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The Fed delivered a big cut but it was a case of ‘sell the fact’ as equities couldn’t keep the winning streak going.

I think at the end of the day, you have a ‘Fed put’ now and that wins out but we could see a squeeze tomorrow.

• S&P 500 -0.2%
• Nasdaq Comp -0.2%
• DJIA -0.2%
• Russell 2000 +0.3%
• Toronto TSX Comp -0.2%

The big problem coming into the decision was that stocks were riding a 7-day rally and right up against the all-time highs. As I noted, that’s a tough hand to deal the FOMC.

This article was written by Adam Button at www.forexlive.com.

We’ve seen this one before.

You can game out the Fed decision as much as possible but the market loves to punish both sides of the trade. That’s exactly what we’re getting at the moment as the US dollar recoups all its FOMC losses, and in some cases more than that.

I think the bond market captures some of the worry. US 10-year yields are now up 6 basis points on the day to 3.69%. Some of that came before the decision but yields are still higher in the aftermath.

I believe the thinking there is something I warned about before the Fed: The idea that by cutting more now, the Fed won’t have to cut as much later, leaving the terminal rate higher. That’s also something you could argue is bullish for the US dollar.

It comes back to what Powell said at the start of the press conference: They want to preserve the strength of the economy. If the Fed is successful in that, it’s ultimately good for the US dollar and means we won’t return to the era of 1-2% Fed funds and instead will be in a +2% regime. I don’t think that’s the case in Europe or many other G10 currencies.

That said, I don’t think this debate is over. At the end of the day, 50 bps is still 50 bps and the Fed could very well be behind the curve, particularly if the US fiscal picture tightens next year.

Increasingly, the best trade on Fed day is to wait for the dust to settle because these kinds of whipsaws are increasingly common. When I look out to next September, the Fed funds market is pricing in 189 bps in additional easing which is basically the same as the 187 bps before the decision.

This article was written by Adam Button at www.forexlive.com.

The price of crude oil is trading lower as the Fed Powell is conference continues.

The settlement price came in at $69.88, and the current price is trading at $69.35.

The low for the day reached $68.61. The high for the day was at $70.28.

This article was written by Greg Michalowski at www.forexlive.com.

Everything has aligned for gold in the past six months with Chinese investors looking for something new, Russia diversifying and the Fed getting on top of inflation. Eyes are on $2600 now but it’s all blue skies from a technical perspective now.

This article was written by Adam Button at www.forexlive.com.

Federal Reserve Chairman Jerome Powell delivered the razzle dazzle on Wednesday with a 50 basis point cut to start the rate-lowering cycle. Economists didn’t expect the move but markets had sniffed it out with Fed funds futures pricing in a 55% chance of a larger cut.

The immediate reaction was a ‘risk on’ one that include broader US dollar selling, bond buying at the front end, a jump in gold prices and higher stocks.

Equity markets are now up eight days in a row as they sensed that Powell could cut by a larger margin. In the aftermath of the cut, the Russell 2000 is particularly strong, up 1.2%.

In FX, the pound was a winner as it rose to the best levels since 2022.

More broadly, the US dollar index fell to a 14-month low, in part due to the euro climbing to 1.1177 at the high.

This article was written by Adam Button at www.forexlive.com.

The major US stock indices are trading within 0.03% of unchanged as the market calmly wait for the FOMC rate decision at 2 PM ET.

The S&P index reached a high price today of 5642.84. Yesterday, a new all-time high price was reached intraday at 5670.82. The high closing level is up 5669.67.

The Dow 30 stock in the same reached a new all-time high at 41835.27 yesterday. It is currently trading at 41593 with a high price of 41636.54 today.

The NASDAQ index is trading down -6.35 points at 17621.78. It’s high price this week reached 17781.74 which was near high prices from August 27 and August 29. Getting above that level would be needed to increase the bullish bias. On the downside the 200 hour moving average comes in at 17381.40. The 100 hour moving average comes in at 17323.49.

This article was written by Greg Michalowski at www.forexlive.com.

On the day:

• Stoxx 600 -0.5%
• German DAX flat
• Francis CAC -0.5%
• UK’s FTSE 100 -0.7%
• Spain’s Ibex -0.1%
• Italy’s FTSE MIB -0.4%

There was a nice run-up into the Fed decision but there is some angst ahead of today’s announcement in many markets. That’s usually a good thing as the Fed often delivers dovish surprises (though the bar for that is certainly high today).

This article was written by Adam Button at www.forexlive.com.

• Crude oil inventories -1630M vs -0.500M est
• Gasoline inventories +0.069M vs +0.240M estimate
• Distillates inventories +0.125M vs +0.551M estimate
• Cushing -1.979M vs -1.704M last week
• refining utilization -0.7% versus expectations of -1.0%. Previously -0.5%

This article was written by Greg Michalowski at www.forexlive.com.

The major indices are little changed to start the trading day. Of course, the FOMC rate decision will be key at 2 PM ET where the Fed is expected to cut by 50 basis points but the decision can go either way. What the Fed chair says, what the Dot plot and the projections for GDP, unemployment, PCE inflation and the price action (see Adam’s preview and my technical preview for the 3 major currency pairs).

A snapshot of the market 15 minutes into the open is showing:

• Dow industrial average -30.73 points or 0.07% at 41575
• S&P index up 2.61 points or 0.05% at 5637.19.
• NASDAQ index up 16.28 points or 0.09% at 17644.34

The small Russell 2000 is up 4.31 points or 0.20% at 2209.78

The S&P index is on a seven-day win streak. The Nasdaq had been up 6 of 7 trading days. The S&P reached a new all-time intraday record level at 5670.81. The Dow also reached a new record this week at 41835.28.

This article was written by Greg Michalowski at www.forexlive.com.

Repositioning looks to be the theme in global markets today.

Treasury yields are rising, which indicates worry about the Fed cutting 25 bps instead of 50 bps. However the US dollar is weakening, which indicates the opposite.

It all points to more of a position squaring trade. On top of that, today’s UK core CPI data ran at 3.6% compared to 3.5% expected. That has the market thinking the BOE will leave rates unchanged tomorrow and spark some divergence with the Fed. Pricing currently sits at 73% for now change, up from 63% before the data.

Technically, the August high of 1.3266 is now within striking distance and I’m certain it will break if the Fed delivers a dovish 50 bps cut.

This article was written by Adam Button at www.forexlive.com.

Treasury yields are up 4 basis points across the curve in a sign of either:

1. The market over-pricing a dovish Fed
2. Angst ahead of the Fed decision

I tend to think it’s the latter as bond buyers have flooded in over the past two months. US 10s highlight just how far the move has come and how small the bounce in the past two days has been.

Looking to beyond the Fed decision, there is an interesting debate about the long end. By cutting rates deeper now, does it mean that the Fed’s terminal rate will be higher? Said differently, by front-loading cuts does it mean that they ultimately cut less?

I think that’s a compelling argument but I don’t think it’s the one the market is making today as the selling is even across the curve. If the market does come to that conclusion, it will be more of a bull steepener.

This article was written by Adam Button at www.forexlive.com.