Fed: Trading a prolonged hold – TD Securities

💡 DMK Insight

The Fed’s extended pause on rate hikes is shifting traders’ focus to potential rate cuts, and here’s why that matters: With the Fed signaling a longer hold on policy, uncertainty is creeping in regarding when and how many cuts we might see. This could lead to increased volatility in both the forex and equity markets as traders recalibrate their expectations. If the market starts pricing in cuts sooner than anticipated, we could see a weakening of the dollar, impacting pairs like EUR/USD and GBP/USD. Keep an eye on economic indicators such as inflation and employment data, as these will be crucial in shaping the Fed’s future decisions. On the flip side, if the Fed surprises the market with a more hawkish stance, we could see a sharp rebound in the dollar, leading to potential short squeezes in long positions. For now, traders should monitor the upcoming economic releases closely, particularly any shifts in consumer sentiment or inflation metrics, as these could provide clues about the Fed’s next moves.