One more cut before a Fed pause

MUFG Research discusses the Fed’s policy trajectory and expects a rate cut at the FOMC meeting later this month before a pause in December meeting.

“The US rate market is almost fully pricing in a 25 basis point rate cut later this month. More important for US dollar performance heading into year-end will be whether the Fed delivers another cut in December or sticks to plans for a rate pause. The WSJ has run an article on the topic in which they suggest that one issue facing the Fed is how to signal in their post-meeting statement later this month that the threshold for additional rate cuts would require stronger evidence of deterioration. The article highlights that one way the Fed has done this in the past is to highlight the accumulation of recent stimulus,” MUFG notes.

“With the dollar index precariously positioned at key support from the 200-day moving, a less dovish Fed policy statement would bring some welcome relief for US dollar from recent selling pressures,” MUFG adds.

Kudlow on Fox Business:

The pound is weaker to start the week but the setback is not as bad as feared

When put into context of last week’s 2.5% rise in cable, the drop in the pound at the start of trading this week isn’t really that much.

What is it the kids say? “It’s all good!”

Brexit still hangs in the balance

Recent data revisions suggest the UK economy has been more resilient to post-referendum Brexit uncertainty than previously thought. Sizeable revisions to business investment indicate firms started to reduce investment from mid-2017 rather than in 2015 as the previous vintage suggested. The overall level of business investment is 3.3% above end-2015 according to the new data. The household saving ratio was also revised up to 6.2% in 1Q19 from 4.4% under the previous vintage. Households appear to have been more cautious than previously believed. This suggests that the household sector is in a somewhat stronger position to withstand the impact of a potential economic shock.