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#1 29-10-2019 13:09:18

johnedward
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EUR/USD: how should we trade the pair if FED decreases rates tomorrow?

EUR/USD: how should we trade the pair in light of the expected FED rate decrease tomorrow? (ING)


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The EUR/USD pair has been in a short-term downward trend since the beginning of last week, and is even questioning the upward trend that has been visible since the beginning of October.

However, it is mainly tomorrow's FED meeting that will determine the fate of the pair in the coming weeks.

The US Federal Reserve is expected to lower its rates by 0.25%, as it was expected to do during its previous meeting, and also the previous one (!), an anticipated event with a probability of over 90% according to the money markets.

There are therefore no questions at this level: the FED should cut its rates by 0.25% tomorrow. If this is not the case, it would be a very strong POSITIVE surprise for the dollar and NEGATIVE one for the stock markets.

However, for the coming months, market expectations are less clear-cut. The most important question to ask when considering the FED's statements tomorrow evening will be whether the FED intends to lower its rates further in the near future (December or January), or whether it intends to end the easing cycle.

If there are indications that the FED could lower its rates again in December/January, the dollar should fall, and the stock markets will rise. Conversely, in the event of a pause in rate cuts, the dollar will rise, and the stock markets will fall.

ING anticipates a rate cut tomorrow, followed by further cuts in both December and January

In this regard, it should be noted that a recent analysis by ING Bank confirms that a rate cut is to be expected tomorrow, but they also suggest that further ones are to be expected in both December AND January:

"Assuming that the economy continues to slow in line with our view - we expect GDP growth to be below 2% in the third quarter of 2019 and below 1.5% in the last quarter - the FED will likely follow suit by further reducing rates in both December and January," ING states.


"Anything worth having is worth going for - all the way." - J.R. Ewing

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