The Market March
The wait is over. In their much-awaited September monetary policy decision, the Fed has opted for a 50-basis point (0.5%) cut to benchmark interest rates in the USA. Even with the hindsight of the Fed’s explanation for its decision and the comments that accompanied the publication, it is hard to feel the Fed was not heavily influenced by market pricing. It made little reference for example to the stronger than expected publications of growth and inflation data in August. One major risk of gratifying market pricing may prove to be that its policy projections continue and may increasingly diverge from market pricing with markets receiving evidence it can march the Fed along to its beat.
What was clear is that US monetary officials have concerns for the ability for US growth to continue to outperform if rates are held in excessively restrictive territory. Perhaps due to limited hard data to support this view, it was clear that bank and credit activity from the Fed’s panel of banks was influential upon its impression of stagnating economic activity. The Fed’s beige book publications are therefore a good starting point for those looking to understand more about the logic behind the Fed’s concern to avoid a future recession.
Despite relative stagnation within EURUSD, a USD move was apparent within the market. USDJPY remains the best barometer for such moves due to its sensitivity to Treasury rates. However, those high beta currencies that would be expected to outperform during such events, including NOK, NZD and CAD, did just that. The market is turning increasingly bearish on the Dollar. The saturation of market shorts however likely remains limited meaning that there is a high probability that barring any data surprises this bout of USD weakness has further to play out.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – 48 Hours
Charles Porter
Thu 11 Sep 2025
48 Hours There has been a noticeable shift in geopolitical risk this week. So how, baring a mild slip lower in EURCHF, have FX markets remained quite so flat? Sure, there have been some contained intraday spikes in some commodity prices but ultimately those legs higher have been thwarted, often in the very same trading […]
Daily Brief – Mixed signals
Charles Porter
Tue 19 Aug 2025
Mixed signals It was not long ago that many investment banks were warning clients of the risk of a slowdown in US equities. Having performed exceptionally well in the aftermath of the pause to Trump’s liberation day tariffs, many market participants warned of the inability of equity values to continue to enable price gains. Volatility […]
Daily Brief – Next!
Charles Porter
Tue 9 Sep 2025
Next! The outcome of the Parliamentary debate in France yesterday leaves the nation in political limbo as its Prime Minister François Bayrou is ousted. The vote yesterday was on the motion that the French Parliament held no confidence in the government’s 2026 budget. As expected, they don’t. Many prominent voices in the market suggested that […]
