Powell confirms a September Fed rate cut | Forex Factory

  • Powell confirms a September Fed rate cut

    From think.ing.com

    There are some strong comments coming through from Chair Powell at his Jackson Hole speech. We get the usual bits and pieces about inflation looking better and the focus is now much more on jobs, but he is as categorical as he can be with the statement "The time has come for policy to adjust. The direction of travel is clear". This follows on from the minutes to the July FOMC meeting, released on Wednesday, that said “the vast majority [of FOMC members] observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting”. There is no discussion ... (full story)

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Faucon
Aug 24, 2024 8:48am
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he did not confirm september he said :The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” if the next employment data is good there will be no rate cut before the ned of the year
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ffghost
Aug 24, 2024 9:41am
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Quoting Faucon
he did not confirm september he said :The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” if the next employment data is good there will be no rate cut before the ned of the year
^ This.....or at least 1/2 of this. No FED chair in their right mind would EVER commit to a rate cut at the next meeting. That said, their message has been "loud and clear": 'the time is right to start reducing the rate...but we will keep watching data".

Regarding zero cuts this year, I just don't buy it. The message from the fed all along has been "we don't take one month of data out of context" (hot or cold). So, even a hot employment number between now and September wouldn't deride the position that their focus is "now on the labor market".

While the title of the article may be inaccurate in that a cut was never confirmed with absolute certainty, it is about as high a likelihood as you are able to get.

Here's a fun challenge: assume that you KNOW the cut is coming, it's size, and exactly when (September meeting). Now invest like it will happen. What direction do you take, with what instrument, and when? I say "fun" because there is a big chance you will be wrong. That's why I love the markets. Even if I gave you 100% confirmation of a 25bps cut at the September meeting, you STILL could not tell me how to make the most money off of it (excluding, of course, simply betting directly on the outcome of the meeting)

It should be an interesting few weeks as NVDA reports, US political posturing ramps up, and all the talking heads bounce back and forth between "recession", "the fed is behind", and "the economy is still too strong" depending on that morning's data dump.
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ffghost
Aug 25, 2024 9:37am
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Quoting ww3361
{quote} Challenge accepted https://www.cmegroup.com/markets/int...ractSpecs.html https://www.cmegroup.com/markets/int...atch-tool.html You’re welcome.
Yep. We've been aware of the fed watch tool pricing in 100% of a September cut (ratio on the size fluctuates) since late June/early July. BUT, my point is that even though you "know" it is coming (several common posters on here would say 'no chance at a cut in 2024', to which I sigh a little ever time), you DONT know how the market will react.

To Vancarbon's point, in the past, rate cuts have been seen as the FED declaring "something is wrong". Forget that the media/governemrnt/world seems to be screaming at them to cut....nope....they are always cutting because thing s are broken (which I don't buy). So, there is a school of thought that exists saying: when they cut, the markets will fall dramatically.

There is another school of thought that says: "the FED is actually holding to its game plan here and really doing a good job of SLOWLY bringing down the targeted economic segments, so cuts this time are simply a way to ease back into normalcy WITHOUT causing massive market panic and/or a recession".

Time will tell which occurs. Our job as traders is to make the most money with the information we have. That can be macro, price action, etc.

It has simply become increasingly apparent to me over the past couple of decades that tectonic movement in the markets doesn't seem to happen when/how you would expect. Since no one can predict what typically DOES shift markets by 10+% in 3 days, we just need to make as much money as we can to float those unforeseen and rapid shifts.

If one truly believes the end of this secular bull market is upon us, then now is probably as good a time as any to lighten up substantially in equities. Otherwise, fighting this trend is going to feel futile.....but when that reversal does ocurr, does it happen 5/10/15% up from these levels??)

Iran/Israel could affect markets at any time. But if not that, keep an eye on NVDA earnings Wednesday for a shift/confirmation of market direction. If NVDA drops 5-10% like some other tech giants did even after they BEAT earnings, whoa boy. The only saving grace here is a company like Walmart (a consumer of AI functionality, not a provider....finally), stating how much AI helped them in productivity. If that trend is expected to continue, then the list of "look how bad things are" is irrelevant (in the short term anyway) and we go higher very quickly.
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ffghost
Aug 25, 2024 9:56am
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Quoting Vancarbon
Maybe the question should be “ Would you invest in the markets at this present juncture “ ? Ask yourself how long markets have anticipated this easing cycle ? Ask yourself why the Fed are abandoning their mandate of 2% ? Ask yourself if the employment figures are stating growth or contraction ahead? Ask yourself who is going to take up the global slack with China in the doldrums and worried about debt issuance. Ask yourself why the ECB is desperate to cut with Europe in contraction. Ask yourself about the geopolitical risks and implications...
You're starting to sound very bearish on equities, my friend! I hope you are not correct (just yet anyway) because my answer to your first question is 'yes' (well, in that I am still quite heavily invested). FOMO is a real thing, not only for the retail investor but pension funds, hedge funds that need to show profit, etc, etc. There is the concept of just following Buffett (it would have worked nicely over time, eh?) but I am long his company too, so perhaps I do a bit

The political ramifications of elected officials, and their policies globally, have so little "lasting" effect. It is all the media can talk about because they get paid by viewer numbers (via selling ads). Without both houses and the oval office being controlled by one party, very little change can even occur. How many campaign promises have ever transpired? 5%?

As for the 2%, I am sorry to say, that is not a mandate. It is only a target of inflation that has been used as a level offering high level of possibly to achieve the mandate. So you don't think I am making this up... "The Fed's modern statutory mandate, as described in the 1977 amendment to the Federal Reserve Act, is to promote maximum employment and stable prices." A shift away from expecting 2% to still be the hard and fast inflation target could be nothing more than realizing the world has changed in the past 50 years and the underlying fed target rate can as well without breaking the mandate.

As for the ECB and China, I will defer to others. Those are not areas in which I am well versed.

All of above, however, is one man's opinion formed after digestion of many other consenting and dissenting opinions. What makes markets is that someone has the exact opposite opinion as I do.

I DO, as of this post (things can change) plan to lighten up a little as the September FOMC meeting approaches though. My memory of 2022 with the fed saying "QE is easing" and the equity markets tanking brings back some pain that I would like to avoid if that type of pullback occurs again.

Best of luck to all this week!
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ffghost
Aug 25, 2024 12:30pm
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Quoting ww3361
{quote} Buy fed funds futures simple. You will profit as it’s not implying 100% right now. Simple. Few words. Ahhhh relaxing
Right.....but my "challenge" expressly said you couldn't just bet on the likelihood (fed futures) of the event transpiring

Quote: "....(excluding, of course, simply betting directly on the outcome of the meeting)"
""
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ffghost
Aug 25, 2024 8:17pm
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Quoting ww3361
{quote} So you're saying: Bet on Sep fed rate, but use an asset class or derivative with a low correlation to the fed rate factor?? Don't follow you. I think you were trying to say: You can't trade on sep fed rate reliably, unless you explicitly bet against a bookmaker. I'm saying: Trade fed futures at the CME.
I see where you are coming from (and agree that's how one plays the outcome directly). I was jesting about number releases in general.

I.e. you know what the FED will do.....now pick an asset class (equities, metals, some forex, bonds, etc) and make a trade based on knowing what the data release will be. Often, people like to say "if I had known then number would have been THAT, I would have been ultra long xyz instrument!" My contention is that, for most situations, even knowing exactly what the numbers will be doesn't guarantee a correct prediction as to how the markets will react.

So, here, we "know" the fed will cut rates in September. As the date approaches, it will become more and more clear that the cut will be 25bps (let's stick with that assumption). Now, what will your market of interest do after that announcement?

Obviously, how I said things was confusing. I am sorry about that.

Best wishes this week!
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pridolfx
Aug 24, 2024 12:55pm
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Quoting Expo33
{quote}He already confirmed rate cut Friday during market hours so no major gaps expected.
and strange why in friday eur/usd goes up than???on base that information ussual drop very much down
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ww3361
Aug 25, 2024 1:00am
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Quoting ffghost
..Here’s a challenge.
Challenge accepted

https://www.cmegroup.com/markets/int...ractSpecs.html

https://www.cmegroup.com/markets/int...atch-tool.html

You’re welcome.
Reply
ww3361
Aug 25, 2024 11:03am
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Quoting ffghost
{quote} You're starting to sound very bearish on equities, my friend! I hope you are not correct (just yet anyway) because my answer to your first question is 'yes' (well, in that I am still quite heavily invested). FOMO is a real thing, not only for the retail investor but pension funds, hedge funds that need to show profit, etc, etc. There is the concept of just following Buffett (it would have worked nicely over time, eh?) but I am long his company too, so perhaps I do a bit The political ramifications of elected officials, and their policies...
Buy fed funds futures simple. You will profit as it’s not implying 100% right now.

Simple. Few words. Ahhhh relaxing
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ww3361
Aug 25, 2024 5:12pm
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Quoting ffghost
{quote} Right.....but my "challenge" expressly said you couldn't just bet on the likelihood (fed futures) of the event transpiring Quote: "....(excluding, of course, simply betting directly on the outcome of the meeting)" ""
So you're saying: Bet on Sep fed rate, but use an asset class or derivative with a low correlation to the fed rate factor??

Don't follow you.

I think you were trying to say: You can't trade on sep fed rate reliably, unless you explicitly bet against a bookmaker.

I'm saying: Trade fed futures at the CME.
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Expo33
Aug 24, 2024 8:28am
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Quoting Logix3
Gap ------on Monday opening ?????
He already confirmed rate cut Friday during market hours so no major gaps expected.
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Logix3
Aug 24, 2024 6:29am
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Gap ------on Monday opening ?????
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Small-whale
Aug 24, 2024 5:46am
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nothing new. So, Gold down to 2050 by October
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FXWish
Aug 24, 2024 10:07am
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DXY already at 52 weeks low.....
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Trader#1F38
Aug 25, 2024 5:09pm
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Quoting ffghost
{quote} Right.....but my "challenge" expressly said you couldn't just bet on the likelihood (fed futures) of the event transpiring Quote: "....(excluding, of course, simply betting directly on the outcome of the meeting)" ""
Then, all you've defined is basis risk.
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Trader#D98E
Aug 24, 2024 6:54am
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No gap - Friday speech caused rally on Friday see bitcoin, aud, gbp and jpy vs. USD
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Trader#CAE9
Aug 24, 2024 7:34am
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everything shot up enough on Friday
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