Nick Timiraos of the Wall Street Journal reported that “the Fed can’t decide whether to cut rates significantly or modestly,” and from there the probability of a rate cut at the FOMC jumped from around 10% to around 50% to 60%. This increase in the probability of a rate hike was nothing more than a leaked report, and the Fed cut rates by 0.5%, as if on schedule.

This was a historic day for the Fed, which had kept interest rates high for more than two years due to the spread of the Corona pandemic and subsequent inflation, to start cutting rates. However, the post-FOMC move was not clear-cut. The market reacted by buying the dollar, even though it was expected to sell the dollar because of the rate cut. Although the rate cut was large, Chairman Powell responded in a hawkish manner, saying that the U.S. economy is strong and healthy. Technically, the pair fell below 140 yen, and the weekly Ichimoku Kinko’s cloud had fallen below and the pair was vulnerable to the downside.

In the Q&A session, Chairman Powell said that he would have cut rates at the July FOMC meeting if he had known the July U.S. employment data, but he probably meant two rate cuts, one in July and the other in June. The pace of future rate cuts is not necessarily 0.5%, the Chairman nailed it. Naturally.

Risk assets reacted positively because the U.S. economy is doing well and yet interest rates were cut sharply. In this sense, has it become more difficult for the dollar to fall sharply? Will buying cross yen on the premise of risk-on work? The Bank of England left its policy unchanged.
The Central Bank of Turkey also left its policy unchanged. If there is a push, we may buy lira yen and pound sterling yen.