Bitget CFD chief analyst Lewis Huang said hawkish remarks by Waller at the Jackson Hole global central banking conference shifted market attention away from the narrow question of whether the Federal Reserve will raise rates in September. In his view, the bigger issue is that the Fed may keep rates elevated for longer, and could still retain the option of further tightening until inflation is clearly moving back to the 2% target.
Huang said that if upcoming CPI, PCE and employment data remain strong, the U.S. 2-year Treasury yield and the U.S. dollar index may stay firm. Under that scenario, gold would continue to face pressure from rising real rates and a stronger dollar, while richly valued technology shares such as the Nasdaq 100 could see larger swings. On the other hand, if inflation cools noticeably and the labor market weakens, markets may trim rate-hike expectations, pushing the dollar and Treasury yields lower and offering support to gold and growth-oriented equity indexes.
He added that traders should also watch whether the U.S. 10-year Treasury yield is being driven by the fiscal deficit, Treasury supply and a higher term premium. Around major data releases, he advised keeping leverage in check and reading market direction through the interaction among the dollar, Treasury yields, gold and stock indexes.
Bitget CFD chief analyst Lewis Huang said Waller’s hawkish comments at the Jackson Hole global central banking conference have shifted the market’s focus beyond whether the Federal Reserve will raise rates in September.
According to Huang, investors are now looking more closely at the possibility that the Fed could keep interest rates high for a longer period before inflation clearly returns to its 2% target, while still keeping the option of additional tightening on the table.
If upcoming CPI, PCE and employment data continue to come in strong, Huang said the U.S. 2-year Treasury yield and the U.S. dollar index may remain firm. In that setting, gold would stay under pressure from both rising real yields and a stronger dollar, and volatility in richly valued technology shares such as the Nasdaq 100 could increase.
If inflation cools sharply and the labor market weakens, he said, the market may scale back expectations for further rate hikes. That could pull the dollar and Treasury yields lower and provide support for gold and growth-focused stock indexes.
Huang also said traders should pay attention not only to Fed communication, but also to whether the U.S. 10-year Treasury yield is being pushed higher by the fiscal deficit, Treasury supply and a rising term premium.
Ahead of and after major economic data releases, he advised traders to keep leverage at a moderate level and judge market direction by tracking the interaction among the dollar, Treasury yields, gold and equity indexes.
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