personal consumption expenditure was 0.2%, lower than the 0.2 percentage point in January, but higher than the expected 0.1 percentage points. In March, the Markit composite PMI initial value 51.1 was higher than the previous value 1.1 percentage points; the fourth quarter actual GDP annulus ratio was 1.4%, lower than three quarter 0.6 percentage points, but higher than expected 0.4 percentage points.

4) maintain the US dollar peaked in stages, the bottom line of large fluctuations, and the judgement of the recent outflow pressure of emerging market funds.

In March, the Fed's Conference on interest rates and Yellen's 29 speech were pigeon clippies to ease the pressure of outflow of funds in emerging market countries.

According to EPFR data, the net inflow into emerging market countries has been US $4 billion 260 million in the past two weeks.

5) although the recent major global monetary policy is loosely accommodating, we need to be vigilant against changes in the Fed's expectation of raising interest rates, and continue to maintain a short-term two-way volatility in the RMB exchange rate.

The Fed's monetary policy has a strong positive correlation with global liquidity.

Although the probability of US interest rate hike in April is very small, the possibility of raising interest rates in the second half of this year is still high.