In November, how much will the US dollar interest rate be reduced? In fact, this is two questions. First, will the US dollar interest rate be reduced in November? Second, if it is reduced, by how many basis points?
There is another more important question. In the past few days, the Chinese yuan has depreciated again, and some people are pessimistic. In addition, the offshore and onshore yuan exchange rates have deviated again, which indicates many issues and implies the important trend of the yuan exchange rate in the fourth quarter.
In the past few days, the depreciation trend of the yuan seems a bit abnormal.
At the end of September, both onshore and offshore yuan exchange rates appreciated and broke through the 7 mark.
However, on October 9, the onshore yuan exchange rate fell to a minimum of 7.08 and a maximum of 7.06; but the fluctuation range of the offshore yuan exchange rate was obviously much larger, with a minimum of 7.11 and a maximum of 6.97.
This indicates that recently, Chinese assets have risen sharply, and US capital is trading yuan in the Hong Kong offshore market, but the transaction volume is not large enough to continue to appreciate the yuan, but is very entangled.
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This正好 confirms our judgment a few days ago that Chinese assets have risen sharply, and international capital is currently transferring funds from surrounding markets such as India, Japan, and Singapore to China.
At the same time, due to reasons such as US financial stability, US domestic capital has not yet entered in large scale, but some capital has first transferred funds to Japan, entering the Japanese stock market, and pushing the Nikkei index to rise temporarily.
In addition, the continuous depreciation of the yen has helped the US dollar index temporarily stabilize above 102.However, this situation is clearly unsustainable for long, as continued interest rate cuts would lead to another depreciation of the US dollar, and capital would start fleeing again, something the Americans cannot prevent.
Now, the key question arises: will the US dollar cut interest rates in November? If so, by how much?
In recent days, we have been discussing that, in fact, the Federal Reserve's options for US interest rate policy in November are limited; raising rates is no longer possible, and the possibility of a 50 basis point cut is also quite slim.
Therefore, the Federal Reserve can only choose between cutting rates by 25 basis points or pausing the rate cuts.
To put it simply, why can't they raise rates? Because the US financial aircraft carrier, with the Federal Reserve at the helm, cannot afford to be chaotic. While US capital can seek profit and even create disorder, the Federal Reserve must maintain order.
This massive ship is not just for the United States; Europe, Japan, South Korea, and the entire circle of American allies generally follow US policies in broad terms. The direction of all capital is towards rate cuts, and it's not easy to change course when the ship is so large.
Why won't they cut rates by 50 basis points? Because since October, the Americans have released three important economic data points: the number of job vacancies in August, ADP employment data, and non-farm employment data, all of which showed very poor employment data in September but suddenly improved in October.
If these data are genuine, then there should be a rate increase, and there is no reason to cut rates by 50 basis points; if these data are fabricated, it indicates that they all want to slow down the rate cuts or even pause them.Current predictions by Americans themselves also clearly confirm this point.
According to the "FedWatch" tool of the Chicago Mercantile Exchange, the probability of the Federal Reserve cutting interest rates by 25 basis points in November is 86.7%, the probability of maintaining the current interest rate remains at 13.3%, and the probability of cutting interest rates by 50 basis points is almost zero.
Predictions from other global institutions are also similar.
On October 5th, Société Générale stated that the U.S. labor market report, which exceeded market consensus, firmly pushed the Federal Reserve to cut interest rates by 25 basis points in November, rather than 50 basis points.
The latest research report from CICC also pointed out that the necessity for the Federal Reserve to cut interest rates by 50 basis points has decreased, and it is expected that a 25 basis point cut will occur in November.
Therefore, from the perspective of predictions, the probability of a 25 basis point interest rate cut in November for the U.S. dollar is far greater than pausing the rate cut.
However, it needs to be particularly noted that, given the rapid increase in Chinese asset prices at present, capital from other markets in Asia is flowing towards China, and domestic U.S. capital is also getting restless, so it is also possible for the U.S. dollar to pause the rate cut.
Because pausing the rate cut implies that U.S. interest rates are still not low, which can按住 U.S. capital and slow down or even pause the outflow to China.
We have repeatedly stated that the most important task for the Federal Reserve at present is to control the pace of interest rate cuts and expectation management to avoid a rapid devaluation of the U.S. dollar and a rapid outflow of capital, to prevent the collapse of the U.S. stock market, bond market, foreign exchange market, and small and medium banks due to rapid capital loss.So, what would happen if the US dollar interest rates were cut by 25 basis points in November?