Core Insights - The report highlights the evolving dynamics of the U.S. economy, particularly the impact of tariffs on inflation, with June CPI data reflecting these influences. The overall market expectations for the Federal Reserve's policy path remain stable, with anticipated rate cuts in September and December [6][7]. Market Trends - Domestic market indices showed positive performance, with the Shanghai Composite Index closing at 3,559.79, up 0.72%, and the Shenzhen Component Index at 11,007.49, up 0.86% [4]. - In the U.S. market, major indices exhibited mixed results, with the Dow Jones slightly down by 0.07%, while the Nasdaq rose by 1.51% and the S&P 500 increased by 0.59% [6]. Macroeconomic Analysis - The report notes a decline in initial jobless claims to 221,000, continuing a five-week downward trend. The June CPI showed a year-on-year increase of 2.67%, up from 2.38%, indicating a rebound influenced by tariffs, particularly in used car prices and imported goods [6][7]. - The analysis suggests limited further increases in tariffs due to insufficient economic fundamentals to absorb negative impacts, with expectations that the inflationary effects of tariffs will diminish by the third quarter [6]. Currency and Credit Dynamics - The report discusses the historical evolution of the U.S. dollar's credit anchor, transitioning from the gold standard to a debt-driven economy, highlighting the challenges faced by the dollar in maintaining its value amidst increasing debt and geopolitical uncertainties [9][10]. - Short-term outlook for the dollar indicates a weak and volatile trend, with potential for structural depreciation in the medium term due to diverging monetary policies and fiscal sustainability concerns [9][10]. Investment Recommendations - Emerging market equities and bonds are becoming increasingly attractive, with expectations of foreign capital inflows boosting stock prices, particularly in domestic demand-driven sectors. Bonds are expected to benefit from a rebalancing of dollar assets [10]. - The report emphasizes the continued importance of gold as an investment, recommending accumulation during price corrections, supported by factors such as a weak dollar and central bank demand for diversification [10].

Group 1: Historical Evolution of the Dollar's Credit Anchor - The dollar's rise was initially supported by gold, with the U.S. holding 62% of global gold reserves by 1945[1] - The Bretton Woods system (1944-1973) faced challenges due to the Triffin dilemma, leading to a collapse of the gold-dollar peg[2] - The transition to the petrodollar system (1973-2008) created a credit loop of "oil-dollar-U.S. debt," but also exposed vulnerabilities during financial crises[3] Group 2: Current Trends and Future Outlook - In the short term (within 1 year), the dollar is expected to experience weak fluctuations, primarily due to anticipated interest rate cuts by the Federal Reserve[4] - The medium-term (1-3 years) outlook indicates a structural depreciation of the dollar, driven by fiscal sustainability concerns and diversification trends[5] - Long-term (over 3 years), the dollar's share is projected to align more closely with economic strength, with a shift towards a multipolar currency system[6] Group 3: Asset Allocation Recommendations - Emerging market equities and bonds are becoming increasingly attractive, with foreign capital inflows likely to boost domestic demand-driven stocks[7] - Gold remains a strong asset allocation choice, supported by weak dollar pricing, central bank demand, and geopolitical risk premiums[8] - Risks include potential deterioration in global liquidity and unexpected advancements in AI technology impacting financial markets[9]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) intervened in the market by selling HKD 60.543 billion due to the Hong Kong dollar reaching the strong-side convertibility guarantee, marking the first occurrence since October 28, 2020 [1] Group 1: Market Intervention - The HKMA injected a total of HKD 116.614 billion into the market on May 3 and May 5 prior to the intervention on May 6 [1] - The strong-side convertibility guarantee was triggered as the HKD/USD exchange rate reached 7.75, prompting the HKMA to buy USD and sell HKD to stabilize the exchange rate [1] Group 2: Currency Dynamics - The recent strength of the HKD is attributed to increased demand related to stock investments, which supports the HKD exchange rate [2] - The USD index fell to a low of 99.60, with a maximum decline of over 0.43%, leading to capital flows towards Asian currencies [1][2] - The offshore RMB fell below the 7.20 mark against the USD, reaching a low of 7.19, marking the first occurrence since November of the previous year [1] Group 3: Economic Outlook - Jefferies' global FX head suggests that the natural resolution to trade tensions may involve a depreciation of the USD, making bets against the USD in favor of Asian currencies potentially meaningful [2] - South China Futures indicates a temporary easing in international trade tensions, which may lead to a technical recovery of the USD index, although the long-term economic outlook for the US remains weak, constraining the USD's strength [2]