MHMarkets：The Fed has an 80% chance of raising rates by 75 points on Thursday

At 02:00 on July 28, Beijing time, the Federal Reserve will announce its interest rate decision and policy statement. Then at 02:30, Fed Chairman Powell held a monetary policy press conference. Markets are pricing in another 75 basis points of rate hikes this time around, taking the federal funds rate to a target range of 2.25% to 2.50%, in line with Fed officialslong-term estimate of a “neutral”policy setting. Fed Chair Jerome Powell's pledge to fight persistently high inflation and policy guidance is key.

Powell's remarks at the post-meeting press conference will be key, and if Powell issues hawkish policy guidance, it will evoke a bullish bias for the dollar to break out of the most recent one-week range and above 107.50. Signs of peaking inflation are the only risk for the dollar right now, and it will prevent the Fed from committing to further rate hikes in the future. The Fed can live with a blocked growth outlook, provided inflation is contained.

Given that the Fed will not update its macroeconomic forecasts and dot plots before its September meeting, the outlook for gold could turn even more negative if Powell hints that another 75bps rate hike is possible in September. The U.S. dollar also gradually rose ahead of the Fed meeting on interest rates, and the U.S. dollar index rose back above 107.

After the announcement of the Fed's decision, the market will usher in the second quarter GDP data of the United States this week, and the expectations are not optimistic. The metrics the National Bureau of Economic Research considers in determining the timing of a recession, such as personal income, don't suggest the economy is in a recession, but other recent data suggest the economy is losing momentum fast. The U.S. GDP is expected to grow slightly at an annualized rate of 0.5% in the second quarter, compared with a 1.6% decline in the first quarter, and the U.S. economy in the first half of this year will be the worst during the post-pandemic recovery.

U.S. Treasury Secretary Janet Yellen said on Sunday that a recession was not inevitable, but most economic data pointed in the other direction, including last week's dismal U.S. and European PMI data. Diane Swonk, chief economist at KPMG, pointed out that Powell's job will be more difficult because of the divergent views within the Fed on how much to raise interest rates. There will still be debate within the Fed because this is the first time the Fed is fully staffed. There is now a debate about speeding up or slowing down the pace of rate hikes. Powell's message will be more complicated given the diversity of internal views. Its wording is also likely to be more ambiguous than at the last meeting, with options reserved for the September meeting.

Financial data and events to focus on today:

20:30 Monthly rate of US durable goods orders in June

22:00 US June existing home sales index monthly rate

22:30 EIA crude oil inventories for the week from the United States to July 22

22:30 U.S. to July 22 EIA Strategic Petroleum Reserve inventory for the week

The next day at 02:00, the FOMC announced the interest rate decision and policy statement

The next day at 02:30, Fed Chairman Powell held a monetary policy press conference