This week’s macro storyline is still a bit complex. For many friends, you may not have much patience to read through it all, so I’ll simplify it. Just focus on two key factors: the Brent price and the October rate-hike probability.
Brent determines inflation expectations, which in turn determines the probability of a rate hike in October. So different Brent price ranges have different effects on the market, and they also change the likelihood of an October rate hike.
As for the October rate-hike probability itself, different probability levels lead to different market reactions and pricing methods. Therefore, you only need to watch two sets of arrays.
Brent:
Above $100, the market is trading energy-inflation risk.
$95–$100, the risk gradually eases and you enter a cautious phase.
$90–$95, the risk of a second rate hike gradually weakens (the probability of an October rate hike is reduced).
$85–$90, the energy-inflation logic reverses, and inflation logic returns to endogenous inflation within the economy.
Below $85, if endogenous inflation does not rebound, the market starts moving toward optimism and gradually sheds its inflation worries.
CME October rate-hike probability:
≤50%, the market is in a stage of uncertainty.
≥50%–60%, the market begins to pay attention to the risk of a rate hike.
≥60%, the market starts pricing more actively, and some assets adjust defensively due to expected rate hikes.
≥70%, pricing shifts from defense to proactive risk avoidance, and rate-hike pricing becomes more obvious.
≥80%, nearing a rate-hike lock-in; the market will fully price in an October rate hike.
>90%, rate hikes are locked in; moving from trading expectations to full pricing, risk assets come under pressure. The upside is that when the hike lands, the “shoe dropping” effect brings a rebound!
This week, just monitor changes in these two datasets. Whether it’s the US-Iran situation or macro data, it will ultimately affect these two figures directly. And of course, if you want to go deeper, you can also look at U.S. Treasury yields—this is an advanced option! #黄金跌至4144美元
Brent determines inflation expectations, which in turn determines the probability of a rate hike in October. So different Brent price ranges have different effects on the market, and they also change the likelihood of an October rate hike.
As for the October rate-hike probability itself, different probability levels lead to different market reactions and pricing methods. Therefore, you only need to watch two sets of arrays.
Brent:
Above $100, the market is trading energy-inflation risk.
$95–$100, the risk gradually eases and you enter a cautious phase.
$90–$95, the risk of a second rate hike gradually weakens (the probability of an October rate hike is reduced).
$85–$90, the energy-inflation logic reverses, and inflation logic returns to endogenous inflation within the economy.
Below $85, if endogenous inflation does not rebound, the market starts moving toward optimism and gradually sheds its inflation worries.
CME October rate-hike probability:
≤50%, the market is in a stage of uncertainty.
≥50%–60%, the market begins to pay attention to the risk of a rate hike.
≥60%, the market starts pricing more actively, and some assets adjust defensively due to expected rate hikes.
≥70%, pricing shifts from defense to proactive risk avoidance, and rate-hike pricing becomes more obvious.
≥80%, nearing a rate-hike lock-in; the market will fully price in an October rate hike.
>90%, rate hikes are locked in; moving from trading expectations to full pricing, risk assets come under pressure. The upside is that when the hike lands, the “shoe dropping” effect brings a rebound!
This week, just monitor changes in these two datasets. Whether it’s the US-Iran situation or macro data, it will ultimately affect these two figures directly. And of course, if you want to go deeper, you can also look at U.S. Treasury yields—this is an advanced option! #黄金跌至4144美元
