HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
MultiBank Group information and reviews
MultiBank Group
84%

Dollar pauses rally ahead of Fed, BoE meets as well


7 November 2024 Written by Raffi Boyadjian XM Investment Analyst Raffi Boyadjian

Will the US election outcome impact Fed policy?

After hitting a four-month high on the heels of Donald Trump’s return to the White House, the dollar is pulling back today, as traders may have decided to lock some profits after the sharp rally and ahead of the Fed decision later today.

With Trump’s tax cut and tariff policies seen as refueling inflation, market participants believe that the Fed may need to proceed with slower rate cuts from here onwards. Although they are nearly certain that the Committee will slash rates by 25bps today, the probability of Fed officials stepping to the sidelines before Christmas is now resting at around 32%, while the likelihood for a January pause stands at around 53%.

So, a rate cut on its own today is unlikely to shake the markets much and traders may turn their attention to the statement and Powell’s press conference for clues on whether officials are indeed considering slowing the pace of future reductions. That said, Powell may prefer to keep his cards close to his chest for now and wait for clearer signals on what a Trump presidency could mean for the economy and inflation.

Thus, if Powell and his colleagues disappoint those expecting a pause around the turn of the year, the dollar may extend its current retreat as Treasury yields pull back. The opposite may be true if the Fed hints at a potential rate cut break.

BoE decision in the limelight as well

The Fed is not the only central bank on today’s agenda. Ahead of the Fed, the BoE will announce its own decision.

A few weeks after the September decision, BoE Governor Bailey said that they may need to be more active with rate cuts if the data continued to suggest progress in inflation, and indeed, the September numbers revealed that the headline CPI slipped to 1.7% y/y from 2.2%, while the core rate dropped to 3.2% y/y from 3.6%. This prompted market participants to nearly fully price in a quarter-point reduction at today’s meeting.

However, with the Office for Budget Responsibility forecasting that the measures announced in the Autumn Budget could push inflation higher, the BoE may be prompted to keep interest rates higher for longer. This added to speculation that the Bank may refrain from pushing the rate cut button in December, with the pause probability resting at nearly 70%.

Thus, like with the Fed, the spotlight is likely to fall on hints and signals regarding the BoE’s future course of action. Should policymakers revise up their inflation projections and/or signal that they would proceed more carefully, the pound may recover some more ground.

Wall Street marches to record highs on Trump victory

On Wall Street, all indices skyrocketed to fresh record highs, with the small-cap Russell 2000 gaining almost 6% and the Dow Jones up by more than 3.5% as investors kept cheering Donald Trump’s victory.

Lower tax cuts and deregulation in the Trump 2.0 era may be a positive development for Wall Street, but tariffs and slower Fed rate cuts are not. With that in mind, it seems that investors are currently focusing on the positive measure, but it may not take long before they start paying attention to tariffs and Fed policy.

Should the Fed appear a bit cautious on future rate cuts as soon as today, equity investors may decide to lock in some profits, thereby allowing a small pullback.

by XM.com

#source


RELATED

Positive sentiment lingers despite mixed newsflow

The markets continue to digest Trump’s victory and last Thursday's Fed dovish rate cut, with most market participants now speculating on the course of action of the new administration as the president-elect is assembling his cabinet.

11 Nov 2024

Dollar and stocks surge on Trump victory bets

The dollar skyrocketed during the Asian session today, and it appears to be headed for its biggest one-day gain since March 2020.

6 Nov 2024

Volatility returns with a vengeance ahead of key US events

The recent, relatively quiet, market sessions were interrupted yesterday, with a strong correction recorded in both equities and gold.

1 Nov 2024

Dollar maintains gains amidst fragile market conditions

Market participants are gradually preparing for an action-packed week, with Friday’s US jobs report being the key event, that also includes some major earnings releases. Alphabet will report today, followed by Microsoft and Meta tomorrow, and Amazon and Apple on Thursday.

29 Oct 2024

Tensions remain high in equities

The next Fed meeting will be held two days after the election date and, assuming an eventless election process occurs, Chairman Powell et al will evaluate the progress made since the September aggressive rate cut.

25 Oct 2024

Demand for safe assets lingers

The US dollar continues to enjoy strong demand, outperforming its main counterparts. In particular, euro/dollar is trading at the lowest level since early August, and dollar/yen is hovering a tad below the 151 area.

22 Oct 2024

Strong US data keep the dollar in demand

The euro suffered another weak session yesterday, with the euro/dollar pair dropping below the key 200-day simple moving average and euro/pound fully erasing the recent UK CPI-induced correction.

18 Oct 2024

US dollar and stock rally continues

Both the US dollar and main US equity indices enjoyed another strong session yesterday.

15 Oct 2024

Dollar baffled after mixed data and Fedspeak

China might have played a key role in gold’s performance, but, at the same time, it offers little assistance to the oil rally as the market remains very pessimistic about the impact of the new set of Chinese support measures.

11 Oct 2024

Dollar stands tall after robust jobs report

Strong US data dent chances of a 50bps Fed rate cut; Plethora of Fed speakers on the wires today. Dollar enjoys strong gains, stocks rally unexpectedly. Oil pushes higher as gold's retreat continues.

7 Oct 2024

Dollar gets a boost from Fed's Powell but will the move last?

Fed's Powell talks down expectations for another 50bps rate cut. Dollar benefits, US stocks shake off the initial negative reaction.

1 Oct 2024

PCE inflation corroborates dovish Fed bets

The dollar slipped against most of its major peers after Friday’s data revealed that the headline PCE price index slowed more than expected in August.

30 Sep 2024

Equities are on autopilot but cannot help the dollar

Increased expectations for another 50bps Fed cut. Dollar continues to suffer but euro's strength is perplexing.

25 Sep 2024

Global broker Octa deploys an AI-based tool for traders to boost trade analysis

Since the first days of Artificial Intelligence’s rapid expansion into various industries, the financial sector has been one of the leading adopters of these technologies.

24 Sep 2024

Markets digest Fed decision. BoE and BoJ stand pat

Dollar tumbles on bets of more aggressive Fed rate cuts. BoE keeps rates steady, reiterating cation about future cuts.BoJ stands pat, Ueda says more rate hikes are coming. S&P 500, Dow Jones and gold hit new record highs.

20 Sep 2024

Fed goes big with first rate cut

Fed lowers interest rates by 50bps. New dot plot signals another 50bps cuts by December. Wall Street closes in the red, futures point to higher open. BoE and BoJ take the central bank torch.

19 Sep 2024

Stocks extend gains as a 50bps Fed cut becomes more likely

Stocks in the green as a 50bps Fed rate cut is expected. US retail sales today could prolong dollar's weakness. Loonie could suffer from another weak CPI report. Gold remains bid as US yields continue to drop.

17 Sep 2024

Slow start to the week ahead of the Fed meeting

Mixed movements in FX but the yen remains on the front foot. Stocks recorded their best weekly performance of 2024. Another assassination attempt against Trump. Bitcoin suffers while gold reaches a new all-time high.

16 Sep 2024

Equities are directionless ahead of US inflation report

Mixed movements in equities as markets prepare for CPI. Strong possibility for a downside surprise in inflation. US presidential debate dominates headlines. Bitcoin suffers while gold and yen rally.

11 Sep 2024

Equities rebound but face danger from US presidential debate

Equities turn positive, but sentiment is fragile. US presidential debate today could prove market moving. UK labour market data supports the pound. Bitcoin gains as risk sentiment improves, gold is range-bound.

10 Sep 2024


Editors' Picks

Regulation Matters: Why a Licensed Forex Broker Should Be Your Top Priority

Choosing a regulated broker is not just a matter of preference; it is a necessity for safeguarding your investments and ensuring that you trade in a fair and secure environment.

Automating Success: The Benefits and Risks of Using Forex Expert Advisors

This article explores the benefits and risks associated with using Forex Expert Advisors, providing insights into how traders can maximize their potential while mitigating potential downsides.

Best Forex Brokers 2024

By prioritizing factors such as overall rating, regulatory compliance, trading conditions and platform reliability traders can make an informed decision that aligns with their trading needs and aspirations, setting the stage for a potentially prosperous trading journey.

The Top Forex Expert Advisors 2024: Performance, Strategy, and Reliability Review

An annual roundup reviewing the most successful Forex Expert Advisors (EAs) based on their performance, strategies employed, reliability, and user feedback. This piece would provide insights into which EAs have been market leaders and why.

The Evolution of Forex Expert Advisors: Navigating the Path of Technological Revolution

The concept of automated trading has been around for decades, but the accessibility and sophistication of Forex EAs have seen significant advancements in the past few years. Initially, automated trading systems were rudimentary, focusing on simple indicators like moving averages.

Best Forex EAs 2024 – Forex Expert Advisors Rating

Expert Advisors (EAs) Rating features high-quality Free and paid Forex EA most popular on the market today.

XM information and reviews
XM
82%
FP Markets information and reviews
FP Markets
81%
FXTM information and reviews
FXTM
80%
AMarkets information and reviews
AMarkets
79%
Octa information and reviews
Octa
79%
BlackBull information and reviews
BlackBull
78%

© 2006-2024 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.