The Federal Reserve's $40 billion "invisible easing" has started! The dollar is weakening, risk assets are rising, is a new round of market movement about to come?
The Federal Reserve has restarted its monthly purchase of $40 billion in short-term bonds. Although officials emphasize that it is a "technical operation", the market does not believe it at all—because this action is essentially a net liquidity injection. The tight reserves and soaring repo rates have forced the Federal Reserve to intervene, and this type of "non-QE QE" often serves as the first sign before a market reversal.
Three macro signals are particularly critical:
The Federal Reserve's goal is to stabilize short-term rates at 3.5%–3.75%, indicating that the degree of liquidity tightness is beyond expectations; rising repo rates mean institutions are short on cash, and the Fed's bond-buying operations equal a release of pressure; although it's not called QE, the effects are almost equivalent to "mild easing"—historically, similar operations have pushed asset prices higher.
The market's reaction also validates this point:
The dollar index (DXY) has broken down, with technical indicators RSI and MACD showing weakness across the board, and the short-term trend for the dollar is clearly bearish; at the same time, U.S. stocks are recovering, gold is strengthening, and the sentiment in the cryptocurrency market is synchronously improving, indicating a clear rise in risk appetite. Once liquidity expectations turn around, risk assets will respond immediately.
As a result, the strategic direction has become clear:
The dollar maintains a downward range, and non-dollar currencies will benefit in phases; risk assets can be positioned long, but the pace must be steady, and one should not blindly chase highs, as the Federal Reserve may adjust its wording at any time to "hit the brakes". The market direction is upward, but the storyline remains complicated.
