It’s a big day today, with the FOMC rate decision happening tomorrow morning at 4 a.m. Australian time. Right now, 66% of the market is expecting a 50 basis points cut. But, I have to ask – does that seem realistic given the current conditions? Inflation is still rising, core CPI is higher than expected, retail sales are up, and the jobs numbers are through the roof.
What do you think? Are you in the 25 basis points camp, or are you still thinking 50? I’d love to hear your thoughts in the comments because I’m curious to know what you’re expecting from the FOMC tomorrow.
Let’s dive a little deeper into this. Every time the Fed cuts rates—whether it’s by 25, 50, or even 75 basis points—the US dollar tends to strengthen. History shows that after the first rate cut, the US dollar rallies. And that’s exactly what I expect to see in the coming days or weeks if we get a 25 basis points cut. The US Dollar Index is hovering around a support level of 100.100, and with high inflation, slow economic growth, and rising labor costs, I expect a 25 basis points cut along with a hawkish statement from the Fed.
Now, how does this affect trading? My trade idea is a short on EUR/USD. Of course, this isn’t a recommendation—just some food for thought on what might happen if we get that 25 basis points cut tomorrow. I’ll be up at 3 a.m., coffee in hand, ready for what’s bound to be a big moment in the market.
What about gold? Historically, when the Fed cuts rates, commodities, especially gold, go up. Investors tend to move their money from fixed income to safe assets like gold when they see the Fed on a rate-cutting path. And don’t forget what I’ve been saying—$3,000 gold by the end of 2024 is still in play. With central banks, especially China and the US, buying up gold reserves, we’re already seeing the price climb toward that target.
There’s more on the horizon too. We’ve got CPI releases for the UK and Europe later today, but honestly, the FOMC decision is likely to overshadow these data points. Brace yourself for some volatility ahead—this is going to be a busy 24 hours.
Remember, with volatility comes opportunity—but also risk. Manage your trades wisely, and good luck! See you tomorrow.
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