Hang Seng: Fed Likely Holds Rates; Trump’s Policies Boost Gold and Currencies
Ryan Lau, Chief Economist at Hang Seng Bank, has provided insights into recent actions taken by the U.S. Federal Reserve. The Fed decided to maintain its target interest rate within the range of 3.5% to 3.75%, aligning with market expectations. The meeting concluded with a voting result of 10 to 2, reflecting some dovish sentiment among committee members.
Positive Economic Outlook from the Fed
The post-meeting statement from the Fed presented a cautiously optimistic view of the U.S. economy. It highlighted steady expansion in economic activity and signs of stability in unemployment rates. Concerns over rising risks in employment were reportedly alleviated.
Fed Chair’s Remarks and Market Reactions
Fed Chair Jerome Powell described the current interest rate as being within a “reasonable range.” This has led markets to interpret the Fed’s stance as one of patience, with expectations that no immediate changes will occur in interest rates before a new chair is appointed.
Gold and Currency Market Dynamics
Hang Seng anticipates that the Federal Reserve will likely stay on hold in the near term. This wait-and-see approach is primarily driven by the need for more economic data before any rate cuts can be considered.
- Carrie Leung, Chief Investment Director of Wealth Management at Hang Seng Bank, emphasized that U.S. political dynamics should not interfere with Fed policies.
- Concerns about the Fed’s independence have spurred increased investment in gold, raising its price above $5,500 per ounce.
Gold Price Forecast and Impact on the U.S. Dollar
Leung further indicated that the forecast for gold prices is between $4,600 and $5,600 per ounce. If gold stabilizes above $5,600, the next target price could reach $6,000. Anticipated actions by Donald Trump to cut mortgage rates and long-term interest rates are likely to weaken the U.S. dollar, which could further benefit gold and foreign currencies.
Equities and Stock Market Performance
The Federal Reserve’s positive stance is expected to bolster global stock markets. In particular, Asia’s market outlook remains optimistic due to ongoing interest in the artificial intelligence sector, especially within technology.
- High-dividend and resource-related stocks have performed well recently.
- The Hong Kong stock market has surged over 8% since January, surpassing the resistance level of 27,000 points.
Focus on China’s Economic Policies
In the short term, it will be crucial to observe the effects of China’s anti-‘involution’ and anti-platform monopoly policies. The recovery of profit margins within Chinese technology stocks could be pivotal for the sustained outperformance of the Hong Kong market.
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