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So, the Fed moved to cut interest rates by 25 bps yesterday. Let’s summarise the key parts of the decision and Fed chair Powell’s press conference.

• The decision only saw Trump nominee Miran as the sole dissenter, voting for a 50 bps rate cut
• Bowman and Waller did not join the more dovish camp, which was a possibility
• Fed chair Powell reaffirmed that “there wasn’t widespread support at all for a 50 bps rate cut today”
• Latest dot plot projection shows 10 members expecting at least two more 25 bps rate cuts this year
• Meanwhile, 9 members are expecting just one more 25 bps rate cut by year-end
• The balance is skewed by Miran, who has his 2025 dot at 2.875% – in wanting a 50 bps rate cut at every meeting
• 2026 dot plot median seen at 3.4%, 2027 dot plot median seen at 3.1% – both meeting expectations
• Fed chair Powell labels the decision as a “risk management” cut
• Adds that labour market risks were the focus of the decision, as inflation risks are “a little bit less” now
• But he also goes on to maintain that the Fed is on a data-dependent path, taking things meeting by meeting

So, what can we make of all of that by putting everything together?

In short, the Fed may yet still be on track to cut rates again in October and one more time in December. Powell said he did not give his “blessing” to the current market pricing but that doesn’t mean they aren’t going to take that into consideration. Market players are focusing on softer labour market conditions and that is what the Fed acknowledged yesterday.

That puts heavy focus on the next non-farm payrolls release on 3 October. If the trend continues, the Fed should be poised to cut rates again next month. But if there is some evidence of a rebound in jobs, that might yet take things off the table.

Nothing is a given but the onus is now on US data to prove markets wrong. As things stand, traders are still pricing in ~44 bps of rate cuts by year-end. The balance is skewed closer towards two 25 bps rate cuts than one more 25 bps rate cut currently.

The dot plots weren’t as dovish to convince of a more aggressive easing cycle, that despite Miran’s skew. Meanwhile, Bowman and Waller not hopping on the 50 bps bandwagon this week means that policymakers are still heavily contemplating existing economic conditions before really taking a bolder step.

The next FOMC meeting decision will fall on 29 October, so we’ll have another month with a full slate of US economic data to digest before getting to that.

As far as yesterday’s decision goes, there is a little bit of something for everyone. And that means at the end of the day, there might not be all much to work with given what markets have priced in before the decision.

The dollar is firmer for now but nothing to suggest a material turnaround in sentiment, besides a near-term pullback to the more dovish pricing in the run up to the Fed. Meanwhile, equities are still seeing dip buyers step in with conviction as the Fed communique mostly just reaffirms what is already priced in.

As mentioned above, it’s more so of a case now that US data has to prove market pricing wrong. Otherwise, there’s not much of a need to overreach and/or overinterpret the FOMC meeting decision this week.

This article was written by Justin Low at investinglive.com.

European stocks are expected to open higher on Thursday as traders digest the U.S. Federal Reserve’s rate cut on Wednesday.

There is arguably just one to take note of on the day, as highlighted in bold below.

There’s been a mixed reaction to the Fed so far as broader markets are still digesting the developments from yesterday. The dollar is firmer but stocks look to be bouncing back, though it doesn’t take much to convince dip buyers these days. But amid a slight bounce back in the dollar, we are seeing large expiries in EUR/USD come into play.

The one today will be at the 1.1800 mark and could very well play a part in locking price action and acting more as a magnet. That as traders continue to duke it out in trying to figure out the balance in which broader markets are leaning after the Fed.

That said, the Fed decision is one that seems to have something for everyone. So, it might be tough to tip the scales too heavily on the hawkish or dovish side with what’s priced in by markets at this stage.

For more information on how to use this data, you may refer to this post here.

Head on over to investingLive (formerly ForexLive) to get in on the know!

This article was written by Justin Low at investinglive.com.

Australia’s labor market weakened in August as total employment fell by -5.4k, against expectations for a 21.2k gain. The headline masked stark contrasts, with full-time jobs dropping by -40.9k while part-time roles increased by 35.5k. Hours worked fell -0.4% mom, underscoring signs of cooling demand for labor. The unemployment rate held steady at 4.2% in […]

The post Australia jobs disappoint in August as employment falls -5.4k appeared first on Action Forex.

Australia’s labor market weakened in August as total employment fell by -5.4k, against expectations for a 21.2k gain. The headline masked stark contrasts, with full-time jobs dropping by -40.9k while part-time roles increased by 35.5k. Hours worked fell -0.4% mom, underscoring signs of cooling demand for labor. The unemployment rate held steady at 4.2% in […]

The post Australia jobs disappoint in August as employment falls -5.4k appeared first on Action Forex.

New Zealand’s economy contracted far more than expected in Q2, with GDP falling -0.9% qoq against consensus forecasts of -0.3% qoq. The release confirmed a deeper downturn, with economic activity now having declined in three of the last five quarters. The breadth of weakness points to rising headwinds that could force the RBNZ into a […]

The post NZ economy shrinks -0.9%, Kiwi dives on bets of 50bps RBNZ cut next appeared first on Action Forex.

New Zealand’s economy contracted far more than expected in Q2, with GDP falling -0.9% qoq against consensus forecasts of -0.3% qoq. The release confirmed a deeper downturn, with economic activity now having declined in three of the last five quarters. The breadth of weakness points to rising headwinds that could force the RBNZ into a […]

The post NZ economy shrinks -0.9%, Kiwi dives on bets of 50bps RBNZ cut next appeared first on Action Forex.

The FOMC’s rate cut overnight initially pressured Dollar and Treasury yields lower, while Gold surged to new records. But sentiment quickly reversed as markets interpreted the decision and projections as less dovish than hoped. The Dollar rebounded, 10-year yields recovered after slipping below 4%, and Gold retreated from its peak. The turning point came from […]

The post Fed less dovish than expected, Gold risks deeper pullback appeared first on Action Forex.

It’s no surprise that tech shares are leading the charge, with Nasdaq futures marked up by 0.7% currently. Wall Street saw a mixed showing yesterday as tech shares fell while the Dow closed higher by 0.6%. But if you look at the intraday moves, things could’ve gotten a whole lot worse for equities and risk sentiment.

When Fed chair Powell did not offer too much of a dovish take, there was some heavy selling. However, dip buyers quickly stepped in as they stuck to their guns in expecting the Fed to continue to deliver rate cuts in October and December.

The dot plots remain a tough one to decipher. That besides the one outlier, in which we know is Miran is wanting 50 bps rate cuts at every meeting by year-end. But at the balance, it shows 10 policymakers expecting two or more rate cuts with 9 policymakers seeing just the one more.

The divide is going to make it tough to pick a side for now, with Fed chair Powell playing it safe in calling this a “risk management” cut while reaffirming a more data-dependent approach.

But if there’s one lesson to be heeded since the post-Covid era, it is that equities will always find a way to spin the narrative to their liking. It feels now that the onus is on US data to prove market players wrong, rather than having to account for the risk of stronger inflation and labour market data.

The mantra these days seems to be buy first, worry later. And this time might not be so different.

This article was written by Justin Low at investinglive.com.