Reasons for the rising expectations of interest rate cuts

- Weak labor market: U.S. job growth has significantly slowed down, with an average of only 35,000 new jobs added per month since May, far below previous levels. Although the unemployment rate remains low at 4.2%, the downward risk in the job market is increasing, prompting the Federal Reserve to consider cutting interest rates to alleviate employment pressure.

- Inflation pressure is controllable: Excluding the short-term effects of tariff policies, the U.S. inflation rate is gradually approaching the Federal Reserve's target of 2%, and long-term inflation expectations remain positive, which provides important support for the Federal Reserve to ease monetary policy.

- Federal Reserve officials' statements: Federal Reserve Chairman Powell delivered a speech at the Jackson Hole Global Central Bank Annual Meeting, sending clear signals for a rate cut, indicating that the Federal Reserve may need to adjust its policy stance to address risks such as the downturn in the labor market. Additionally, Federal Reserve Governor Waller also explicitly expressed support for a rate cut in September and expects to continue lowering interest rates in the next three to six months.

The impact of rising expectations for rate cuts

- On the financial market: The US Dollar Index will be suppressed. On Friday (August 29), during the Asia-Europe session, the US Dollar Index rebounded slightly. As the market gradually deepens its pricing for the Federal Reserve's rate cut in September, the weakening trend of the dollar may continue. Gold prices benefit from the dollar's weakness and expectations of rate cuts; spot gold had previously risen sharply and is currently trading at a high level. US Treasury yields are also expected to decline, with the 10-year and 2-year Treasury yields both showing varying degrees of decline after Powell's speech.

- On the global economy: The Federal Reserve's rate cut will trigger changes in global capital flows, with funds flowing from the United States to other countries, especially emerging markets, bringing financial support for the economic development of these countries. At the same time, it will also reconstruct the performance of global equity assets and the demand logic for precious metals, impacting the stability and development of the global economy.

- On the A-share market: The Federal Reserve's rate cut will attract foreign capital back, enhancing the attractiveness of the A-share market. Sectors such as finance, real estate, non-ferrous metals, consumption, and technology growth will benefit. For example, in a situation of increased market liquidity, the overall operating environment and profitability of the financial sector are expected to improve; the real estate sector may ease funding pressure due to expectations of loose monetary policy.