March 19 (Wednesday) Bank of Japan meeting
High probability that interest rates will remain unchanged
March 20 (Thursday) Federal Reserve interest rate meeting
Interest rates are expected to remain at 4.25% - 4.5%, but the key point is Powell's speech and the dot plot.
These past few days can be described as a super central bank week! Major central banks are holding meetings, especially the Federal Reserve's interest rate meeting in the early hours of March 20, which is one of the most important events in the first half of this year! It could even mark the beginning of the mid-year market trend! Therefore, we need to provide some risk warnings in advance.
In simple terms, Trump's delay in starting a tariff war may be to wait for the Federal Reserve's stance at this meeting. If inflation expectations do not rise significantly before March 19, the Fed is likely to release a relatively neutral signal. If the Fed leans dovish this time, Trump may immediately initiate a tariff war against Canada, Mexico, or even East Asia at the end of this month or early April. The underlying logic may be that Trump wants to wait for a 'signal that excites the heart' before taking action, a signal that allows him to use controllable market fluctuations to promote deflation and squeeze U.S. Treasury bonds.
In fact, we can consider the results of this meeting on March 19 in three possible scenarios:
If the Federal Reserve is very dovish (gentle, leaning towards easing), it is likely that Trump and the so-called 'deep state' have reached some sort of tacit agreement. Both sides may orchestrate a 'controllable recession': U.S. stocks drop, scaring funds into the U.S. bond market to rescue U.S. Treasuries, but if the drop is too much, they will pull it back, thus benefiting both the stock and bond markets. Meanwhile, the 'deep state' can take the opportunity to cash out at high levels.
If the Federal Reserve is very hawkish (strong, leaning towards tightening), it indicates that Trump and the 'deep state' have not reached an agreement and are instead acting against each other. The 'deep state' may take advantage of this to turn a fake recession into a real collapse, dragging Trump down. If U.S. stocks completely crash, countries like Canada and Mexico that rely on the U.S. may also face misfortunes, and even Europe could be affected. At that time, the 'deep state' can use the money they cashed out at high levels to buy the assets of these countries, achieving the goal of dollar expansion.
If the Federal Reserve's stance is ambiguous (the most likely scenario), it indicates that Trump and the 'deep state' are in a heated battle, with neither wanting to take responsibility. The Federal Reserve does not want the stock market to collapse and damage its reputation, and Trump fears that a stock market crash will impact his votes; both sides are testing each other, with neither wanting to take the first move.
In summary, the current situation is that before the Federal Reserve's interest rate meeting, the market is very sensitive, and all parties are waiting for signals. If you have U.S. stocks or risk assets like cryptocurrencies, it’s best to respond cautiously and protect your principal. Recently, U.S. stocks have already broken through some key levels, and whether the rebound in the past few days is a false breakout or a real opportunity still depends on the final result of the interest rate meeting on March 20.
As for Bitcoin (BTC), it is currently hovering around 83,000, likely waiting for the interest rate decisions from Japan and the U.S.
If the Federal Reserve does not cut interest rates on March 20, the market may see a short-term correction;
If the Fed's stance is dovish, Bitcoin may have a chance to rebound and test some levels;
If it leans hawkish, combined with the pressure of Japan raising interest rates, the market may test the support level of 73,000.
Lastly, discussing the probability of Japan raising interest rates is quite difficult to predict. In fact, Japan already raised interest rates in January 2025, and the probability of raising rates again in March is not high. If Japan does raise rates a day before the Federal Reserve, it indeed carries a somewhat 'provocative' implication, especially since the boss is set to announce something the next day. Trump has laid the groundwork for so long, and then you just go and break it? However, based on Japan's domestic economic data, there is still a certain possibility of raising rates, for example, the recently released basic wage for workers in January increased by 3.1% compared to the same period last year, the largest increase in 32 years. Excluding bonuses and overtime pay, wages also rose by 3%, reaching a nearly two-year high. This is mainly due to the increasingly tight labor market in Japan, making it harder to find workers, leading to wage increases.
At the same time, the inflation rate surged to 4% in January, the highest point in two years. With wages and prices rising, there's speculation that the Bank of Japan may take action to raise interest rates, possibly as early as May 1. If interest rates rise, it will not only impact the yen, but also the stock and bond markets.
Additionally, Japan's 10-year government bond yield has risen to 1.5% this year, the highest level since 2009, indicating strong market expectations for future interest rate increases. In summary, this wave of 'double increase' in wages and inflation may indeed lead the Bank of Japan to make a firm decision to raise interest rates.
In the worst-case scenario, if Japan raises interest rates and the Federal Reserve is also hawkish, the market may form a 'double tightening' expectation, and this downward trend will require greater caution.
Summary of the article: How to infer from a macro perspective, the downside is larger! (Note that this is a risk warning, not an investment advice)