Core Viewpoint - The Federal Reserve implemented a "dovish pause" during the January FOMC meeting, signaling a shift in the future rate cut path, which will now depend more on inflation data rather than solely on labor market weakness [1][5] Economic Outlook - FOMC members showed greater consensus on the economic outlook, with Powell noting stronger economic performance compared to December, supported by resilient consumer spending, expanding business investment, fiscal support expectations, favorable financial conditions, and ongoing AI-related capital expenditures [5] - The only weak area identified was the housing market [5] Rate Cut Logic - The logic for future rate cuts has fundamentally changed, with a shift towards being "inflation-based" rather than "employment-based" as the risk of job losses diminishes [5][6] - Morgan Stanley expects the Fed to maintain patience until clearer signs of inflation deceleration appear, likely later in the year, before considering rate cuts [5][6] Market Strategy - Morgan Stanley's rate strategists recommend maintaining a neutral position on U.S. Treasury durations and curves, while continuing to favor 2-year UST SOFR swap spreads [8][9] - In the foreign exchange market, the firm predicts a weaker dollar, but notes that the Fed's policy is unlikely to be the main driver of dollar depreciation, with more focus shifting to international monetary policies and related intervention risks [9] MBS Strategy - For agency MBS, Morgan Stanley maintains a neutral stance, citing low volatility as favorable but noting that the option-adjusted spread (OAS) is near its narrowest levels in recent years, with ongoing uncertainty in housing policy [9]

Core Viewpoint - The market has fully priced in the Federal Reserve's decision to maintain interest rates between 3.50% and 3.75%, with attention shifting to whether this will be a "dovish pause" or an "hawkish pause" [1] Group 1: Interest Rate Expectations - Economists unanimously expect the Federal Reserve to keep rates unchanged, with 58% predicting rates will remain stable throughout the first quarter [3] - The money market currently prices in a reduction of approximately 45 basis points by the end of the year, with the first 25 basis point cut potentially occurring as early as July [3] - Goldman Sachs describes the upcoming meeting as "uneventful," expecting no changes to the federal funds rate and minimal guidance on future policy [3] Group 2: Statement Adjustments - Institutions anticipate several adjustments in the statement, including an upgrade of economic growth assessment from "moderate" to "solid" [4] - The Fed is expected to remove language regarding "increased risks to employment," indicating reduced concerns about the labor market [4] - Despite recent core PCE data being relatively mild, the statement is likely to maintain that "inflation has risen in recent months and remains elevated" [4] Group 3: Forward Guidance - The market expects the retention of language indicating consideration of further adjustments to the target range, suggesting a dovish stance [7] - A shift back to language indicating any adjustments would imply a longer pause, constituting a hawkish pause [7] Group 4: Press Conference Focus - Analysts will focus on three key areas during Powell's press conference: assessment of the labor market, inflation trends, and neutral interest rate judgments [8] - The market will closely watch whether Powell emphasizes the December unemployment rate drop to 4.4% or downplays it as a one-month data point [8] - Powell's comments on neutral interest rates will be significant, especially if he highlights improvements in productivity [8] Group 5: Political Pressures - The Federal Reserve faces unprecedented political pressure from the White House, with ongoing investigations into Powell and debates regarding presidential powers over Fed officials [9] - Analysts expect Powell to avoid political questions during the press conference, reiterating the Fed's independence in monetary policy decisions [9] Group 6: Divergence in Rate Cut Expectations - There is notable divergence among institutions regarding the rate cut path for the year, with Goldman Sachs predicting cuts in June and September, while Barclays expects cuts in June and December [9] - Morgan Stanley notes that 12 out of 19 Fed officials anticipated at least one more rate cut this year, but there is significant disagreement among them [9] Group 7: Market Impact - Institutions generally expect limited price volatility from the upcoming meeting, with the U.S. interest rate market already pricing in the unchanged rate [12] - The meeting is likely to produce limited net price action unless a significant surprise occurs [12] - It is anticipated that at least one dissenting vote will arise, highlighting ongoing divisions within the committee [12]

Core Viewpoint - Morgan Stanley anticipates that the upcoming January FOMC meeting will maintain interest rates unchanged, focusing on the tone of the statement [2][5] Group 1: Interest Rate Outlook - The Federal Reserve is expected to keep the federal funds rate target range at 3.50%-3.75%, indicating a tactical adjustment rather than a return to a tightening cycle [2] - The statement is likely to upgrade the economic growth assessment from "moderate" to "robust" and remove references to "increased risks to employment," suggesting reduced concerns about the labor market [2] Group 2: Forward Guidance - The key aspect for investors is the forward guidance, with Morgan Stanley predicting the statement will retain language about "considering further adjustments" rather than "any adjustments," indicating a continued dovish stance [3][5] Group 3: Voting Dynamics - There is an expectation of dissenting votes, with predictions that Governor Miran will vote against the decision, advocating for a 50 basis point rate cut [4] Group 4: Economic Context - Powell is expected to justify the pause by referencing recent strong growth data, stable hiring, and a decrease in the unemployment rate to 4.375% [7] - Despite strong activity data, inflation data has not shown the expected effects from tariffs, but the Fed remains confident that inflation will decline later in the year [7] Group 5: Market Strategy - The short-term financing market remains accommodative, with repo rates normalizing below the interest on reserve balances (IORB), indicating an excess of cash in the system [9] - Morgan Stanley recommends a long position on the 2-year UST SOFR swap spread, targeting -14 basis points, based on the loose financing environment and expectations of a steepening front-end curve [10] Group 6: Currency Outlook - Morgan Stanley has revised its outlook for the foreign exchange market, now expecting stronger U.S. economic growth (GDP growth forecast for 2026 raised to 2.4%) and a delay in Fed rate cuts [12] - Despite this, the firm maintains a moderately bearish view on the U.S. dollar due to synchronized global growth and undervaluation of the Japanese yen [13] Group 7: Asset Class Focus - In the mortgage-backed securities (MBS) sector, the significant $200 billion purchase plan by GSEs has led to a substantial narrowing of MBS spreads, prompting a neutral stance from Morgan Stanley [18] - Municipal bonds are considered fundamentally sound but expensive, with low yield ratios compared to corporate bonds, raising concerns about sustainability if the Fed provides ambiguous signals [18]

Core Viewpoint - The financial markets are closely watching the upcoming Federal Reserve policy announcement, with a consensus that interest rates will remain in the 3.5% to 3.75% range, but the language used by Chairman Powell will significantly influence the short-term dynamics between the dollar and risk assets [1][3]. Group 1: Federal Reserve Policy and Market Reactions - The market is at a delicate balance; if Powell adopts a "dovish pause," indicating that the current interest rate level is temporary and that a rate cut may be on the horizon, risk assets like Bitcoin could see a resurgence [1][3]. - Current macroeconomic data supports a cautious approach from the Fed, with the probability of maintaining interest rates unchanged pegged at 96% according to CME FedWatch [1][3]. - Internal divisions within the Fed are emerging, with some voting members stating that it is "too early" for a rate cut, which could weaken the dollar's dominance and provide a boost to the cryptocurrency market if a minority advocating for significant rate cuts is recognized [1][3]. Group 2: Dollar Strength and Economic Implications - Powell's commentary on economic robustness could act as a "booster" for the dollar; if the Fed does not acknowledge the current financial environment as restrictive, the interest rate differential will further favor the dollar against low-yield currencies like the yen and euro [2][4]. - A strong dollar backdrop typically exerts valuation pressure on dollar-denominated assets like Bitcoin [5]. - The proposed $200 billion mortgage bond purchase plan by Trump and potential tariff policies are viewed as medium to long-term inflation risk factors, complicating the Fed's future policy guidance [5]. - The current shift in risk appetite and safe-haven logic is significant, with political disputes regarding Fed independence and bond market volatility adding complexity to the upcoming decision [5]. - Given Bitcoin's correlation with tech stocks, if Powell's statements fail to alleviate inflation concerns, the market may experience a volatile phase characterized by initial gains followed by a pullback [5].

Core Viewpoint - Morgan Stanley anticipates that the upcoming January FOMC meeting will maintain interest rates unchanged, focusing on the tone of the statement [1][2] Group 1: FOMC Meeting Insights - The Federal Reserve is expected to keep the federal funds rate target range at 3.50%-3.75%, indicating a tactical adjustment rather than a return to a tightening cycle [2] - The statement is likely to upgrade the economic growth assessment from "moderate" to "robust" and remove references to "increased risks to employment," suggesting reduced concerns about the labor market [2][4] - Morgan Stanley predicts a dissenting vote from a board member advocating for a 50 basis point rate cut [2] Group 2: Market Strategy and Liquidity - Despite the Fed's pause on rate cuts, the short-term financing market remains loose, with repo rates normalizing below the interest on reserve balances (IORB), indicating an "excessively ample" cash situation [5] - The Fed is expected to maintain reserve levels by purchasing $40 billion in Treasury bills monthly, with projections for the SOMA account holdings to exceed $600 billion by the end of 2026 [6] Group 3: Currency Outlook - Morgan Stanley has revised its outlook on the foreign exchange market, now projecting a stronger U.S. economy with a GDP growth forecast of 2.4% for 2026, delaying the anticipated rate cuts [8] - Despite this, the firm maintains a moderately bearish view on the dollar due to synchronized global growth and undervaluation of the Japanese yen, which is expected to converge [9] Group 4: Asset Class Focus - In the mortgage-backed securities (MBS) sector, the significant $200 billion purchase plan by government-sponsored enterprises has led to a narrowing of MBS spreads, prompting a neutral stance from Morgan Stanley [11] - The municipal bond market shows solid fundamentals but is considered expensive, with low yield ratios compared to corporate bonds, raising concerns about sustainability if the Fed signals ambiguity rather than a clear dovish stance [11]

1. Report Industry Investment Rating - There is no information about the industry investment rating in the report. 2. Core Views of the Report - Last week, international precious metal futures prices continued to rise, with gold and silver prices hitting new all - time highs. The COMEX gold futures main contract approached the $5,000/ounce mark, and the COMEX silver futures main contract reached a record high of $103/ounce. Platinum and palladium futures prices also followed the upward trend, especially platinum, with the NYMEX platinum futures price surging on Thursday and Friday last week, with a weekly increase of 18.37% [2][5]. - Geopolitical tensions have increased the demand for safe - haven assets, and countries' accelerated "de - dollarization" process and large - scale gold purchases are the main reasons for the continuous record - breaking of precious metal prices. Silver, with higher volatility, has risen by 40% in less than a month this year, and the COMEX gold - to - silver ratio has dropped to 48, a 50 - year low. Given the current volatile geopolitical situation, precious metal prices are expected to remain strong in the short term. The platinum/gold and palladium/gold ratios are still in the low - range, and the platinum/silver and palladium/silver ratios are at historical lows. The catch - up market of platinum and palladium is worth attention [2][8]. - The US is expected to obtain "sovereignty" over the area of the US military base on Greenland, and the US - EU relationship is accelerating the "decoupling". The Fed will hold an interest - rate meeting on January 27 - 28, and the market generally expects the interest rate to remain at 3.50% - 3.75%. Due to the better - than - expected US employment and inflation data recently, the Fed is expected to implement a "dovish pause" or imply a loose tendency in the statement [2][6][8]. 3. Summary by Relevant Catalogs 3.1 Last Week's Trading Data | Contract | Closing Price | Change | Change Rate (%) | Total Volume (Lots) | Total Open Interest (Lots) | Price Unit | | --- | --- | --- | --- | --- | --- | --- | | SHFE Gold | 1,115.64 | 83.32 | 8.07 | 206,580 | 178,255 | Yuan/gram | | Shanghai Gold T + D | 1,110.35 | 79.26 | 7.69 | 54,268 | 208,322 | Yuan/gram | | COMEX Gold | 4,983.10 | 382.00 | 8.30 | - | - | US dollars/ounce | | SHFE Silver | 24,965 | 2,202 | 9.67 | 522,479 | 634,627 | Yuan/kilogram | | Shanghai Silver T + D | 24,988 | 2,347 | 10.37 | 436,090 | 3,292,636 | Yuan/kilogram | | COMEX Silver | 103.26 | 13.32 | 14.80 | - | - | US dollars/ounce | | GFEX Platinum | 685.90 | 75.85 | 12.43 | 25,095 | 11,348 | Yuan/gram | | Platinum 9995 | 681.50 | 79.04 | 13.12 | - | - | Yuan/gram | | NYMEX Platinum | 2,773.20 | 79.04 | 18.37 | - | - | US dollars/ounce | | GFEX Palladium | 497.95 | 79.04 | 6.09 | 11,027 | 11,348 | Yuan/gram | | NYMEX Palladium | 2,047.00 | 79.04 | 10.86 | - | - | US dollars/ounce | [3] 3.2 Market Analysis and Outlook - Geopolitical events include the US seeking "sovereignty" over the US military base area in Greenland, threatening to retaliate against European countries, and the US dispatching troops to Iran and imposing a 25% tariff on countries trading with Iran. The selection of the new Fed chairman is in the final stage, and the Polish central bank has approved a plan to buy 150 tons of gold, which will support the gold price [6]. - The Fed's interest - rate meeting is expected to maintain the 3.50% - 3.75% interest rate, and the market expects at least two 25 - basis - point interest rate cuts this year. Attention should be paid to the monetary policy clues from the upcoming Fed meeting [8]. 3.3 Important Data Information - The US GDP in the third quarter of 2025 had a final annualized quarter - on - quarter growth of 4.4%, higher than the initial value of 4.3%, the fastest growth rate in nearly two years [9]. - The Fed's preferred inflation indicator, the core PCE price index in November, rose 2.8% year - on - year and 0.2% month - on - month, in line with expectations [9]. - The number of initial jobless claims in the US last week was 200,000, lower than the expected 210,000. The average number of applicants based on the four - week moving average was 201,500, the lowest since January 13, 2024. The number of continued jobless claims, with a one - week lag, slightly decreased to 1.85 million, a decrease of 26,000 from the previous week [9]. - The preliminary value of the US S&P Global Manufacturing PMI in January was 51.9, slightly higher than the previous value of 51.8; the preliminary value of the service PMI remained flat at 52.5, and the preliminary value of the composite PMI slightly rose to 52.8. All three data were slightly lower than expectations [9]. - The preliminary value of the Eurozone's manufacturing PMI in January slightly rebounded to 49.4, still in the contraction range; the preliminary value of the service PMI dropped to 51.9, lower than expectations. The manufacturing and service PMIs in Germany rebounded more than expected. The French manufacturing PMI rose to a nearly four - year high of 51, but the service PMI sharply slowed down to 47.9 [9]. - The Bank of Japan maintained the benchmark interest rate at 0.75% and raised the economic growth and inflation expectations for the 2026 fiscal year. The Bank of Japan governor said that it will closely monitor the impact of the weakening yen and will buy government bonds to stabilize the market if the long - term bond interest rate rises abnormally [10]. 3.4 Related Data Charts - The report provides multiple charts, including the price trends of SHFE and COMEX gold and silver, the inventory changes of COMEX, LBMA, Shanghai Futures Exchange, and Shanghai Gold Exchange gold and silver, the non - commercial net long positions of COMEX gold and silver, the holdings of SPDR gold and SLV silver, the price differences between domestic and foreign gold and silver, the COMEX gold - to - silver ratio, the US inflation expectations, the relationships between gold price and various factors such as the US dollar, copper price, VIX index, crude oil price, US 10 - year Treasury bond yield, US real interest rate, Fed's balance - sheet size, US government debt scale, copper - to - gold ratio, and the NYMEX platinum and palladium inventory and ratio, as well as the non - commercial net positions of platinum and palladium futures and options [14][15][21][29][36][39][41]

Group 1 - The core viewpoint is that Morgan Stanley anticipates the Federal Reserve will maintain interest rates during the upcoming January FOMC meeting, with a focus on the tone of the statement indicating a dovish pause to soothe the market [1][2] - The Federal Reserve is expected to keep the federal funds rate target range unchanged at 3.50%-3.75%, which is seen as a tactical adjustment rather than a return to a tightening cycle [1][2] - The key for investors lies in the forward guidance, with expectations that the Fed will retain language suggesting consideration for further adjustments, indicating a continued dovish stance [2][9] Group 2 - Jerome Powell is expected to justify the pause by referencing recent strong growth data, stable hiring, and a decrease in the unemployment rate to 4.375% [3] - Despite the Fed's pause on rate cuts, the short-term financing market remains loose, with repo rates normalizing below the interest on reserve balances (IORB), indicating an excess of cash in the system [4] - Morgan Stanley has revised its outlook on the foreign exchange market, now projecting a stronger U.S. economy with an upward adjustment of GDP growth to 2.4% for 2026, while delaying the anticipated rate cuts [5] Group 3 - In the mortgage-backed securities (MBS) sector, the announcement of a $200 billion purchase plan by government-sponsored enterprises (GSEs) has led to a significant narrowing of MBS spreads, prompting a neutral stance from Morgan Stanley [8] - The FOMC statement is expected to upgrade the assessment of economic growth from "moderate" to "robust" and remove references to increased risks in the labor market, reflecting a more positive outlook [9] - The Federal Reserve is projected to maintain a monthly purchase of $40 billion in Treasury bills to manage reserve levels, with expectations that the SOMA account will exceed $600 billion by the end of 2026 [9]

Market Review - Silver prices reached a high of $61.94 per ounce and a low of $60.08 per ounce on Wednesday, closing at $61.82 per ounce. On Thursday, it opened at $61.80 per ounce, with a current high of $62.88 and a low of $61.67, trading around $61.75 per ounce [1]. Fundamental Analysis - **Federal Reserve's Position**: Federal Reserve Chairman Jerome Powell stated that current interest rates are adequate for various economic scenarios, indicating that a rate hike is "extremely unlikely" in the near term. The market interpreted this as a "dovish pause," suggesting a reduced probability of significant short-term easing, although the rate cut cycle is not entirely over [3]. - **Drivers of Silver's Rise**: Silver has seen a cumulative increase of 113% this year, significantly outperforming gold's 35% rise. This surge is attributed to: 1. Explosive industrial demand from sectors such as photovoltaics, AI data centers, and electric vehicles 2. Stagnation in global mining supply, with available mining years dropping below 20 3. The U.S. government officially designating silver as a "critical mineral," enhancing its strategic importance [3]. - **Geopolitical Risks**: Ongoing geopolitical uncertainties, particularly regarding the Ukraine crisis, continue to provide potential support for precious metals. Russian Foreign Minister Lavrov emphasized the need to address the root causes of the crisis, while U.S. President Trump criticized Ukrainian President Zelensky, calling for realistic approaches to end the war [4]. - **Federal Reserve Dot Plot**: The Fed's dot plot indicates varied opinions among officials regarding rate cuts by 2026, with projections ranging from no cuts to a cumulative reduction of up to 150 basis points [5].

Fundamental Analysis - Gold prices are currently trading around $4213, having experienced a slight increase on December 10, reaching a high of $4238.59, marking a 0.5% daily gain [1] - Silver has shown remarkable performance, breaking the $61 mark and reaching a new record high of $61.92, with a year-to-date increase of 113% [1] Federal Reserve Actions - The Federal Open Market Committee (FOMC) announced a 25 basis point reduction in the federal funds rate target range to 3.50%–3.75%, aligning with market expectations [4] - Following the announcement, the U.S. dollar index fell to a low of 98.59, the lowest in over a month, closing at 98.65, reflecting a 0.6% drop, the largest single-day decline in three months [4] - The 10-year U.S. Treasury yield also decreased by 0.88 percentage points to 4.192%, marking the largest single-day drop in over a month [4] Economic Projections - The latest economic projections indicate that the median federal funds rate for 2025 remains at 3.00%, consistent with previous forecasts, while only one 25 basis point cut is anticipated for 2026 [5] - Some committee members have raised their 2026 rate forecasts, with three members suggesting potential future rate hikes, indicating a significant divergence in views within the Fed regarding future monetary policy [5] Market Interpretation - Fed Chair Jerome Powell stated that the current interest rate levels are sufficient for various economic scenarios, and further rate hikes are "extremely unlikely," suggesting a pause in the tightening cycle [6] - The market interpreted the Fed's recent statements as a signal of a potential pause in rate cuts, while the longer-term outlook remains supported by accommodative policies and geopolitical uncertainties [6] Technical Analysis - Gold prices recorded a bullish close, indicating buying support, but have not yet broken through the short-term trading range of $4150–$4250 [7] - Traders are advised to monitor the support level around $4190 for potential short-term buying opportunities [9]

Core Viewpoint - The Federal Reserve faces a critical decision point as it approaches the December meeting, balancing between a weakening labor market and persistent inflation nearing 3% [2] Group 1: Federal Reserve's Dilemma - Fed Chair Powell is caught between two factions: the "preemptive" camp advocating for a rate cut and the "cautious" camp insisting on no further cuts [2] - Market expectations for a rate cut have surged from 40% to 80%, putting Powell in a precarious position where any decision could lead to a split within the FOMC [2] - Powell is weighing two options: a "hawkish cut" of 25 basis points in December with a commitment to future restraint, or a "dovish pause" delaying decisions until January [2][3] Group 2: Economic Indicators - Economic data suggests a "stagflation" scenario, with a three-month average job growth falling below 100,000 without significant layoffs, and core inflation remaining steady at 0.3% month-on-month [3] - Concerns arise from the potential for prolonged economic stagnation if rates are cut too slowly or the risk of reigniting inflation if cut too quickly [4] Group 3: Leadership Pressure - The December vote represents not only a decision on economic direction but also a test of Powell's leadership, as he must navigate the delicate balance of opinions within the Fed [4] - Experts indicate that the outcome of the December 19 meeting will be crucial, with global risk assets already reacting to the uncertainty [4]