The US Federal Reserve cuts rates by 0.25% as widely expected, but there are increasing signs that further cuts in 2026 will face a difficult path.
-
The Fed's long-awaited policy meeting yesterday saw a rate cut of 0.25% as expected, with only 2 Fed members dissenting. However, there is increasing evidence of regional Fed members being sceptical of significant further cuts in 2026, so this cut is seen as something of a "hawkish cut". According to the CME FedWatch tool, there is no majority expectation of another cut before April 2026. More than 12 hours after the rate announcement and statement by the Fed, the S&P 500 Index is trading at its lowest level this week, while the US Dollar fell quite firmly to trade below key support levels, putting its long-term bullish trend into question, and US Treasury Yields are falling - so the market's reaction does not look clearly hawkish or clearly anything. At the same time, Silver rose powerfully to trade just below $63 per ounce at a new all-time high price before falling back.
-
The Bank of Canada held its interest rate at 2.25% at yesterday's policy meeting, as was widely expected.
-
Precious metals continue to look bullish, led upwards by Silver, which has risen very strongly to hit a new all-time high just shy of $63. Trend and momentum traders will want to be long of Silver and might be thinking about getting long of Gold too, although this is still some way off its recent record high price.
-
In the Forex market, since the Tokyo open, The Euro and the Japanese Yen have been the strongest major currencies, while the Australian Dollar has been the weakest, which suggests a growth in risk-off sentiment over the Asian session. The USD/MXN currency pair is testing very long-term lows, having reached a new 17-month low a few hours ago. Many Forex brokers pay positive swap on short positions, which could make this an attractive carry trade. Many trend traders will still be long of the USD/JPY currency pair, which got a bullish bounce a few days ago after printing a large engulfing candlestick - the price is now just below ¥156.00 and I am still long here.
-
Stock markets are mostly lower today, although there was a small boost just after the Fed cut rates yesterday. This is a bearish sign, although we are in a bull market.
-
The Swiss National Bank will be holding a policy meeting today and is seen as likely to hold its interest rate at 0%.
-
The Japanese government made its usual warning about excessive movements in the Yen, which could possibly lead to intervention. There is increasing speculation that the Bank of Japan will make as many as 4 rate hikes over 2026, and if more market participants start to believe this, we could start to see a sustained rise in the relative value of the Yen.
-
The Australian Unemployment Rate remained at 4.3% when it was expected to rise to 4.4%, which suggests that the Australian economy is a little more dynamic than was thought yesterday.
-
Yesterday's release of US Employment Cost Index came in a little lower than expected at a quarterly rate of a 0.8% increase, which will be seen as slightly good news for inflation.
-
There will be a release of US Unemployment Claims data today