<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/afa49817-c794-4f95-acb0-b4666e39a8e5.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/afa49817-c794-4f95-acb0-b4666e39a8e5.png"/>
Summary
For the global market, the past week has been extremely tangled. On one hand, the market is fully digesting the interest rate cuts from the Federal Reserve and the European Central Bank this month; on the other hand, the mixed performance of U.S. economic data makes it difficult for the market to find the most certain answer. Meanwhile, although the U.S. dollar stands out, it seems to encounter resistance at some key positions. In other words, while the market is preparing for a &#34;reset&#34; of the dollar and U.S. Treasuries—meaning that the dollar exchange rate may correspond to a lower central level of U.S. Treasury yields—the significant differences within this process can also cause distress for investors.
At this juncture, the emergence of the &#34;China factor&#34; has disrupted the short-term balance of the market. While the market will continue to wait for the Federal Reserve's interest rate decision next week, it will also become more anxious to understand the possible direction of Chinese policies. Although it is clear that all relevant information will not be finalized before next year's &#34;Two Sessions&#34; in China, and there may still be room for adjustments, the financial market will &#34;imagine&#34; this series of policies and implement them in trading.
For global asset pricing, a strong dollar will face a new round of shocks. In this already somewhat crowded trading environment, any slight movement can lead to significant position changes. Especially in the case where the euro cannot effectively break through the 1.05 level, the &#34;strong dollar&#34; logic will continue to be challenged. Meanwhile, as the Federal Reserve is about to cut interest rates, the recent relative stabilization of U.S. Treasury yields actually indicates the market's hesitation, which likely means that the market has not chosen a clear direction, and many investors are even considering whether the yield curve will steepen.
Overall, both the Trump trade and the Basant trade have shown some signs of fatigue. The seemingly contradictory combination of &#34;strong dollar&#34; and &#34;low dollar interest rates&#34; has operated without conflict for a period, largely indicating that investors believe in the effectiveness of the next U.S. government. However, when such trades reach a certain stage, they begin to encounter resistance from cognitive inertia and fixed thinking.
At this time, the &#34;China factor&#34; has emerged at an opportune moment, becoming a new variable that dominates the market. If both &#34;strong dollar&#34; and &#34;low dollar interest rates&#34; are questioned, then the &#34;China factor&#34; can relatively easily take their place. In the foreign exchange world, commodity currencies may rise with the wind.
Main Text
For the global market, the past week has been extremely tangled. On one hand, the market is fully digesting the interest rate cuts from the Federal Reserve and the European Central Bank this month; on the other hand, the mixed performance of U.S. economic data makes it difficult for the market to find the most certain answer. Meanwhile, although the U.S. dollar stands out, it seems to encounter resistance at some key positions. From the chart below, we can see that while the market is preparing for a &#34;reset&#34; of the dollar and U.S. Treasuries—meaning that the dollar exchange rate may correspond to a lower central level of U.S. Treasury yields—the significant differences within this process can also cause distress for investors
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2aefd17d-4758-4a23-9776-37a1a83fe54d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2aefd17d-4758-4a23-9776-37a1a83fe54d.png"/>
At this moment, the emergence of the &#34;China factor&#34; has disrupted the short-term balance of the market, or created a dilemma. Just like in &#34;The Chef's Table,&#34; when the black side's chef presents a stunning dish, the white side chef takes a different approach and serves an even more pleasing dish. The market can easily be swayed by that more novel information.
From this perspective, while the market will continue to wait for the Federal Reserve's interest rate decision next week, it will also become increasingly anxious to understand the possible direction of Chinese policies. Although it is clear that all relevant information will not be finalized before next year's &#34;Two Sessions&#34; in China, and there may still be room for adjustments, the financial market will &#34;imagine&#34; this series of policies and implement them in trading.
For global asset pricing, a strong dollar will face a new round of shocks. In this already somewhat crowded trading environment, any slight movement can lead to significant position changes. Especially in the case where the euro cannot effectively break through the 1.05 level, the &#34;strong dollar&#34; logic will continue to be challenged. Meanwhile, as the Federal Reserve is expected to cut interest rates soon, the recent relative stabilization of U.S. Treasury yields actually indicates the market's hesitation, which likely means that the market has not chosen a clear direction, and many investors are even considering whether the yield curve will steepen. As the year-end approaches, it is believed that large funds will find it difficult to make decisions. What is relatively certain is that if U.S. Treasury yields can rise, there will be some buying interest.
Overall, both the Trump trade and the Basant trade have shown signs of fatigue. The seemingly contradictory combination of &#34;strong dollar&#34; and &#34;low dollar interest rates&#34; has operated without conflict for a period, largely indicating that investors believe in the next U.S. government's execution capability. However, when such trades reach a certain stage, they begin to encounter resistance from cognitive inertia and fixed thinking.
At this time, the &#34;China factor&#34; has emerged at an opportune moment, becoming a new variable that dominates the market. If both &#34;strong dollar&#34; and &#34;low dollar interest rates&#34; are questioned simultaneously, then the &#34;China factor&#34; can relatively easily take their place. In the foreign exchange world, commodity currencies may rise. For the stock market, the Nasdaq and Hang Seng Index have formed an interesting &#34;intertwined&#34; trend this year. Since February, the returns of the two indices have been remarkably similar. It remains to be seen who will prevail by the end of the year.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b40dabe4-ced8-49ef-adab-b2cddfe52987.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/b40dabe4-ced8-49ef-adab-b2cddfe52987.png"/>
Author of this article: Zhou Hao S0880123060019, Sun Yingchao, Source: [Guotai Junan Overseas Macro Research](https://mp.weixin.qq.com/s?__biz=MzA5MTc0NzY0NA==&amp;mid=2650795162&amp;idx=1&amp;sn=60bf2ce42c10694d96f7cc5f4dfa1afe&amp;chksm=89f464ff2e91fef0ff8eeadfa6e9391a6d4cbd1d6dc4fe4efe30ff880e02348ad3e806782817&amp;mpshare=1&amp;scene=23&amp;srcid=1210MFmOKUuoL
7Zrm1X1ZaMB&amp;sharer_shareinfo=195e9247c780c7263e1ec04abf381201&amp;sharer_shareinfo_first=195e9247c780c7263e1ec04abf381201#rd), Original title: &#34;[Guojun International Macro] Can the 'Chinese Factor' Become a New Variable?&#34;
Risk Warning and Disclaimer
The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk

In the past week, global markets faced challenges as they digested the interest rate cuts from the Federal Reserve and the European Central Bank (ECB), while U.S. economic data showed mixed results, making it difficult for the market to find a clear direction. The U.S. dollar remained strong but faced resistance, as the market prepared for a reset of the dollar and U.S. Treasury bonds. The emergence of Chinese factors disrupted the short-term balance, with the market anticipating the direction of Chinese policies. A strong dollar may be impacted, especially as the euro failed to break through 1.05. Overall, the market remains hesitant about the future direction, with "Chinese factors" becoming the new dominant variable

- The global market experienced significant turmoil last week, balancing the impacts of interest rate cuts by the Federal Reserve and ECB against mixed U.S. economic data.  
- The emergence of "China factors" disrupted the market's short-term equilibrium, leading investors to anxiously anticipate potential policy directions from China ahead of next year's Two Sessions.  
- As the strong dollar faces challenges, particularly with the euro struggling to break the 1.05 level, any shifts in market sentiment could lead to substantial position changes, especially as the year-end approaches.

Can the "Chinese factor" become a new variable?