Three black swans are about to strike this week, and the global capital markets are likely to face another blow.
Currently, the biggest concern in the global capital markets is that the US dollar index is above 110. If the dollar index exceeds 110, major global assets will undoubtedly experience significant declines, and this week could see three consecutive black swans prompting the dollar index to continue rising.
The first black swan is that the Bank of Japan is set to raise interest rates again. At the end of January, the Bank of Japan will hold a monetary policy meeting, but last week, the Bank of Japan did not provide any guidance to the market. Therefore, on Tuesday, during the last window period, Bank of Japan Governor Kazuo Ueda is likely to communicate with the market. If the Bank of Japan releases hawkish news during this communication meeting, it may lead to an interest rate hike, which could cause the market to react sharply.
The second black swan is that even if the US debt ceiling is resolved as scheduled, it will not be good news for the market but rather bad news. Because once the debt ceiling is resolved, the US government will have to issue bonds in a rush, which will absorb liquidity from the market, draining excess cash from the market and causing assets like Bitcoin to experience a liquidity-induced spiral downward. US bank deposit reserves have already fallen to the 8% lower limit, and if the debt ceiling releases a liquidity bomb, the Federal Reserve may ultimately have to pause or end its balance sheet reduction.
The third black swan is the US inflation CPI, which the market is most concerned about. The CPI in December is expected to rebound again, given that last December's CPI base was relatively low. The market is now on edge, and those feeling drowned are looking to the Federal Reserve's interest rate cut as their only lifeboat. However, this lifeboat has begun to leak (last week's non-farm payrolls exceeded expectations), and everyone believes the Federal Reserve may only cut rates once this year or possibly not at all.
Which of these three black swans will ultimately breach the market? Let’s wait and see.