Fed Chair May Reveal Rate Cut Plans for 2024; Dollar Gains Amid Positive Data, Bitcoin Struggles

Will FOMC cut interest rate in July or just warm up for September meeting?

FOMC meeting began on Tuesday amid hopes that Jerome Powell, Fed Chairman, could hint the timing or number of rate cuts at least until the end of 2024, this comes amid accelerating expectations that the Federal Open Market Committee will begin cutting rates in its meeting next September.

These expectations are based on the continuing cooling in inflation at all levels in the United States, which is evident from the data that has been released recently, highlighting that price growth in the country has been witnessing a slowdown in the past few months.

Despite this decline in prices, growth readings are still sending signals to the markets that the US economy is still resilient, showing a great deal of flexibility in the face of the historically high federal interest rates, which reinforces the “soft landing” scenario that includes the possibility that the United States will overcome the sharp rises in inflation rates without falling in a recession.

Beyond rate cut

It is widely expected that the Fed will make the decision to keep interest rates unchanged; at the same record high levels that it has adopted since last year, so the focus will be beyond the central bank’s decisions on Wednesday. We expect that investors in the markets will focus on the language that is expected to appear in the interest statement issued after the announcement of monetary policy decisions.

Investors also seek references to the timing and number of interest rate cuts in Jerome Powell’s statements during the press conference held after the announcement of the central bank’s decisions and the publication of the interest statement, which comes amid expectations dominating the markets that the Federal Open Market Committee may begin reducing interest rates at the next September meeting.

The Federal Reserve may begin cutting interest rates for the first time in four years at its meeting, which will be held on September 17-18. The central bank has been maintaining the federal interest rate in the 5.25%-5.50% area for a full year, as the Fed raised the interest rate to this level at the July 2023 meeting.

As for the July meeting, which ends on Wednesday, there are a few traders in the markets who see the possibility of the Fed starting to reduce interest rates in the coming hours, but the vast majority of market expectations indicate that the reduction may begin next September, with more clear signs of that expected. In the interest statement and Powell’s statements signals, hints and remarks.

US Dollar Holds Recent Gain Amid Promising Data, Ahead of FOMC Meeting

US Dollar maintains momentum ahead of Fed decision and labor market update. US JOLTs and CB Consumer Confidence figures exceed expectations. Fed is expected to stay data-dependent and keep possibilities open for a September cut.

The US Dollar, measured by the DXY index, is trying to continue its upward trend, but slides 0.04%. Despite uncertainties hanging in the air over the Fed’s next steps, optimism about the robustness of the US economy is helping the Greenback to gain ground. The forthcoming decision from the Fed due on Wednesday alongside the labor market data expected this week will be pivotal indicators for the market.

The US is starting to show signs of disinflation that strengthen the market’s confidence in a possible rate cut in September. However, the overall economy remains resilient as evidenced by the incoming data, which might delay the pivot to rate cuts.

Daily digest market movers: US Dollar firms up following upbeat labor and consumer confidence data. US consumer sentiment improved slightly in July with the Conference Board’s Consumer Confidence Index rising to 100.3 from a downwardly revised 97.8 in June.

Present Situation Index had a slight decline to 133.6 from 135.5, as the Expectations Index climbed to 78.2 from 72.8. US Bureau of Labor Statistics (BLS) reported in its Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that on the last business day of June there were 8.184 million job openings.

That figure exceeded the market expectation of 8.03 million and follows the 8.23 million openings (revised from 8.14 million) reported in May. Week’s highlight will be the Federal Open Market Committee (FOMC) meeting, which ends on Wednesday with a widely expected hold for interest rates.

US economy’s strong performance negates the immediate need for Fed to lower interest rates, but investors expected the Fed to keep possibilities open for a rate cut at the September FOMC meeting.

The DXY index, after rebounding from the 200-day SMA, has now successfully climbed above the 20-day Simple Moving Average (SMA). The key signals such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), although still remaining on the negative side, are inching toward the positive side, brightening the outlook.

There is noticeable support at 104.50, one more than Monday’s 104.30 level, and resistance is eyed at 104.70 and higher around 105.00.

Bitcoin retreats, stoops to conquer selling pressure

Bitcoin price started a downside correction taking it below $66,000. BTC is now correcting gains and might extend losses. Bitcoin struggled close to $70,000 and started a downside correction. The price is trading at $65,673; down 1.66%. There was a break below a key bullish trend line with support at $68,620 on the hourly chart of the BTC/USD pair.

The BTC/USD pair might extend losses if it fails to break past the $66,000 support zone. Last week, Bitcoin price extended gains above the $68,500 resistance zone. BTC even spiked toward the $70,000 resistance zone. However, it failed to stay near $70,000 and started a downside correction.

There was a move below the $68,500 and $68,000 support levels. Besides, there was a break below a key bullish trend line with support at $68,620 on the hourly chart of the BTC/USD pair. The pair even declined below the $66,500 support zone.

The zone of $66,000 was tested. At $66,063, a low was noticed, and the market was consolidating losses. The 100 hourly Simple Moving Average and $68,500 are both below the current price of bitcoin. The $67,000 mark may provide resistance for the price increase. Near the $67,200 mark, or the 23.6% Fib retracement level of the decline from the $69,985 swing high to the $66,036 low, is the first significant resistance level. A clear move above the $67,200 resistance might send the price further higher in the coming sessions.

Last Updated on 4 months by News Desk 2