Is a big Fed rate cut coming?
The U.S. Federal Reserve completes its latest policy meeting on Wednesday and is expected to begin cutting interest rates from very close to the 5.25%-5.5% range it has held for the past 14 months.
A rate cut has been widely indicated by Fed officials as the U.S. consumer price index declined last month to its lowest level not seen since February 2021. However, there is still some degree of uncertainty in the air regarding the size of the cut, and the U.S. currency fell sharply on Friday just after media reports served to once again fuel speculation related to the Fed potentially making a sharp interest rate cut by nearly 50 basis points.
According to CME FedWatch, Fed funds futures indicate a 59% chance of a 50 basis point cut during the September meeting.
U.S. Treasury yields have retreated again Monday during the anticipation of a cut, with benchmark 10-year yields down 30 basis points in about two weeks.
The Fed’s rate decision will be followed by a post-meeting press conference, where Fed Chairman Jerome Powell could give signals on future rate estimates and the economy at home.
Both the euro and the pound soar
In Europe, EUR/USD rose 0.4% to 1.115, with the single currency in demand despite the European Central Bank cutting interest rates by about 25 points for the second time the previous week.
European Central Bank President Christine Lagarde downgraded estimates of a further cut in funding costs next week, citing that the rate path was not predetermined and that the ECB would decide rates on a meeting-by-meeting basis, without making prior commitments.
ECB Chief Economist Philip Lane and Vice President Luis de Guindos will speak at separate events on Monday.
GBP/USD rose 0.4% to 1.3173 ahead of the latest ECB policy meeting scheduled for Thursday.
The UK central bank is expected to keep its policy rate at 5%, after starting its easing with a 25 basis point reduction during the August meeting.
Yen soars ahead of Bank of Japan meeting
The yen rose 0.8% against the dollar to 139.76, hitting more than eight-month highs, ahead of this week’s Bank of Japan meeting.
The BOJ’s interest rate decision next Friday is expected to hold its short-term target at 0.25%.
However, BOJ board members have signaled their desire to raise rates, possibly leading to the cancellation of more yen terminated carry trades.
USD/CNY traded flat at 7.0930, with regional trading volume moderated by public holidays in China, Japan and South Korea.Dollar slips before Fed meeting; euro and pound advance
Is a big Fed rate cut coming?
The U.S. Federal Reserve completes its latest policy meeting on Wednesday and is expected to begin cutting interest rates from very close to the 5.25%-5.5% range it has held for the past 14 months.
A rate cut has been widely indicated by Fed officials as the U.S. consumer price index declined last month to its lowest level not seen since February 2021. However, there is still some degree of uncertainty in the air regarding the size of the cut, and the U.S. currency fell sharply on Friday just after media reports served to once again fuel speculation related to the Fed potentially making a sharp interest rate cut by nearly 50 basis points.
According to CME FedWatch, Fed funds futures indicate a 59% chance of a 50 basis point cut during the September meeting.
U.S. Treasury yields have retreated again Monday during the anticipation of a cut, with benchmark 10-year yields down 30 basis points in about two weeks.
The Fed’s rate decision will be followed by a post-meeting press conference, where Fed Chairman Jerome Powell could give signals on future rate estimates and the economy at home.
Both the euro and the pound soar
In Europe, EUR/USD rose 0.4% to 1.115, with the single currency in demand despite the European Central Bank cutting interest rates by about 25 points for the second time the previous week.
European Central Bank President Christine Lagarde downgraded estimates of a further cut in funding costs next week, citing that the rate path was not predetermined and that the ECB would decide rates on a meeting-by-meeting basis, without making prior commitments.
ECB Chief Economist Philip Lane and Vice President Luis de Guindos will speak at separate events on Monday.
GBP/USD rose 0.4% to 1.3173 ahead of the latest ECB policy meeting scheduled for Thursday.
The UK central bank is expected to keep its policy rate at 5%, after starting its easing with a 25 basis point reduction during the August meeting.
Yen soars ahead of Bank of Japan meeting
The yen rose 0.8% against the dollar to 139.76, hitting more than eight-month highs, ahead of this week’s Bank of Japan meeting.
The BOJ’s interest rate decision next Friday is expected to hold its short-term target at 0.25%.
However, BOJ board members have signaled their desire to raise rates, possibly leading to the cancellation of more yen terminated carry trades.
USD/CNY traded flat at 7.0930, with regional trading volume moderated by public holidays in China, Japan and South Korea.Publication date:
2024-09-16 13:10:31 (GMT)
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