Bitget CFD chief analyst Lewis Huang said in a livestream yesterday that the minutes from the Federal Reserve’s July Federal Open Market Committee, or FOMC, meeting delivered an overall hawkish signal.
He said that although the meeting kept interest rates unchanged, several officials stressed that if inflation fails to continue moving back toward the 2% target, further policy tightening or even another rate hike would remain a viable option.
Markets may need to rethink the high-rate outlook
Huang said this means markets should not simply trade around rate-cut expectations in the short term. Instead, they should reassess how a longer period of higher rates could affect the U.S. dollar, U.S. Treasury yields, gold and valuations in U.S. equities.
Inflation and labor data are the next key inputs
According to Huang, the next market direction will be determined by the combination of inflation and employment data. If CPI, PCE or wage data move higher and the labor market remains resilient, the U.S. dollar and Treasury yields may strengthen, while gold and highly valued assets such as the Nasdaq 100 could come under pressure.
On the other hand, if inflation cools materially and employment and consumption weaken at the same time, markets may again lift expectations for Federal Reserve easing. In that case, gold, non-U.S. dollar currencies and risk assets could find support.
What CFD traders should watch
Huang said CFD traders should closely monitor the interaction between the U.S. two-year Treasury yield, the U.S. Dollar Index and gold. He also suggested waiting for a breakout and a retest after major data releases instead of chasing the first wave of volatility, while keeping strict control over leverage and stop-loss risk.