Fed Rate Cut Fully Priced In
Traders are now fully pricing in a September rate cut, according to CME’s FedWatch tool. This shift in expectations follows recent comments from Fed Chair Jerome Powell, who suggested the central bank might lower rates before inflation reaches its 2% target. Powell emphasized the need for “greater confidence” in the inflation trajectory while acknowledging the risks of waiting too long to cut rates.
Treasury Yields Remain Stable
Despite the dollar’s weakness, U.S. Treasury yields showed minimal movement on Wednesday. The 10-year Treasury yield edged up less than 1 basis point to 4.17%, while the 2-year Treasury yield increased slightly to 4.47%. Investors are closely monitoring economic data and Fed official comments for further insights into the timing of potential rate cuts.
Gold Prices Surge to Record Highs
Gold continues to benefit from the dollar’s decline and rate cut expectations. Spot gold prices reached an all-time high, trading at $2,469.50 per ounce, up 0.1%. The precious metal’s appeal as a safe-haven asset has been bolstered by slowing inflation, weak economic data, and ongoing geopolitical tensions in the Middle East.
Market Forecast
The short-term outlook for the U.S. Dollar remains bearish as rate cut expectations solidify. Traders should anticipate further downside potential for the greenback, particularly if upcoming economic data supports the case for monetary easing. Conversely, gold is likely to maintain its bullish momentum, with some analysts projecting prices could exceed $2,500 per ounce by year-end. As the Fed’s next meeting approaches, market participants should stay alert for any shifts in central bank rhetoric that could impact these trends.
