The Federal Funds rate is probably the most-watched and popular interest rate in the United States as it affects monetary and financial conditions. This time around the Federal Reserve faces a dilemma, will they hit pause in what Fed chair Powell sees as a “mid-cycle adjustment” or will we see a third consecutive rate cut?
Some analysts say another interest rate cut should be enough to stimulate the economy, achieve the Fed’s objectives and hit pause after that for the rest of the year. On the other hand, if the FOMC signals a pause in easing now, we might see a negative market reaction, which it doesn’t want.
If the CME Group's Fed Watch Tool (below) is anything to go by, then there is a 97.3% chance that we might see a further easing of interest rates by 25 basis points later tonight. This will bring the Federal Funds target rate to between 150 - 175 basis points.
The Federal Open Market Committee (FOMC) statement communicates its monetary policy to investors and market participants. It also contains the outcome on the vote on interest rates and will be released around 20:00 SAST.
At the FOMC press conference this Wednesday the focus will turn to the statements that come from this sitting and comments by the Fed chair to see if the outlook has changed.
The Dollar Index (DXY) might head back to the 97.12 support level if the interest rates are indeed cut later today if not already priced in. A move lower on the greenback might just spark a revival in equity indices and push them higher for the last leg of the year.
The S&P 500 came close to our target price of 3050 yesterday but gave up gains later in the session and now firmly above the 3026-support level. If we see a break from this level, then the target lower would be the major 3000 psychological level once again.
Source - Bloomberg
The Nasdaq is finding support at the 8035, a previous resistance level which will be watched closely as we might see lower levels targeted later today. If the support level holds them we might see the price action continue to make new all time highs.
Source - Bloomberg
The Wall Street 30 Index is holding above the 27000 level and awaiting on direction from the Fed with the 50-day SMA moving in as support. The Boeing hearings in congress yesterday put a damper on the Dow’s price action which is still lagging the rest of the major U.S Indices.
Source - Bloomberg
A decrease in U.S interest rates will possibly see the Dollar (USD) weaken, so look at the following:
South African instruments:
Major Forex pairs:
Major Indices:
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