Key Takeaways:
- 💵 The dollar gained ground after the Federal Reserve cut interest rates by 50 basis points.
- 📉 Initially, the dollar traded lower after the Fed announcement before paring those losses.
- 🛑 Fed policymakers expect more interest rate cuts through 2026 to bring rates down to a range of 2.75%-3.00%.
- 📈 Currency bid prices fluctuated following the Fed’s rate move.
- 🇬🇧 The British pound and Chinese yuan saw positive movements against the dollar.
- 📉 Initially, the dollar traded lower following the announcement but recovered after Chair Jerome Powell’s press conference.
- 📈 The Fed sees additional rate cuts this year and in the following years, aiming for the Fed’s benchmark rate to end in a 2.75%-3.00% range.
- 📱 Futures on the fed funds rate indicate about 70 basis points of more rate cuts this year.
- 📊 The U.S. Treasury yield curve steepened following the Fed’s cut, reaching its steepest level since July 2022.
- 💷 Sterling was the best performing G10 currency of the year and rose 0.28%.
- 🔄 The Fed’s goal is to provide support to the U.S. economy and avoid a potential slowdown.
- 💹 Dollar edged higher after Federal Reserve cut interest rates by 0.5%
- 📉 Dollar index DXY was up 0.05% on the day at 100.970
- 📈 Futures on the fed funds rate have priced in about 70 basis points of more rate cuts this year
- 💱 Sterling (GBPUSD) rose 0.28%
- ⏰ Currency bid prices at September 18 08:15 p.m. GMT
- 💱 Federal Reserve lowered its benchmark fed funds rate by 50 basis points to 4.75%-5%
- 📝 Fed projects median benchmark rates to come down to 4.4% by year-end
- 📈 Bitcoin price briefly hit $61,000 after the FOMC decision
- 📈 Cryptocurrency-related stocks surged after the rate cut
- 🎙️ Chairman Jerome Powell expected to hold a post-meeting press conference
Federal Reserve Announces Rate Cut and Its Impact on Markets
The recent decision by the Federal Reserve to cut interest rates by 50 basis points has had significant implications for various financial markets. Here are the key takeaways from the Fed’s announcement and how they have influenced market dynamics:
Dollar Strengthens Initially:
- The dollar initially gained ground following the rate cut, showcasing strength in the currency markets.
- Despite some initial trading lower post-announcement, the dollar eventually rebounded, buoyed by Chair Jerome Powell’s press conference remarks.
Fed’s Projections and Market Response:
- Federal Reserve policymakers anticipate further interest rate cuts in the coming years, aiming to bring rates down to a range of 2.75%-3.00% by 2026.
- This forward guidance has led to fluctuations in currency bid prices and futures on the fed funds rate, with markets pricing in approximately 70 basis points of more rate cuts this year.
Impact on Other Currencies:
- The British pound and Chinese yuan experienced positive movements against the dollar, with sterling being one of the best performing G10 currencies of the year.
Market Reactions:
- The U.S. Treasury yield curve steepened post-rate cut, reaching its highest level since July 2022.
- Cryptocurrency-related stocks surged, and the price of Bitcoin briefly hit $61,000 in response to the Fed’s decision.
Future Expectations:
- The Fed’s overarching goal with the rate cut is to provide support to the U.S. economy and prevent a potential slowdown, as reflected in its median benchmark rate projections for the year.