Last week, global assets remained in a volatile state. The USD Index broke above 105, nearing 106, but the yield on the U.S. 10-year Treasury note did not rise to the restrictive 4.5% level, instead hovering around 4.2%. This reflects the interest rate differentials between countries rather than expectations of Fed rate hikes or cuts, as Switzerland, Europe, and Canada have all begun to cut rates. The U.S. Nasdaq also started a pullback last week, ending its unilateral rise. There is significant divergence within the U.S. capital markets, with the Nasdaq mainly driven by leading AI companies like NVIDIA. Meanwhile, the cryptocurrency market is also experiencing broad fluctuations, waiting for macroeconomic factors and the Ethereum ETF narrative to determine the next direction. We believe the main trading logic in the global market remains the anticipation of rate cuts, though some traders have begun trading on recession logic. Historically, recessions are highly probable and occur rapidly, making this a high-risk, high-reward bet. Overall, the market remains in a state of uncertainty, awaiting more definitive data or events to initiate a new trend.
Key data to watch this week are:
- CB Consumer Confidence Index (Tuesday 10:00 PM): Expected at 100.2, previous value 102. From a recession logic perspective, a decline in this data is negative for equities and commodities. From a rate cut logic perspective, a decline supports future rate cuts, benefiting equities. Given the steady decline in the University of Chicago’s Consumer Confidence Index, we lean towards a bearish view on this data, and would go long on equities under the rate cut logic.
- Australian Inflation Data (Wednesday 9:30 AM): Expected at 3.5%, previous value 3.6%. This data will determine whether Australia considers rate cuts, affecting currency differentials, the USD Index, and equity markets. Currently, Australia’s inflation remains stubborn, with housing prices high and the government increasing stamp duties. We expect the data to be higher than anticipated, which is bearish for the USD Index.
- U.S. Q1 GDP Final Value (Thursday 8:30 PM): Expected at 1.4%, previous value 1.3%. This will influence the market’s inclination towards recession or rate cuts. If GDP is below expectations, the market may shift further towards recession logic. If above expectations, the rate cut logic remains but implies a strong economy, delaying rate cuts. We believe this data is negative for equities unless it meets expectations.
- Core PCE Index (Friday 8:30 PM): Directly affects rate cut prospects but its importance has diminished following Powell’s recent remarks. Considering previous data releases, we expect it to be below expectations, which is bullish for rate cuts and positive for equities.
Considering next week’s data and the current economic outlook, we maintain our previous rate cut trading logic: reduce positions at high levels, hold at low levels, and moderately increase recession logic shorts on equities and commodities. If the Nasdaq corrects sufficiently, we would buy Nasdaq indices for potential gains, but sell if it technically breaks the current upward range, shifting to a bearish stance. For cryptocurrencies, we remain bullish on Ethereum, expecting the Ethereum ETF to be approved by July 2nd, according to Bloomberg ETF analysts. We hold positions in ALT and BTC, anticipating macro data to guide new directions. We see no new upward channel for commodities and gold in the macro view, suggesting high-level consolidation while awaiting macro data to decide the next direction. The short-term rise in the USD Index is due to interest rate differentials from staggered rate cuts by other countries, but we remain bearish on U.S. Treasury yields.