Fed Uncertainties Shake Markets Again Today

Global Markets Still Uncertain about Fed’s Interest Rate Path

Global markets are still in turmoil over doubts regarding the Federal Reserve’s interest rate path.
Asian stock markets have slipped, while the dollar has strengthened despite the drop in U.S.
Treasury yields, as markets weigh conflicting signals from U.S.
policymakers and economic data on the Federal Reserve’s interest rate outlook.

The broader MSCI index of Asia-Pacific shares outside Japan fell by 0.4%, with mainland China blue chips and Hong Kong’s Hang Seng seeing sharp declines.
The Japanese Nikkei lost 1.54% as traders took profits from the previous session’s 1.6% rally.

Debate on Fed’s Rate Cuts Persists

The ongoing debate among investors revolves around one key question: when and to what extent will the Fed cut rates? The uncertainty lingers, and the markets navigate through the unknown.

The focus remains on the Fed: what will it do with interest rates? Last Tuesday, Minneapolis Fed President Neel Kashkari suggested that the U.S.
central bank might need to forgo interest rate cuts this year due to persistent inflation.

Last week, Jerome Powell had stated that the wait to ease monetary policy was taking longer than expected, but the inclination still leaned towards cuts within the year.
“The debate continues within the markets and among policymakers on the appropriate level for interest rates,” wrote Kyle Rodda, senior market analyst at Capital.com.

Forex Pressure and Dollar Strength

The prospect of higher U.S.
rates for longer, with the ECB and BoE likely to cut rates before the Fed, is already putting pressure on the Forex market.
The EUR/USD pair extends its losses for the second consecutive session, trading around 1.0745 as of now.

The greenback is gaining ground due to expectations of prolonged higher interest rates by the Federal Reserve.
Looking ahead, relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the U.S.
economy, reinforce expectations for a stronger dollar in the medium term.

Given these prospects, further weakness in the EUR/USD exchange rate should be considered a possibility in the medium term.
The continued analysis by Fxstreet experts suggests a potential further decline in the EUR/USD exchange rate.