Fed Preview: Dovish cut in September – Nordea


Anders Svendsen, analyst at Nordea Markets, suggests that the US activity indicators have disappointed, the trade war has escalated and a bigger part of the yield curve has been inverted since the July FOMC meeting and in other words, the Fed has plenty of reasons to turn more dovish.

Key Quotes

“We expect the Fed to cut its key policy rates by 25 bp at next week’s FOMC meeting – which would be the second consecutive rate cut in the current easing cycle – taking the Fed Funds corridor to 1.75-2.00% with an Interest On Excess Reserves (IOER) rate of 1.85%. Two hawks will likely dissent...again.”

“We expect the Fed to signal its intention to “act as appropriate to sustain the expansion”, which we take to mean that more rate cuts are likely if and only if the outlook worsens. The outlook has worsened, though – perhaps enough for the new dot plot to show a third rate cut later this year.”

“A rate cut is more or less priced in by the market so the words of Mr Powell and the outcome of the dot plot chart will likely be what determine market reactions. We expect a softer stance from the Fed, which should satisfy the fairly dovish market expectations going forward. In our view, it would be a massive hawkish surprise if the Fed were to leave rates unchanged.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD hovers around the 34-months lows amid growth concerns

EUR/USD is trading below 1.0850, just above the lowest since April 2017. Concerns about eurozone growth are weighing on the common currency. Markets are watching coronavirus developments. 

EUR/USD News

GBP/USD shrugs off Brexit concerns and holds its ground

GBP/USD is trading around 1.3050, little-changed. The French foreign minister warned of acrimonious Brexit talks as the UK's chief negotiator is laying down a tough stance. 

GBP/USD News

Forex Today: Coronavirus fears persist, Japanese economy squeezes, cryptos climb down

China has announced it will stimulate the economy in the face of the coronavirus outbreak, including lower corporate taxes and increased spending. While most factories have returned to work, Beijing has tightened restrictions on movements in the Hubei province.

Read more

Gold slips below $1580 level amid improving risk sentiment

Gold retreats from two-week tops amid receding demand for traditional safe-haven assets. The precious metal failed to capitalize on its recent positive move to near two-week tops and edged lower during the early European session on Monday amid fading safe-haven demand.

Gold News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex MAJORS

Cryptocurrencies

Signatures