For some major events that are clearly going to happen in the future, the capital market often predicts their impact and responds in advance based on a series of information.
When the news is actually announced, the changes in the market are actually revisions to expectations. Not a reaction to the message itself.
For example, after the Fed’s decision to raise interest rates in March this year was announced, the market rose instead, because before the announcement of the decision, the market had already anticipated a rate hike this year and fell ahead of schedule, and because before that, the Fed had been It is the state of cutting interest rates and releasing water. The first interest rate hike also means that the good days of monetary easing are over, so the market is too pessimistic and the short-term decline is too large. After the conclusion was announced, it added 25 basis points, which is far smaller than the previous market. As expected, the price of the currency rose after the negative landing.
Similarly, after the CPI exploded this month, the market still rose, also because, with the support of other data, the market expects that the CPI has probably begun to fall, and the currency price is at a low level (this can also be expected, if August 10 If the daily CPI data falls slightly, then the market will most likely not continue to rise. On the contrary, if the CPI still explodes and the currency price has rebounded in advance, it is not in line with expectations, and the market will fall directly.
Similarly, if it is good news, and it is not as expected when it is announced, it is often a trap. Unless the announced results exceed expectations, the market will indeed continue to move in the direction of the news, but the internal logic is still a revision of expectations.
Of course, the above principles do not apply to emergencies, such as the A-share rooster crowing in the middle of the night, which is a major event without prior warning, which is the direct response of the market to the news.
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Comment by Hans
April 24, 2024
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