SignalPlus Macro Research Report (20230614): Inflation is slowing down, the market is concerned about the progress of the Fed meeting and SEC supervision

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Dear friends, welcome to the SignalPlus macro research report. SignalPlus macro research reports update macro market information for you every day, and share our observations and opinions on macro trends. Welcome to track and subscribe, and follow the latest market trends with us.

The overall CPI in the United States rose slightly by 0.1% in May, and the core CPI rose by 0.436% month-on-month (not rounded). The lowest since November 2021, but still well above the Fed's target; energy prices fell by 3.6% in the month (-11.7% year-on-year), which was the main reason for the overall slowdown in CPI growth, while housing inflation remained Remained strong, rising 0.5% for the third straight month.

U.S. Treasury yields initially fell as headline CPI missed expectations as the market tried to find reasons from the data to justify the Fed's pause in rate hikes, including headline inflation that was weaker than expected, core inflation trends slowing, and inflation outside of housing that was weaker , but follow-up in-depth interpretation of the components of inflation (landlord equivalent rent increased by 0.52% month-on-month, implied PCE pass-through price increased by 0.4% month-on-month), coupled with a sharp rise in UK yields (2-year + 26 bp, Bank of England's next The probability of raising interest rates by 50 basis points in a week is about 15%), pushing the U.S. bond yield curve to finally close more than 10 basis points higher.

As for today's Fed meeting, nearly all expectations of a rate cut before the end of the year have been priced out of the forward rate curve, pricing in the fed funds rate for the November-December period rising from around 4.5% to around 5.2% in just one month % , however, the market is still widely expected that the Fed will pause interest rate hikes at today's meeting, and the probability of raising interest rates by 25 basis points is only about 10%, but the market expects that the probability of FOMC raising interest rates in July is more than 50%.

• Some key points to focus on from today's meeting:

• Whether to raise interest rates? Historically, the Fed has never tightened policy when the market probability is less than 65%.

• How the SEP (Summary of Economic Projections) and changes in the dot plot explain the difference between "skip rate hikes" and "stop rate hikes".

• How Powell would verbally present his arguments during a press conference.

How many, if any, voters dissented from this rate decision.

The stock market went its own way as usual, the stock market was satisfied with its dovish interpretation of the CPI, and the US stock market basically rose in a straight line for another day; in addition, the People's Bank of China cut the open market operation rate by 10 basis points, shocking the commodity market , oil rose 3.5 percent and copper rose 2.2 percent, with raw materials and industrials the strongest performers among all SPX sectors.

Also, in a sign of the return of retail enthusiasm, the most popular meme stock on old Reddit has performed very well, up nearly 15% so far in June, easily outperforming the performance of the SPX index, which is already doing very well; If the FOMC unexpectedly turns dovish, it may push the market euphoria further to the peak.

On the cryptocurrency front, the first hearing between the US SEC and Binance looked more optimistic for the latter, with District Court Judge Berman refusing to enforce the SEC’s request for an asset freeze and instead urging both parties to agree on a possible compromise In consultations, they believe they are "closer to reaching an agreement than the wording in court documents" and asked for an update on the situation by Thursday; in addition, the judge expressed doubts about the US SEC's use of enforcement powers to regulate the entire cryptocurrency field, saying it is "effective." Low and cumbersome," she said, though she also said Binance's lawyers' surprise at the SEC's allegations sounded "a bit bogus," given that the question of whether cryptocurrencies should be classified as securities has been debated for years.

In addition, there have been new developments in the case between the SEC and Ripple. The unsealed "Hinman documents" show that, according to the internal communication records (2018) of former SEC director William Hinman, he clearly stated that ETH is not a security.

"Based on my understanding of the current state of ETH, the Ethereum network and its decentralized structure, the current offer and sale of Ether is not a securities transaction."

“I have attached a draft of the speech I referred to, which states that we do not believe there is a need to regulate the current offering of ETH as a security,” Hinman wrote in an email that has been made public.

In addition, the unsealed documents show that SEC editors also edited Hinman's speech because they were concerned that Hinman's comments might weaken the SEC's legal position in the future.

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