- Trading
- Trading
- Markets
- Markets
- Products
- Forex
- Commodities
- Metals
- Indices
- Shares
- Cryptocurrencies
- Treasuries
- ETFs
- Accounts
- Accounts
- Compare our accounts
- Our spreads
- Funding & withdrawals
- Open account
- Try free demo
- Platforms & tools
- Platforms & tools
- Platforms
- Platforms
- Platforms overview
- MetaTrader 4
- MetaTrader 5
- Mobile trading platforms
- Premium trading tools
- Premium trading tools
- Tools overview
- VPS
- Genesis
- Education
- Education
- Resources
- Resources
- News & analysis
- Education hub
- Economic calendar
- Earnings announcements
- Help & support
- Help & support
- About
- About
- About GO Markets
- Our awards
- Sponsorships
- Client support
- Client support
- Contact us
- FAQs
- Quick support
- Holiday trading hours
- Fraud and scam awareness
- Legal documents
- Trading
- Trading
- Markets
- Markets
- Products
- Forex
- Commodities
- Metals
- Indices
- Shares
- Cryptocurrencies
- Treasuries
- ETFs
- Accounts
- Accounts
- Compare our accounts
- Our spreads
- Funding & withdrawals
- Open account
- Try free demo
- Platforms & tools
- Platforms & tools
- Platforms
- Platforms
- Platforms overview
- MetaTrader 4
- MetaTrader 5
- Mobile trading platforms
- Premium trading tools
- Premium trading tools
- Tools overview
- VPS
- Genesis
- Education
- Education
- Resources
- Resources
- News & analysis
- Education hub
- Economic calendar
- Earnings announcements
- Help & support
- Help & support
- About
- About
- About GO Markets
- Our awards
- Sponsorships
- Client support
- Client support
- Contact us
- FAQs
- Quick support
- Holiday trading hours
- Fraud and scam awareness
- Legal documents
- Home
- News & Analysis
- Shares and Indices
- The “Dovish” or “Hawkish” Rate Cut
- S&P500 reached a record high at 3,027.98 points
- Nasdaq Composite reached an all-time high at 8,293.33.
- The ASX200 briefly rose to an all-time high at 6,875 on Tuesday before retreating to high levels seen in 2007. The Australian share market has returned to levels seen before the global financial crisis.
News & AnalysisA “Dovish” or “Hawkish” Rate Cut
The Federal Reserve (Fed) is poised for its first-rate cut in a decade-long of economic expansion. Trade protectionism and a slowing world economy are the two primary factors behind the global push towards easing policies.
As the world’s central banks are in a race to cut interest rate to stimulate their economies, the focus will be on the Fed this week which is likely going to engage in its first-rate reversal since the financial crisis.
Source: Bloomberg TerminalIt should be highlighted that the US interest rate is still in the low levels despite years of economic growth. It is around half levels it was before the financial crisis. If the Fed starts a rate cut cycle, the central bank will have limited room to lift its economy, in case of future downturns.
American Economy
The US economy remains strong, and a look at the recent economic figures may not by its own justify an interest rate cut. However, the Fed is mostly concerned about the slowing world growth, the effects of the ongoing trade war and subdued inflation.
The labour market has remained the bright spot of the US economy. Total nonfarm payroll employment increased by 224k in June and it is forecasted to come around 170k for July. In the latest report, the most prominent jobs gains were in the professional and business services, health care, transportation and warehousing.
The unemployment rate in the US is near a 50-year low. Wages have also risen in the past few days. Growth in consumer spending has also bounced back in the second quarter. Despite a low unemployment and strong overall growth, inflation pressure remains muted which is the source of worry for the central bank.
Gross Domestic Product increased at an annual rate of 3.1% in June. Last Friday, the annual preliminary GDP figure was significantly lower at 2.1% from 3.1% in the first quarter. However, it came above expectations as markets forecasted a drop to 1.8%.
Business Investment growth and the manufacturing sector have slowed notably, and the weak growth is mostly due to trade tensions and the rising threats of trade protectionism. The housing sector is also showing some signs of distress.
All in all, the Fed does not see the economy in distress and will likely cut interest rate as a preventative measure.
A 25 or 50 Basis Points?
Market participants are pricing nearly 80% probability of a 25bps and above 20% probability of a 50bps rate cut. There were mixed messages on the dovishness of FOMC members which did not fully convince the markets that the Fed will engage in an aggressive rate cut cycle in the coming months.
If the Fed slashes interest rate this week, it will likely be a quarter-point precautionary cut.
If the Fed is cutting interest rate for preemptive reasons in the face of a slowing economy and trade tensions, a 50 basis point might signal that the US economy is in distress which does not seem to be the aim of the Fed. Also, a 50 bps might signal that the Fed made a policy mistake in December in hiking rate.
The rate cut should have pleased President Trump, but President Trump renews attack on the Fed and is already telling the Federal Reserve that the quarter-point cut will not be enough.
Stock Market
To some extent, the rate cut has already been priced-in at least one rate cut as we have seen some record highs in the stock markets based on the return to the lower rate world.
Source: Bloomberg Terminal
Source: Bloomberg Terminal
Source: Bloomberg TerminalThe stock markets are being buoyed mostly by monetary easing policies. However, the fears of a fragile global trade system and volatile political climate are forcing investors to stay cautious.
Yesterday’s tweets from the US President reiterates that actions in the global stock markets are a Tweet Away!
Many dubbed this week as one of the “busiest weeks of the year” because trade negotiations have resumed this week, and the markets are waiting to see if the Fed will lead the global push to lower rates.
Ready to start trading?
Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets. Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice.
Next Article
Apple Reports Third Quarter Results
Apple Reports Third Quarter Results Apple announced its financial results for the June quarter after the closing bell on Tuesday. The Company reported revenue of $53.8 billion, which represents a 1% increase from the year-ago quarter. It is the first time in years that the iPhone revenue ($25.99bn) is less than half of Apple’s total revenue. ...
July 31, 2019Read More >Previous Article
3 significant benefits of having an FX trading buddy
By Mike Smith Let’s face it, trading can be a lonely occupation sometimes. Along with the hope of picking up a “hot tip”, this seems to be a ...
July 29, 2019Read More >We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies. You can view our cookie policy here.Manage consentPrivacy Overview
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.Cookie Duration Description AWSALBCORS 7 days This cookie is managed by Amazon Web Services and is used for load balancing. cookielawinfo-checkbox-advertisement 1 month Set by the GDPR Cookie Consent plugin, this cookie is used to record the user consent for the cookies in the "Advertisement" category . cookielawinfo-checkbox-analytics 1 month This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics". cookielawinfo-checkbox-functional 1 month The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". cookielawinfo-checkbox-necessary 1 month This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary". cookielawinfo-checkbox-others 1 month This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other. cookielawinfo-checkbox-performance 1 month This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance". elementor never This cookie is used by the website's WordPress theme. It allows the website owner to implement or change the website's content in real-time. PHPSESSID session This cookie is native to PHP applications. The cookie is used to store and identify a users' unique session ID for the purpose of managing user session on the website. The cookie is a session cookies and is deleted when all the browser windows are closed. viewed_cookie_policy 1 month The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data. _GRECAPTCHA 5 months 27 days This cookie is set by Google. In addition to certain standard Google cookies, reCAPTCHA sets a necessary cookie (_GRECAPTCHA) when executed for the purpose of providing its risk analysis. __cfruid session Cloudflare sets this cookie to identify trusted web traffic. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.Cookie Duration Description CONSENT 16 years 3 months 17 days 20 hours These cookies are set via embedded youtube-videos. They register anonymous statistical data on for example how many times the video is displayed and what settings are used for playback.No sensitive data is collected unless you log in to your google account, in that case your choices are linked with your account, for example if you click “like” on a video. SPSI session This cookie is used for setting a unique ID for the session and it collects user behaviour on the website during the session. This collected information is used for statistical purposes. vuid 2 years Vimeo installs this cookie to collect tracking information by setting a unique ID to embed videos to the website. _ga 2 years The _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors. _gat_UA-2467324-17 1 minute This is a pattern type cookie set by Google Analytics, where the pattern element on the name contains the unique identity number of the account or website it relates to. It appears to be a variation of the _gat cookie which is used to limit the amount of data recorded by Google on high traffic volume websites. _ga_9P2FTXTH5P 2 years This cookie is installed by Google Analytics. _gcl_au 3 months Provided by Google Tag Manager to experiment advertisement efficiency of websites using their services. _gid 1 day Installed by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously. _uetsid 1 day This cookies are used to collect analytical information about how visitors use the website. This information is used to compile report and improve site. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.Cookie Duration Description IDE 1 year 24 days Google DoubleClick IDE cookies are used to store information about how the user uses the website to present them with relevant ads and according to the user profile. MUID 1 year 24 days Bing sets this cookie to recognize unique web browsers visiting Microsoft sites. This cookie is used for advertising, site analytics, and other operations. NID 6 months NID cookie, set by Google, is used for advertising purposes; to limit the number of times the user sees an ad, to mute unwanted ads, and to measure the effectiveness of ads. test_cookie 15 minutes The test_cookie is set by doubleclick.net and is used to determine if the user's browser supports cookies. VISITOR_INFO1_LIVE 5 months 27 days A cookie set by YouTube to measure bandwidth that determines whether the user gets the new or old player interface. YSC session YSC cookie is set by Youtube and is used to track the views of embedded videos on Youtube pages. yt-remote-connected-devices never YouTube sets this cookie to store the video preferences of the user using embedded YouTube video. yt-remote-device-id never YouTube sets this cookie to store the video preferences of the user using embedded YouTube video. yt.innertube::nextId never These cookies are set via embedded youtube-videos. yt.innertube::requests never These cookies are set via embedded youtube-videos. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.Cookie Duration Description AWSALB 7 days AWSALB is a cookie generated by the Application load balancer in the Amazon Web Services. It works slightly different from AWSELB. DEMO_FORM_PCODE past No description geot_rocket_city session No description available. geot_rocket_country session No description available. geot_rocket_state session No description available. ms-uid 1 year No description available. SPSE session No description available. STYXKEY_geot_country session No description _uc_current_session 1 hour No description available. _uc_initial_landing_page 1 month No description available. _uc_last_referrer 1 month No description available. _uc_referrer 1 month No description available. _uc_visits 1 month No description available. _uetvid 1 year 24 days No description available. Please share your location to continue.
Check our help guide for more info.