Is the data expected to rise or correct tonight? Here are my personal insights
From a macro perspective, the expectation for interest rate cuts is cooling, and there are significant internal disagreements within the Federal Reserve. The conservatives, Harker and Schmid, believe that the current interest rates are appropriate, with inflation risks outweighing employment risks, opposing a rate cut in September. The moderates, Bostic and Collins, still expect one rate cut within the year, but it depends on the extent of deterioration in employment data.
Currently, the economic data is quite contradictory. On the positive side, the PMI has reached an 8-month high of 55.4, indicating short-term economic strength; on the negative side, the number of unemployment claims surged by 235,000, showing a clear softening in the job market. The market's betting on a September rate cut has dropped from 91% to 75%, and the probability of a 25bp rate cut is only 61%.
The internal situation within the Federal Reserve remains significantly divided. Tonight, Powell's speech is likely to be a mix of hawkish and dovish tones, expressing concerns about inflation but actually paving the way for a rate cut. There is a 60% probability of a hawkish statement, but ultimately, a 25 basis point rate cut will still occur in September.
