Pepperstone

The FOMC delivered a 50bp cut at the September FOMC, kicking-off the easing cycle with a surprise jumbo rate reduction, as the ‘dot plot’ points to a further 50bp of cuts this year, albeit while policymakers pledge to take a ‘meeting-by-meeting’ approach to future policy decisions.

Markets continue to digest the Fed’s 50bp cut this morning, with equity futures advancing overnight, as focus shifts to today’s decisions from the BoE and Norges Bank.

Markets trod water yesterday. Today, all eyes are on the FOMC, as market expectations remain delicately poised between a 25bp, or a 50bp, cut. What matters, though, is not the magnitude of today’s cut, but the speed at which rates return to a neutral level.

The September FOMC decision will see the normalisation process get underway, though markets might not get the degree of easing that they seek just yet, even if a more rapid return to neutral could well be on the cards in the longer-run.

Having delivered the first Bank Rate cut of the cycle at the August meeting, the MPC are likely to stand pat this time around, instead waiting for the November meeting, and forecast round, before further removing policy restriction.

Trade was choppy, but ultimately risk-positive on Tuesday, albeit amid a distinct lack of conviction among market participants, ahead of today’s US CPI report.

Contrary to popular belief, incoming data is nowhere near as downbeat as the prevailing narrative would imply which, coupled with the relatively more hawkish BoE outlook, could provide some support to the GBP over the medium-term.

Trade was choppy, but ultimately risk-positive on Tuesday, albeit amid a distinct lack of conviction among market participants, ahead of today’s US CPI report.

Friday’s US labour market report did little to clear up the ‘25bp vs. 50bp’ Fed cut debate, leaving markets hyper-sensitive to incoming data, wanting more easing than is likely to be delivered, potentially posing short-term headwinds to risk.