Shifting Election Odds Erases “Trump Premium,” but it Remains Difficult to Be Bearish Amid Falling Rates and Dollar
Ideal FOMC Outcome
This week's events have been a reminder that while macro factors can align favorably, idiosyncratic elements can sometimes complicate the picture. On Wednesday, the Federal Reserve decided to hold interest rates steady until September. Notably, the FOMC statement emphasized the Fed's dual mandate, a significant shift from previous communications. Fed Chair Jerome Powell expressed a dovish stance, indicating a potential openness to rate cuts in September, contingent on forthcoming data. Although he refrained from making any guarantees, his tone was notably accommodative.
The market's reaction underscored the dovish interpretation: both the DXY and interest rates declined following the statement, continuing their downward trend throughout Powell's press conference.
Risk assets rallied strongly into the market close, reflecting investor optimism.
The Fed funds futures market for September remained relatively stable, but there was a significant increase in the perceived likelihood of three rate cuts by December.
Despite this seemingly bullish macro backdrop, bitcoin and the broader crypto market moved sideways and eventually sold off after the market close.