Fed Chair Jerome Powell explicitly pushed back against a 50bp rate cut by year-end, and Israel started a ground offensive in Lebanon. In other conditions, the US Dollar (USD) would have rallied on such a combination of events, but sensitivity to Fedspeak and Middle East turmoil has been reduced, ING’s FX strategist Francesco Pesole notes.
Geopolitics-FX link is also rather weak at the moment
“On the Fed side, the 50bp reduction in September means that market pricing is more structurally dovish-leaning, perhaps also on the premises that the Fed wouldn’t want to underdeliver on easing should a 50bp move be priced in by the FOMC date. On Monday, Powell said the base case is two 25bp moves by year-end, which is unusually specific guidance that signals his discontent with market dovish pricing.”
“The geopolitics-FX link is also rather weak at the moment. Israel’s ground raids in Lebanese territory were a highly-anticipated risk by US authorities, and the escalation was somewhat expected. The lack of substantial repercussions on commodities, with oil prices staying weak, means that FX markets are also not responding to the latest developments. There are upside risks for the dollar here too.”
“On the US data side, we’ll see the August JOLTS job openings print today, which is expected at an unchanged 7673k after a surprise drop last month. Markets may be more sensitive to those job opening numbers than the ISM Manufacturing index, which is also expected to have stabilised around 47.5.”
(This story was corrected on October 1 at 08:57 GMT to say, in the title, that Powell pushes back against 50bp cut, not hike.)
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
GBP/USD holds near 1.3450 after UK CPI data
GBP/USD clings to small recovery gains near 1.3450 in the European session on Wednesday following Tuesday's sharp decline. The data from the UK showed that the annual CPI inflation edged lower to 3.4%, as expected. Later in the day, the Fed will announce monetary policy decisions.
EUR/USD holds positive ground near 1.1500 ahead of Fed rate decision
The EUR/USD pair attracts some buyers to around 1.1500 during the Asian trading hours on Wednesday. A slew of downbeat US economic data weigh on the Greenback. However, escalating Israel-Iran tensions might cap the upside for the major pair. The US Federal Reserve rate decision will be closely watched later on Wednesday.
Gold price extends the range play as traders keenly await Fed rate decision
Gold price reverses an Asian session dip and refreshes daily high in the last hour, though it struggles to capitalize on the move beyond the $3,400 mark. Rising geopolitical tensions in the Middle East, along with persistent trade-related uncertainties, continue to weigh on investors' sentiment and act as a tailwind for the metal.
Bitcoin, Ethereum and Ripple dips as US involvement in Israel-Iran conflict looms
Bitcoin, Ethereum and Ripple prices hovered around key levels on Wednesday after falling the previous day. The crypto market turned risk-averse amid growing concerns that the United States could intervene in the escalating conflict between Israel and Iran.
Chinese data suggests economy on track to hit 2025 growth target
China's May data was mixed with strong retail sales, but soft readings on fixed-asset investment and property price. Overall, though, data suggests that China remains on track to achieve its growth target in the first half of 2025.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.