Webinar: What if… The Fed cuts rates by next summer?
The desk is framing a scenario where the Federal Reserve may not follow through with an anticipated rate hike due this September, and could even undertake rate cuts by mid-2024. Per the full note source, the expectation of a rate hike conflicts with potential economic indicators such as inflation trends that could shift market consensus. This contrasts with the view from firms like **jpmorgan** which anchors their predictions around a mildly bullish USD outlook through to early 2027, suggesting a levels target around 1.075 for EUR/USD.
What the desk is arguing
The central argument posits that financial markets might be mispricing future rate actions from the Federal Reserve. The expected hike could pivot if inflation metrics don't play out as anticipated and labor market dynamics reveal contrary strength, leading to a potential cut scenario by summer next year.
The insight provided by ING stresses the importance of upcoming economic data releases, including employment figures that could reshape Fed policy expectations. The volatility around such pivotal data points suggests that traders should remain vigilant and responsive to emerging trends.
Where it sits in our coverage
Currently, our target for EUR/USD is set at 1.075, with a range from 1.04 to 1.12. Significant targets around this currency pair include those from: - jpmorgan: 1.10 by Mar-26 - bofa: 1.04 by Mar-26
This perspective aligns closely with jpmorgan, indicating our stance sits near their forecasted target, while showing some divergence from bofa, which projects a more bearish range.
How other firms see it
Analysts at jpmorgan and others present a more optimistic view for a strong dollar based on anticipated Fed actions lending support to their targets. Conversely, bofa's bearish approach, projecting a lower target, highlights concerns over potential economic softening and declining inflation.
Watch for the interplay between USD and inflation readings, as well as Fed commentary that could reshape expectations linked to EUR/USD trajectories in the near future.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Expectations for a rate hike may be misplaced.
- 02Potential for Fed rate cuts by mid-2024 has significant implications for the dollar.
- 03Upcoming economic data could significantly impact Fed policy directions.
Market implications
Traders should closely monitor the upcoming employment report which may influence the Fed's rate decision amid shifting inflation concerns. A break below 1.05 in EUR/USD may signal market recalibration towards more hawkish Fed sentiment, while movements above 1.10 could reinforce projections for a steadier dollar.
Risks to this view
A stronger-than-expected labor market report or persistent inflation could force the Fed's hand, solidifying the rate hike narrative and reversing current positioning strategies. Additionally, any shifts in key inflation metrics that misalign with current market expectations might prompt significant retracement in USD bullish positions.
Articles Webinar: What if… The Fed cuts rates by next summer? Published 07:54 United States Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Financial markets are expecting a Federal Reserve rate hike to come as soon as September. But what if investors have got it the wrong way around?
Join us this Thursday for a live webinar on the outlook for US interest rates and the dollar. Sign up here James Smith , James Knightley and Francesco Pesole Financial markets are expecting a Federal Reserve rate hike to come as soon as September. But what if investors have got it the wrong way around?
How could inflation surprise us, and what would it mean for the dollar? Join us the day before a crunch US jobs report for the second episode of What if? – a new summer webinar series hosted by James Smith exploring what could turn today’s market consensus on its head. You’ll learn: What it would take for the Fed not to hike rates this year and what data matters most How Kevin Warsh is reshaping the Federal Reserve Why the Fed could cut rates in 2027 What ING’s call for the Fed means for the dollar Click here to sign up Details Date: Thursday 6 August Time: 1400 BST/1500 CEST/0900 ET The webinar will last 30 minutes, including Q&A.
The event will take place online, and the waiting room will open 60 minutes ahead of the scheduled start time. A joining link will be emailed following registration, and you will receive a reminder email 10 minutes before the scheduled start time. Note: If you registered for or attended our recent webinar on oil prices, you’ll automatically be signed up for this event and future events in our What if? series.
Add it to your calendar by following the instructions on this page Speakers James Smith (Developed Markets Economist) James Knightley (Chief International Economist) Francesco Pesole (FX Strategist) Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors James Smith Developed Markets Economist, UK James is a developed market economist, responsible for ING's view on the UK economy and Bank of England.
He graduated from the University of Bath with a degree in economics and joined ING in 2015. James Knightley Chief International Economist, US James Knightley is the Chief International Economist in New York. He joined the firm in 1998 in London and has been covering G7 and Western European economies.
Sources & References
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