The last issue mentioned that May is not a good month for fans of the US dollar. However, entering mid-June, the US dollar can be described as a dazzling flower. Just within 6 days, the US dollar index rebounded from 90 Soaring to 92.40. The main reason for the rebound is due to Fed’s monetary policy stance has changed significantly after the interest rate negotiation. Powell has changed his point of view from stating that inflation is only temporary, to inflation that may continue to rise for a period in the future. He also stated that if the Inflation expectations are too high, there might need a policy adjustment. The dot plot also shows that the number of committee members who expect interest rates early will raise in the future has increased compared with the previous meeting, especially since the number of committee members increased to 7. The market believes that the bureau’s attitude has turned to hawks, stimulating the US exchange rate to rise sharply. Non-US currencies and gold fell sharply. The author believes that with the good process of vaccination, the two main functions of the Fed are to stabilize prices and promote full employment. Although the current labour market performance is fluctuating, it is recovering, and inflation has already exceeded the bureau’s target. As Powell said that if prices will continue to rise and remain high, it is time to adjust the unconventional monetary policy resulting from the epidemic of the century.

Regarding the Fed’s QT process in the past, to avoid a sudden impact on the financial market, the initial adjustment must be needed to control the market expectations, and then release the message about reducing debt purchases. But the actual hands-on will be a few months later and the normalization operation may last for more than a year. It is now estimated that The Jackson Hole Economic Symposium in August should be the time for Powell to issue the message of the reduced debt purchases and he will begin to act on QT gradually. Among other major economies, only Canada has begun to reduce the scale of debt purchases. The Bank of New Zealand has indicated that it may adjust its monetary policy earlier. The Bank of England has not made a clear statement, but due to the continued upward pressure on the inflation rate, it is estimated that the QT will be discussed soon; However, the European Central Bank still emphasizes that it will maintain economic support measures, and even pointed out that Europe and the United States are in different economic conditions. In the past, the results of the Fed’s replenishment for the U.S. dollar were postponed. And should compare this together with the monetary policies of other economies, and the overall situation should still be regarded as higher. The key is that Fed officials’ remarks have turned. May buy low and pay attention to the three support levels of 91.30, 91.00 and 90.70 for the US exchange rate. Among non-US currencies, the euro can be shorted when it close to 1.20.

Patrick Law General Manager of Hantec Group