Goolsby: Interest rate cuts need to wait for inflation to fall; expectations of increased productivity are insufficient to support them.
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Citigroup: The case for raising interest rates has disappeared; the Fed is expected to resume rate cuts in October.
According to BlockBeats, on July 5th, Citigroup Research stated in its weekly US economic report released on July 2nd that the significantly weaker-than-expected US non-farm payroll data in June strongly refuted the necessity of raising interest rates. Citigroup believes that several factors previously supporting a hawkish stance, including rising oil prices, accelerating wage growth, and core PCE exceeding the target, have faded, and "the rationale for raising rates has disappeared." Data shows that US non-farm payrolls increased by only 57,000 in June, far below expectations, and the data for the previous two months was revised downward by a combined 74,000. After the revision, the average monthly increase in non-farm payrolls over the past three months fell to approximately 111,000, a significant drop from the pre-revision level of over 180,000. The unemployment rate fell from 4.296% to 4.189% in June, but Citigroup believes this was mainly due to the labor force participation rate falling from 61.8% to 61.5%. If the participation rate had remained unchanged, the actual unemployment rate would have risen to over 4.5%. Regarding inflation, Citigroup stated that multiple factors are collectively suppressing price pressures. Oil prices have fallen back to pre-conflict levels, and July CPI and PCE data are expected to show a month-on-month decline; further slowdown in housing rents will also drag down core CPI and core PCE. Furthermore, the revised core PCE methodology will adopt a more reasonable price adjustment method for AI-related goods. Citigroup estimates that the revised core PCE year-on-year growth rate may be lowered by 20 to 30 basis points, and will be officially reflected in September. Citigroup maintains its baseline forecast, expecting the Federal Reserve to hold rates steady at the July and September FOMC meetings, cut rates by 25 basis points for the first time at the October 28 meeting, and then cut rates by another 25 basis points in December, bringing the federal funds rate range down to 3.0% to 3.25% by the end of the year. Citigroup also expects the Federal Reserve to cut rates three more times in 2027, with a terminal interest rate range of 2.75% to 3.0%.
The dollar is on track for its biggest weekly drop since April, as expectations for interest rate cuts rise.
According to ChainCatcher, citing Jinshi, the US dollar weakened significantly this week, and is expected to post its biggest weekly drop since April. This was due to a noticeably weaker-than-expected US June jobs data, leading the market to lower its expectations for a near-term Federal Reserve rate hike. The dollar index fell by about 0.5% this week. Against this backdrop, the euro rose to $1.144, a weekly gain of about 0.5%; the pound rose to $1.3352, a weekly gain of about 1.1%. The yen rebounded from near a 40-year low, with the dollar/yen pair briefly falling back to around 161. Analysts pointed out that the dollar's performance is clearly influenced by jobs data and interest rate expectations; if subsequent economic data continues to weaken, the dollar may face further pressure.
The protagonist of ByteDance's stock trading success story: CPI, non-farm payroll data, etc., are not just market noise; he previously suffered a significant drawdown in his Nvidia investment due to ignoring the interest rate hike environment.
According to BlockBeats, on July 5th, Leto Bao, the protagonist of the "ByteDance stock trading 30 million yuan" story, reviewed his journey to a 30 million yuan fortune in the US stock market on Binance Square. He stated that CPI, non-farm payrolls, and Federal Reserve policies are all macroeconomic factors, while earnings season reflects the performance of specific companies or industries, and also reflects changes in the macroeconomy. Leto Bao stated that the CPI (Consumer Price Index) is one of the key indicators monitored by the Federal Reserve. A high CPI usually indicates greater inflationary pressure; a low CPI may reflect deflationary pressure. The Federal Reserve's long-term goal is to maintain inflation at around 2%, which represents a moderate inflationary environment, meaning a slow depreciation of the currency, while investment, consumption, and credit activities are relatively healthy. Non-farm payroll data also influences market judgment. There is a certain correlation between overheated employment and inflation, but the relationship between macroeconomic indicators is complex and not a simple linear deduction. The Federal Reserve is responsible for formulating economic policies related to interest rates and serving the US economy through policy adjustments. Leto Bao believes that CPI, non-farm payrolls, Federal Reserve policies, and earnings season should not be simply dismissed as "noise," but all have some reference value. He mentioned that when he previously invested in Nvidia, he ignored the broader interest rate environment, leading to a significant drawdown in his account. Therefore, macroeconomic factors still need to be incorporated into investment decisions. Leto Bao is a former employee of ByteDance, known as the "ByteDance Stock Investor." He reportedly made substantial profits (around 30 million RMB) by investing in the AI storage sector in the US stock market and subsequently resigned. The story began when he noticed an abnormal price increase when buying hard drives on Pinduoduo, which prompted him to research data storage needs and heavily invest in related stocks.
Bitunix analysts: The Federal Reserve has downplayed policy guidance, with "uncertainty premium" becoming the main battleground, rather than the interest rate path.
According to BlockBeats, on July 7th, the focus of global markets is gradually shifting from interest rate direction to policy communication methods. Federal Reserve Governor Waller stated that forward guidance should not be a fixed framework and could even be completely eliminated if necessary, reiterating that the central bank will not deliberately maintain low interest rates to address government fiscal deficits. This means that the market will rely more on real-time economic data rather than pre-determined interest rate paths from central banks, reducing policy predictability. It also means that asset prices will become increasingly sensitive to inflation, employment, and economic data, and market volatility may refocus during periods of major data releases. On the other hand, Middle East risks have escalated again. Reports of missile attacks on merchant ships in the Strait of Hormuz have surfaced again, threatening to shatter the previously established window of easing tensions between the US and Iran. Trump reiterated that he would not rule out escalating military action if negotiations fail. However, Saudi Arabia lowered its official selling price for crude oil to the Asian market in August, reflecting relatively ample supply. The energy market is currently still oscillating between "geopolitical risks" and "supply easing," and whether oil prices can rebound in the short term depends on whether the conflict further impacts actual supply. On the other hand, the issues of Japanese debt pressure and the continued weakening of the yen have resurfaced, and market doubts about the Bank of Japan's policy space have not subsided. The trend of global capital flowing into high-yield dollar assets has not changed significantly. For the crypto market, what truly deserves attention is not a single event, but the loss of the "certainty" provided by central bank forward guidance. As policy begins to rely entirely on data, geopolitical risks escalate, and global liquidity remains tight, the crypto market will continue to be primarily driven by changes in risk appetite and liquidity momentum in the short term. Price movements will continue to be repeatedly disrupted by macroeconomic events and market sentiment. Until capital flows truly form a unified direction, a cautious stance is expected to persist.
Federal Reserve Governor Waller: The Fed will not deliberately maintain low interest rates.
Odaily Odaily reports that Federal Reserve Governor Waller stated that the Fed will not deliberately maintain low interest rates to help the US government finance its fiscal deficit. He believes it is reasonable to consider setting an inflation target range, and that Fed Chairman Warsh is reiterating the commitment to the 2% target, favoring a range for inflation. However, adjusting the inflation target at this stage would undermine the Fed's credibility. (Jinshi)
Market Outlook for Next Week: Fed and ECB Meeting Minutes Released, Market Focuses on Interest Rate Hike Path and Gold Price Movement
Mars Finance reports that on July 5th, global markets will see the release of the Federal Reserve's June meeting minutes, the European Central Bank's meeting minutes, and several important economic data releases next week. The market will focus on the Fed's latest assessment of inflation and interest rate paths, as well as US services PMI and initial jobless claims data. Gold may maintain range-bound trading in the short term. Key points to watch include: • Federal Reserve Meeting Minutes: Released early Thursday morning Beijing time, the market hopes to glean more details about the first meeting chaired by new Fed Chairman Warsh to determine if there is still room for rate hikes by the end of the year. The interest rate market has largely priced in a 25 basis point rate hike in December and believes there is a certain probability of an earlier move in October. • Fed Officials' Speeches: Officials such as Williams, Logan, and Waller will deliver speeches, and the market will focus on whether they will adjust their hawkish stance due to recent weak non-farm payroll data. • European Central Bank Minutes: Released on Thursday, investors will focus on the European Central Bank's latest assessment of economic growth, inflation, and subsequent monetary policy. * **Reserve Bank of New Zealand Interest Rate Decision:** The market expects an approximately 80% probability of a 25 basis point rate hike; attention will be focused on whether it delivers on its previous hawkish guidance. * **Important Economic Data:** Data including the US ISM Non-Manufacturing PMI, the final S&P Global Services PMI, EIA crude oil inventories, and initial jobless claims will be released successively, providing new clues for the market to assess the US economic and interest rate outlook. * **Gold Outlook:** HSBC believes that with real interest rates remaining high and the US dollar relatively strong, gold may maintain range-bound trading in the short term, but central bank gold purchases, ETF inflows, and the global trend of de-dollarization still support its medium- to long-term upward trend. * **Earnings Season Begins:** PepsiCo, Delta Air Lines, Levi's, and other companies will be among the first to release their second-quarter results. The market will focus on consumer demand, profit margins, and full-year earnings guidance, serving as a warm-up for the mid-July bank earnings season.