Guotai Junan: The Fed will skip another rate cut, and the market remains uncertain.

Guotai Junan released a research report stating that the US core CPI rose 0.4% month-on-month in January, higher than market expectations, which dampened the market's easing expectations, and added to Powell's remarks that "he is not in a hurry to cut interest rates", the market pushed back the timing of this year's easing. At present, "Trump trade" is performing poorly, and the trend of US assets is complicated. The Fed is likely to skip easing again in March, and US bonds may remain slightly volatile this month, and the market as a whole is in a state of waiting for new directions. Guotai Junan's main views are as follows: 1. US inflation is overheated, and the market's easing expectations are delayed: The US core CPI rose more than expected in January, and Powell recently said in the congressional hearing that "he is not in a hurry to cut interest rates", and the market again delayed the timing of this year's easing and priced in that there will be only about one easing this year. The market's feedback is that the overall US bond yields rose by 7-8 basis points, but the US dollar index and US stocks did not fluctuate much. 2. "Trump trade" is performing poorly, and the market lacks visibility: Since the beginning of this year, "Trump trade" has performed poorly, and the US dollar and US bond yields have not risen as expected, but have retreated, and the Nasdaq has performed well, but also seems not as strong as expected. The current Treasury Secretary Mnuchin said that Trump is most concerned about the 10-year US bond yield, not whether to cut interest rates. Before the January inflation data was released, Trump also said on social media that interest rates need to be lowered to match the tariffs that are about to be imposed. 3. The market enters the waiting period, and US bonds fluctuate short-term: The market still lacks visibility, which is the fundamental reason why US assets have performed more complicatedly recently. From the interest rate trend of 2-year US bonds and overnight SOFR, it can be seen that short-term bonds are almost consistent with capital costs, which also indicates that the market's trading logic is pursuing more certainty. 4. The divergence between the US dollar index and US bond yields is reconciled: There was some "divergence" between the US dollar index and bond yields before, that is, the US dollar index was higher than the level implied by the interest rates, but this "divergence" has also gradually reconciled, which also indicates that the "fight" between interest rates and exchange rates has come to an end. Overall, the market seems to be not calm, but has actually calmed down, waiting for new driving factors.