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Fed's Strategic Timing: Delaying Rate Cuts Until Election Season

Published 06/13/2024, 03:50 AM

Hey everyone, and welcome to the new update after some volatile trading sessions yesterday.

As you know, inflation in the US came in slightly lower than expected, which caused the dollar to drop across the board. At the same time, US yields fell, and stocks moved higher. However, this dollar weakness slowed down during the Fed press conference, as they highlighted that one month of good inflation data might not be enough to commit to a potential interest rate cut. It's still uncertain whether the Fed will cut rates after summer or not. But keep in mind that this is an election year, so they might play it safe rather than cutting rates too soon. If they would have  rates yesterday, inflation might spike again, forcing them to hike rates after summer, which they definitely want to avoid during the election period. They want a stable economy and don't want to risk any market selloff.
Looking at the dollar index, there was a strong sell-off from the 105.20 level, highlighted as an important resistance for this week. The drop from that level is impulsive and strong, suggesting that more weakness can be expected in the upcoming sessions.


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