To The Moon

Last week’s CPI release brought market expectations for a Federal Reserve rate hike into much sharper alignment. Following the euro area’s earlier rate increase and a 0.3% month-over-month rise in core CPI, markets are now pricing in roughly a 90% probability that the Fed will raise rates in September.

Although core CPI came in marginally above expectations, the overall reading was not excessively strong. In particular, core CPI has not accelerated significantly even with oil prices approaching USD 100 per barrel. The market also generally expects the Fed’s tightening path to remain relatively gradual. As a result, a rate hike this week is largely priced in. Conversely, if the Fed unexpectedly leaves rates unchanged, the decision could be interpreted as a positive surprise and potentially trigger renewed market strength.

The CME FedWatch Tool currently indicates a roughly 90% probability of a September rate hike.

U.S. Equity Indices Still Await a Breakout

As discussed previously, U.S. equity indices remain among the most resilient asset classes in the current market environment. Rate hikes are being driven by solid economic data, while the incumbent party typically has incentives to stabilize market expectations ahead of midterm elections.

This leaves U.S. equity indices at the center of an intense bullish-versus-bearish tug-of-war. The next material move will depend on whether the market breaks higher or lower.

Accordingly, this week’s trading framework for U.S. equity indices is relatively straightforward:

• Maintain a bullish bias as long as the index remains above 28,900.

• Turn tactically bearish if 28,900 is decisively breached.

  

More aggressive traders may also consider buying both calls and puts to position for a potential volatility event or “black swan” outcome, such as an unexpected decision by the Fed not to raise rates or an unforeseen economic shock. Nasdaq futures have remained range-bound for an extended period, which could set the stage for elevated volatility; options may offer a way to position for such a move.$纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $NQ100指数主连 2609(NQmain)$ $微型NQ100指数主连 2609(MNQmain)$ $标普500ETF(SPY)$ $标普500(.SPX)$ $SP500指数主连 2609(ESmain)$ $微型SP500指数主连 2609(MESmain)$ $标普500波动率指数(VIX)$ $道琼斯指数主连 2609(YMmain)$ $微型道琼斯指数主连 2609(MYMmain)$ $道琼斯(.DJI)$

Fed Tightening Could Pressure Commodities

The inflation narrative that has dominated the past six months may come under pressure as the Federal Reserve begins raising rates. Commodities, led by crude oil, have continued to lift inflation expectations. This year’s gains have also been supported by unstable El Niño weather conditions—described by some market participants as the strongest in 140 years—as well as the Russia-Ukraine conflict and disruptions to maritime passage through key straits.

As a result, even commodities with relatively ample inventories have posted gains this year.

However, once Fed tightening is implemented to curb inflation, commodities with elevated inventories—such as agricultural products and certain industrial metals—may be the first to retreat. The medium- to long-term magnitude of any decline will depend on the ultimate pace and extent of the Fed’s tightening cycle.

Overall, the most favorable window for broad commodity longs may have passed. For now, a short-term tactical trading approach may be more appropriate.$WTI原油主连 2610(CLmain)$ $小原油主连 2610(QMmain)$ $微型WTI原油主连 2610(MCLmain)$ $天然气主连 2610(NGmain)$ $布油现金主连 2612(BZmain)$ $小天然气主连 2610(QGmain)$ $铜 ETF(COPA.UK)$ $铝ETF(ALUM.UK)$

Focus on U.S. Dollar Currency Pairs

A Fed rate hike increases the likelihood of U.S. dollar appreciation, implying depreciation pressure on other currencies against the dollar.

Among the major currency pairs, the renminbi and the euro offer relatively clear directional setups. Although the euro area raised rates earlier, its economy remains weaker than that of the United States. A Fed rate increase could therefore preserve the U.S. dollar’s relative appeal versus the euro.

Meanwhile, China’s Ministry of Finance has recently injected substantial capital into domestic financial institutions to replenish their Tier 1 capital. While this is not a direct interest-rate cut or reserve-requirement-ratio reduction, it is widely viewed as an important signal of greater lending capacity within the financial system. This could widen the China-U.S. interest-rate differential and place further downward pressure on the renminbi.

In addition, CNH appears to be approaching a key cycle window and could enter a depreciation phase as the U.S. dollar strengthens following a Fed rate hike. Investors may wish to adjust their positioning in line with their own portfolio circumstances.$欧元主连 2612(EURmain)$ $加元主连 2612(CADmain)$ $SG人民币主连 2612(UCmain)$ $HK人民币主连 2612(CNHmain)$ $小型HK人民币主连 2610(MCNHmain)$ $小型SG人民币主连 2610(MUCmain)$