Something for your Espresso: The trade you apparently cannot miss before a rate cut
Jay Powell and the FOMC shifted their focus back to the dual mandate yesterday, signaling that they might be seeking reasons to start cutting rates, despite inflation plateauing at levels 40 basis points above their target.
Gold and fixed income markets surged following the FOMC press conference, as it now seems almost certain that a rate-cutting cycle will begin, with the focus shifting to employment on the margin. This expectation has turned the “cutting cycle theme” into an unmissable trade over the past few days, and the usual suspects are gaining ground.
Chart 1: Gold around the first rate cut
We need a major hawkish shocker in either inflation or non-farm to derail the cutting cycle from the FOMC after yesterday’s presser. Betting on the cutting cycle is now “the trade you cannot miss”
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