When will the United States begin to lower interest rates? After the U.S. announced a significant data point in the late night, the Federal Reserve's previously announced expectation for a rate hike in June started to look a bit "precarious."

Does the significant U.S. data disrupt financial markets?

In the meantime, the U.S. financial market has also begun to experience severe turmoil, with U.S. Treasury bonds plummeting, the U.S. Dollar Index soaring, gold starting to weaken, and the global financial community once again on edge.

So, why did the manufacturing data announced by the U.S. this time have an impact on the Federal Reserve's rate cuts? Did the strengthening of the U.S. economy lead to a significant bearish factor in the financial market? Does this mean that the U.S. continues to reap the world?

Significant data announced! The strengthening of the U.S. economy disrupts the market?

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The significant data that disturbed the market this time is actually the manufacturing data from the Institute for Supply Management (ISM). The data shows that the U.S. manufacturing PMI index for March rose by 2.5%, reaching 50.3%.

March PMI data soars, exceeding 50%

Although the data just surpassed the 50% threshold, it is of great significance to the U.S. manufacturing industry because this is the first time in 16 months that the U.S. has exceeded 50%. As long as it stays above this line, it means that the U.S. manufacturing industry is on the path to recovery.

What does a strong manufacturing industry mean? In simple terms, it means that the U.S. manufacturing industry has begun to show a significant improvement, domestic demand in the U.S. has increased, which implies that the U.S. economy remains very robust.

Is a strong U.S. economy a good thing? Not necessarily. Because when the U.S. economic data is strong, it means that U.S. monetary policy will change, and this will also affect the U.S. financial market.As expected, after the data was released, the prices of U.S. Treasury bonds plummeted. Previously, the yield on the 10-year U.S. Treasury bonds was around 4.19%, and after the data release, it fell to 4.31%. The higher the yield on U.S. Treasury bonds, the lower the price, and the less popular U.S. Treasury bonds are in the market. From a monetary policy perspective, this is actually a continuation of maintaining high interest rates.

At the same time, the U.S. dollar index surged, with the dollar strengthening and the renminbi weakening and continuing to depreciate, currently depreciating to the level of 1 U.S. dollar: 7.26 yuan. So you see, China's exchange rate has also been impacted in sync with the strengthening of the U.S. economy.

Of course, the most significant impact is still from the Federal Reserve's monetary policy. Last week's Federal Reserve interest rate meeting indicated that the U.S. interest rate cut, which was to be in July, will be advanced to June, with three interest rate cuts this year, as clearly indicated by the dot plot.

However, with the release of manufacturing data and the recovery of the U.S. economy, the market believes that the probability of a rate cut in June has fallen to less than 50%, which means that the timing of the U.S. rate cut will be postponed again, from June to July.

The U.S. dollar index hits a new high! Will the U.S. continue to reap the world?

In the turbulent U.S. financial market, one index is very crucial, that is, the U.S. dollar index. It represents the strength of the U.S. dollar in the global financial market.

But with the release of the U.S. manufacturing index, the U.S. dollar index surged, closing at 105.06, indicating that the dollar is overwhelmingly strong. The dollar strengthens, U.S. Treasury bond yields rise, and the U.S. financial system returns to the strength before the interest rate cut signal was issued at the end of last year, and this stage is actually the sharpest phase of the U.S. reaping the world.

U.S. Treasury bonds continue to depreciate, and the Federal Reserve reaps the world!

For example, after the dollar strengthens, all non-U.S. dollar currencies begin to depreciate. Since the renminbi has already depreciated significantly before, our depreciation this time is relatively small; and the yen exchange rate is eager to break through the previous record of depreciation of 1 U.S. dollar: 151.97 yen, trying to break through 152 yen.

China and Japan are at least among the world's top economies, and the currencies of the two countries are still like this, let alone the currencies of other countries. For example, the Argentine currency depreciated by more than 77% last year, Lebanon by 80%, and the Turkish currency depreciated by 40% last year, and 82.6% in 5 years.Due to the interest rate hike in the United States, the Turkish currency has collapsed, depreciating by more than 40%.

The direct and indirect causes of this are the strengthening of the US dollar due to the Federal Reserve's interest rate hikes, and the liquidity issues faced by other countries leading to the collapse of their economies and exchange rate markets.

Moreover, as long as the Federal Reserve continues to maintain a high interest rate of 5.5% without cutting rates, the Federal Reserve's sickle will continue to reap other developing countries in the world. This will deal a fatal blow to the economies of these countries.

It is worth mentioning that even if the Federal Reserve begins to cut interest rates, the sickle with which the United States reaps the world will essentially become a dull blade. For example, if the Federal Reserve is expected to cut rates by 100-150 basis points this year, then even with the rate cut, the interest rate will still hover around 4.5%. It will only be after two years of continuous rate cuts next year and the year after that, that the crisis of reaping the world can be considered to be lifted.

Therefore, although we hope that the Federal Reserve will cut interest rates and inject liquidity into the world economy and developing countries through rate cuts, do not think of the Federal Reserve as the so-called "savior". Even if the United States cuts interest rates, the interest rate will still be much higher than before the rate hike. US Treasury Secretary Yellen even stated: The United States has already returned to the "low interest rate era" of that year.

For China, we actually need to remain highly vigilant. Previously, we always thought that the US economy would not be able to withstand the pressure and would cut interest rates, but we didn't expect the United States to go crazy with debt to stimulate the economy, resulting in current economic data that is not bad and has not experienced a hard landing. And now even if the Federal Reserve cuts interest rates, the magnitude of the rate cut will not be very large.

In order to stimulate the economy domestically, we have been cutting interest rates, which has led to relatively low interest rates in China. If the Federal Reserve's rate cut is not strong enough, this will lead to a situation where even if the United States cuts interest rates, there will still be an interest rate difference between China and the United States, and domestic funds in China will still flow out to the United States. This is something we need to be vigilant about.

Of course, if the United States cuts a little more, things will become much better. According to data, the current maximum interest rate difference between China and the United States is about 1.99%, or 200 basis points. According to the current data, by the middle of next year, the interest rate difference between China and the United States will be completely eliminated. The Chinese exchange rate will also truly stabilize.

However, do not forget that the current economic situation in the United States is very complicated. We do not rule out that Biden will continue to stimulate the economy by borrowing for votes. This behavior will lead to the continued strengthening of the US economy, a more severe debt crisis, and a continuous surge in the inflation index. This will also lead the Federal Reserve to maintain high interest rates and continue to reap the world.

The Federal Reserve's indecision disturbs the global market.After the data was released, the probability of a rate cut in the United States in June fell below 50%, indicating that the previously mentioned expectations for a rate cut have begun to cool down. However, the strengthening of the economy implies that the inflation index may become deeply entrenched, corroding the long-term development of the U.S. economy. For instance, ordinary American workers have found that inflation is already affecting their lives and weakening their purchasing power.

The continuous decline in the U.S. bond market also signifies a crisis in bond prices and a potential debt crisis. Therefore, for China, selling U.S. bonds and buying gold might be a good idea.

China must maintain strategic focus! Achieve the great rejuvenation of the nation!

Despite the Federal Reserve frequently switching between signals of rate cuts and rate hikes, China should also maintain its strategic focus, stabilize the exchange rate by continuously developing the economy, stimulate the economy by increasing people's income, achieve common prosperity through income distribution reform, and stabilize China's finance by buying gold and selling U.S. bonds.

Only in this way can we continuously de-dollarize, resist the harvest of dollar hegemony, and achieve the great rejuvenation of the Chinese nation!