The USD has just dropped to its lowest level in 9 days due to forecasts that the Federal Reserve (Fed) will soon cut interest rates.

Information from Fed leaders and weak employment data has led the market to expect the Fed will cut rates in September. This rate is currently priced into the U.S. money market at 91%.

MAIN CONTENT

  • The USD has fallen sharply in 9 days due to signals of interest rate cuts from the Fed.

  • Fed leaders like Neel Kashkari and Mary Daly affirm the possibility of rate cuts.

  • Weak employment data increases expectations for a rate cut in September with a probability of 91%.

Why has the USD fallen sharply ahead of expectations for Fed rate cuts?

The depreciation of the USD stems from clear signals that the Fed may lower interest rates soon, reducing the appeal of the USD among investors.

When the Fed cuts rates, bond yields and USD-denominated assets decrease, leading to the USD losing competitiveness against other currencies. Currently, the weakening of the USD has been clearly demonstrated following statements from Fed leaders in Minneapolis and San Francisco, along with recently released weak employment data.

According to LSEG data, the U.S. money market estimates the probability of the Fed cutting rates in September at 91%, reflecting a high level of confidence in the upcoming monetary policy adjustment.

What do Fed leaders say about the possibility of rate cuts in the near future?

Neel Kashkari – President of the Minneapolis Fed and Mary Daly – President of the San Francisco Fed have both raised signals indicating that the Fed is considering rate cuts in the near future.

The Fed may start cutting interest rates again to support the economy in light of economic data that has not met expectations.

Neel Kashkari, President of the Minneapolis Fed, August 2024

These statements help reinforce expectations that the Fed will act in the September meeting to adapt to current market conditions, especially after the weaker-than-expected employment report released last week. This view has garnered widespread attention as it directly affects monetary policy and global financial markets.

What economic factors are driving the Fed to consider cutting rates in September?

The recently released employment report shows that job growth is lower than expected, putting pressure on the Fed to adjust its current interest rate policy.

This weak data is seen as a clear signal of the slowdown in the U.S. economy, creating momentum for the Fed to potentially cut rates to stimulate growth and stabilize the market.

Analysis from economists and LSEG data indicates that the market currently places a 91% chance that the Fed will take action to cut rates in the next meeting, reflecting careful preparation by investors to respond to changes in monetary policy.

What are the potential impacts of the Fed's interest rate cut policy on financial markets?

Cutting interest rates often leads to lower bond yields, increases liquidity, and stimulates investment in riskier assets like cryptocurrencies and stocks.

This could create volatility in the foreign exchange market, weakening the USD while also driving cash flows into other asset classes such as gold, stocks, or cryptocurrencies.

The Fed's actions also influence global investor sentiment, as the Fed's policies are often seen as a leading indicator for many other economies, affecting capital flows and exchange rate volatility on a broad scale.

Frequently Asked Questions

1. Why does the Fed want to cut rates when the U.S. economy shows signs of weakness?

The Fed cuts rates to stimulate investment, consumption, and economic growth when economic data falls short of expectations, helping to stabilize financial markets.

2. How is the 91% probability of a rate cut determined?

This rate is based on prices and data from the U.S. money market, such as interest rate futures that reflect investors' expectations of the Fed.

3. How does the depreciation of the USD affect cryptocurrency investors?

A weak USD often stimulates capital flows into cryptocurrencies as a hedge against risk and a search for profits in a low-interest-rate environment.

4. What economic indicators does the Fed monitor to decide on interest rate policy?

The Fed focuses on employment data, inflation, GDP, and financial market indicators to determine appropriate policy.

5. How long can news about the Fed change the USD exchange rate?

The effects may occur in the short term, typically from a few days to a few weeks, depending on the level of surprise and the sustainability of the news.

Source: https://tintucbitcoin.com/do-la-tiep-tuc-giam-vi-fed-cat-giam-lai-suat/

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