Central Bank wars: The Great Fed Pivot
Yesterday, the Federal Reserve underwent a significant shift that caught many market participants off guard. Just a few weeks ago, on November 29th, the Fed Chair had expressed caution, deeming rate cuts as "premature" and indicating the possibility of further rate hikes. The market responded with a rally in the dollar as investors factored in the likelihood of an additional rate hike. However, the scenario changed on December 11th when the Consumer Price Index (CPI) surpassed analyst expectations, solidifying the belief among many that a rate hike was imminent.
Simultaneously, the Eurozone faced economic stagnation, attributed in part to its dependence on energy imports and the decline in demand for their intricate cars and fast fashion labels. Market participants were convinced that the Eurozone needed substantial intervention, potentially involving a rate cut of up to 100 basis points at the beginning of the year.
The turning point came on December 12th during an interview with former Fed Chair Janet Yellen in The Wall Street Journal. Yellen revealed that, after discussions with President Biden, concerns were raised about the impact of higher interest rates on the federal government's budget through increased borrowing costs. This revelation prompted a decisive shift in strategy to lower rates, aiming to boost public sentiment and economic confidence as the elections approached.
It became evident that this coordinated effort was led by Yellen and Biden, the latter facing public dissatisfaction due to perceived warmongering and genocidal tendencies. To improve his standing and support his ambitious spending plans, Biden had already faced difficulty getting funding approved to his publicly pledged $118 billion to the genocidal squad in the middle east, at a time when everyday Americans want an American First policy and with US Debt approaching 35Trill serviced at over 5% interest rates.
The narrative transitioned on December 11th from expectations of the Fed maintaining higher rates for an extended period, with the U.S. economy performing well and potential for further hikes, to a scenario where Fed rates had peaked.
Not only was the Fed contemplating rate cuts, but discussions had already taken place regarding a potential 75 basis point reduction. However, market expectations were likely to demand a more significant reduction of 150 basis points. This is more then what was being priced in by the Eurozone, as of writing this post, 90% of the cut is being priced in on the 2nd 2024 FOMC meeting
On the Eurozone front, the depreciation of the dollar was seen as a gift for the energy-importing region, potentially alleviating economic struggles by funding cheaper energy and manufacturing production helping to grow the Eurozone out of their current stagnation. It also means the ECB doesn't need to do as much as first put forward.
As the market actively adjusts to this new narrative, technical indicators will take time to align with the evolving prices. Retail traders, relying on short-term time frames (5m-15m), may face losses if they fail to recognize the swift change in the narrative and policy direction.
My proposed trade idea is to anticipate a move to 1.15 by February, with the first rate cut expected in March, and a further increase to 1.20 by the time of the election.
Good luck traders
Simultaneously, the Eurozone faced economic stagnation, attributed in part to its dependence on energy imports and the decline in demand for their intricate cars and fast fashion labels. Market participants were convinced that the Eurozone needed substantial intervention, potentially involving a rate cut of up to 100 basis points at the beginning of the year.
The turning point came on December 12th during an interview with former Fed Chair Janet Yellen in The Wall Street Journal. Yellen revealed that, after discussions with President Biden, concerns were raised about the impact of higher interest rates on the federal government's budget through increased borrowing costs. This revelation prompted a decisive shift in strategy to lower rates, aiming to boost public sentiment and economic confidence as the elections approached.
It became evident that this coordinated effort was led by Yellen and Biden, the latter facing public dissatisfaction due to perceived warmongering and genocidal tendencies. To improve his standing and support his ambitious spending plans, Biden had already faced difficulty getting funding approved to his publicly pledged $118 billion to the genocidal squad in the middle east, at a time when everyday Americans want an American First policy and with US Debt approaching 35Trill serviced at over 5% interest rates.
The narrative transitioned on December 11th from expectations of the Fed maintaining higher rates for an extended period, with the U.S. economy performing well and potential for further hikes, to a scenario where Fed rates had peaked.
Not only was the Fed contemplating rate cuts, but discussions had already taken place regarding a potential 75 basis point reduction. However, market expectations were likely to demand a more significant reduction of 150 basis points. This is more then what was being priced in by the Eurozone, as of writing this post, 90% of the cut is being priced in on the 2nd 2024 FOMC meeting
On the Eurozone front, the depreciation of the dollar was seen as a gift for the energy-importing region, potentially alleviating economic struggles by funding cheaper energy and manufacturing production helping to grow the Eurozone out of their current stagnation. It also means the ECB doesn't need to do as much as first put forward.
As the market actively adjusts to this new narrative, technical indicators will take time to align with the evolving prices. Retail traders, relying on short-term time frames (5m-15m), may face losses if they fail to recognize the swift change in the narrative and policy direction.
My proposed trade idea is to anticipate a move to 1.15 by February, with the first rate cut expected in March, and a further increase to 1.20 by the time of the election.
Good luck traders
