GUOTAI JUNAN I: Powell maintains "independence" as the market remains decent

According to the Zhitong Finance APP, GUOTAI JUNAN INTERNATIONAL released a research report stating that the Federal Reserve kept the benchmark interest rate unchanged and expressed uncertainty about the economic and inflation paths, leading to a decrease in the probability of a rate cut in June from 35% before the meeting to 20%. Although Powell emphasized the independence of the Federal Reserve's policy, previous trends seem to indicate that the financial market is more concerned about the uncertainty of a "lack of forward strategy." Coupled with recent currency interventions by Asian central banks and the divergence in global trade data, GUOTAI JUNAN INTERNATIONAL believes that the picture received by the Federal Reserve and Powell is also relatively chaotic. The main points from GUOTAI JUNAN INTERNATIONAL are as follows: As expected by the market, the Federal Reserve kept the benchmark interest rate unchanged while expressing uncertainty about future economic and inflation trends, thus raising questions about whether a rate cut will occur in June. From the results of market trading, the probability of a rate cut in June was about 35% before the FOMC meeting and dropped to 20% after the meeting. Another issue of concern for the market is the relationship between Powell and Trump. Powell emphasized that he did not request to meet with Trump and reiterated that Trump's attitude would not affect the Federal Reserve's decisions. Maintaining its independence may also be the best strategy that Powell can adopt at the moment, as reflected in the market's response. Previously, Trump threatened to fire Powell, leading to a collapse in dollar assets, which seems to indicate that the financial market is more concerned about the uncertainty of a "lack of forward strategy." From the trade uncertainty index compiled by institutions, this index has actually declined recently. The upcoming US-China trade negotiations have provided some comfort to investors, but long-term US Treasury yields have remained relatively stable, indicating that the market is currently more worried about inflation. Another issue of concern for investors recently is the credit worries surrounding the dollar, while there are also growing concerns about a potential significant weakening of the dollar. It is a fact that there are worries about confidence in the dollar, but it is still some distance from collapse. Recently, after several Asian currencies appreciated, some Asian central banks have also begun to intervene. The Bank of Japan has also hinted that it may raise interest rates later and more slowly in the future, which to some extent indicates that most economies still wish to maintain policy flexibility rather than easily follow the financial market, especially the leveraged trading dominated by hedge funds. The issue of tariffs remains unclear. South Korea, known as the canary in the coal mine, reported export data for April that exceeded market expectations, with a year-on-year increase of 3.7% (market expectation: -2.0%), indicating that the impact of tariffs has not yet manifested. On the other side of the ocean, both imports and exports at US ports have seen significant declines, suggesting that the headwinds facing global trade are still strong. Summing up this information, it is believed that the Federal Reserve and Powell are also receiving a relatively chaotic picture.