At 02:00 Beijing time on July 27 (Thursday), the Federal Reserve will announce its interest rate decision. The market expects the Fed to raise interest rates by another 25 basis points this time. However, guidance on whether another rate hike is likely will determine the market's reaction. The dollar could come under pressure if the Fed signals that rate hikes are over, but any hint that more work needs to be done could prove to be a surprise and support the greenback's recovery.
According to CME "Fed Watch": The probability that the Fed will keep interest rates unchanged at 5.00%-5.25% in July is 0.2%, and the rate will be raised 25 times.
The probability of a basis point reaching the range of 5.25%-5.50% is 99.8%; the probability of maintaining interest rates until September is 0.2%, the probability of a cumulative rate hike of 25 basis points is 84.9%, and the probability of a cumulative rate hike of 50 basis points is 15.0%.
"The stable message from the FOMC should limit the downside for front-end rates and the dollar," said analysts at Bank of America Merrill Lynch, explaining that Fed Chairman Jerome Powell is unlikely to rule out further monetary tightening at his press conference possibility.
So, will tonight be the last rate hike? I think there are three possibilities.
First, Powell will hint at further rate hikes, but not imminently. Such a balance would mean another pause in September followed by a final hike in November, which is a highly likely scenario.
Second, interest rates will be raised continuously. A return to the line of raising rates at every meeting would be hawkish with a medium probability;
Three, wait and see. The odds of such dovishness are low. While Powell may prefer to end the tightening cycle at current levels, the committee is filled with hawks. Falling inflation and concerns about global growth make it unlikely that Powell will signal that the bar for further rate hikes is already high.
In short, it is foreseeable that once Powell releases the hawk dove signal again at tonight's interest rate meeting to "play Tai Chi", then the suspense about when the Fed will end this round of tightening cycle will continue all the way to September. at the next meeting.
Corresponding to our steel coil industry, what impact will rising interest rates have on us?
If raising interest rates will bring about global economic deflation, it will be negative for commodity prices. On the one hand, under the background of the Fed’s continuous interest rate hikes, market liquidity has decreased, and the funds available for investment in the capital market have decreased, so commodities have no upward momentum; , This will attract more capital to buy dollars, and the impact on other commodities is still relatively large.
From the cost point of view, the profit margins of major iron and steel plants are relatively small at present, and some iron and steel plants are even in a state of loss. Against the background of slowing market demand, more and more steel plants will reduce production capacity in the future. The demand for ore will decrease, and the price of iron ore may drop.
But don’t expect the price of steel coils to drop too significantly. Although the demand for steel coils in my country has entered the off-season, there is a fact that we have to face. At present, the stocks of iron ore and coke in major ports are decreasing. The domestic iron ore price will not drop too much, which means that the production cost of steel coils will not drop too much in the future.
How will Hot Dipped Galvanized Steel Coils prices go next? Let us wait to see.
