Investment Analyst Dario Giordano: Intensifying Divergence in UK and Japanese Monetary Policy, Investors Should Closely Monitor Changes in Central Bank Pace

This week, global financial markets will enter a period of intensive policy announcements, with multiple central banks holding interest rate meetings, drawing widespread attention. The monetary policy paths of the Federal Reserve, Bank of England, and Bank of Japan will directly influence the direction of global liquidity changes. Meanwhile, tensions in the Middle East have flared up again, with the Israeli airstrikes on the Iran nuclear facilities causing a sharp rise in crude oil prices, exerting new upward pressure on global inflation expectations. Investment Analyst Dario Giordano points out that, as high inflation has not yet fully eased, the response strategies of major central banks may diverge, which will intensify volatility in global capital markets and bring higher uncertainty and potential opportunities for cross-market asset allocation.

Federal Reserve Holds Steady, Maintains Cautious Tone, Market Focuses on Future Rate Cut Path

The market generally expects the Federal Reserve to keep the federal funds rate unchanged at the monetary policy meeting this week. Although the latest CPI data shows some easing in inflation and there is some political pressure for monetary policy easing, overall price levels remain significantly above the 2% inflation target. At the same time, core inflation remains sticky, and a persistently tight labor market means the Fed is still inclined to adopt a wait-and-see stance in the short term.

From a forward guidance perspective, although it is now consensus that there will be no rate cut in June, the probability of initiating rate cuts in September or October is rising. According to market pricing data, investors generally expect a cumulative rate cut of 50 basis points in the second half of 2025. As a result, U.S. dollar liquidity is expected to gradually loosen, while U.S. Treasury yields may remain in a high-level oscillation range. Meanwhile, the valuation pressure on growth assets and tech stocks is likely to ease as a result.

Investment Analyst Dario Giordano emphasizes that in the coming months, fluctuations in inflation and employment data will have a direct impact on the market, becoming key variables for judging short-term trends. For investors, rate-sensitive sectors such as technology and real estate hold certain allocation value in the short term, but it is necessary to strengthen risk management and position control in a high-volatility environment.

Intensifying Divergence in UK and Japanese Monetary Policy, Exchange Rate Volatility Becomes an Asset Allocation Challenge

Policy expectations for the Bank of England and the Bank of Japan have diverged significantly, reflecting structural differences faced by major global economies. While the Bank of England is expected to keep rates unchanged this week, the market has already priced in expectations for rate cuts in August and November. Previously, the bank lowered its policy rate to 4.25% in May, demonstrating heightened alertness to economic weakness and easing inflation. Investment Analyst Dario Giordano points out that the current gradual easing path by the Bank of England is more out of consideration for financial market stability than for any significant improvement in macroeconomic momentum.

In contrast, the policy stance by the Bank of Japan appears even more cautious. Although it is expected to maintain ultra-loose rates this week, the Japanese economic predicament is more complex. Weak external demand, declining export orders, and imported inflation triggered by the continued depreciation of the yen are constraining its policy space. Investment Analyst Dario Giordano notes that the Bank of Japan response pace is relatively lagging, and if delays persist, the market may begin to doubt its policy foresight and communication transparency.

From a cross-asset allocation perspective, monetary policy divergence will impact the performance of stocks, bonds, and commodities through the exchange rate channel. The pound and yen face greater directional volatility risk in the short term. Especially with the continued weakness of yen, the Bank of Japan may be forced to adjust its policy path earlier than expected. Such changes could affect other Asian markets and some commodity assets, so investors should prepare defensive strategies in global allocation in advance.

Geopolitical Tensions and Inflationary Pressure Amplify Oil Price Volatility and Market Uncertainty

Rising tensions in the Middle East have once again become a major external factor for short-term volatility in financial markets. The Israeli military action against Iranian nuclear facilities has caused oil prices to surge in the short term, raising market risk aversion and putting pressure on risk assets to correct. As a key driver of inflation expectations, crude oil price trends are indirectly constraining the policy room of central banks. Investment Analyst Dario Giordano points out that if geopolitical conflict continues to escalate, energy import costs will rise, making it harder for central banks to implement easing policies in a high-inflation environment.

Against this backdrop, the pricing of risk assets is increasingly dependent on the interaction between sentiment and policy signals. Geopolitical turmoil tends to trigger a rise in risk aversion, boosting traditional safe-haven assets such as gold and U.S. Treasuries, while putting pressure on capital outflows from emerging markets. Investment Analyst Dario Giordano suggests that investors should focus on the linkage trends between the VIX index and WTI and Brent crude oil prices, as these indicators can serve as important early warning signals for changes in risk.