Fed: Three cuts still expected by year end – BNY

💡 DMK Insight

BNY’s call for three Fed rate cuts by year-end could shake up market expectations significantly. If Velis is right, it suggests a more aggressive easing stance than what traders are currently pricing in. This could lead to a weaker dollar, impacting forex pairs like EUR/USD and GBP/USD. A shift in interest rate expectations often triggers volatility in both equity and bond markets, so keep an eye on those correlations. Moreover, if the Fed does pivot more aggressively, we might see a rally in risk assets as liquidity increases. Watch for key economic indicators like inflation and employment data that could influence the Fed’s decisions. If these indicators come in weaker than expected, it could validate BNY’s forecast and lead to a rapid market adjustment. On the flip side, if the Fed holds steady or cuts less than anticipated, we could see a sharp reversal in sentiment, particularly in growth stocks and commodities. Traders should monitor the 10-year Treasury yield closely; a significant drop could signal a shift in investor sentiment towards riskier assets. Keep your eyes peeled for upcoming Fed meetings and economic releases that could impact these dynamics.