GBP/USD registers gains of over 0.80% following Fed’s cut. The Fed delivers a 50 bps rate cut as it grows confident that inflation will reach its 2% target. The Fed's dot-plot projects the fed funds rate to end 2024 at approximately 4.4%. The GBP/USD hit a new yearly high of 1.3286 during the North American session after the Fed surprised the markets with a 50 bps rate cut. At the time of writing, the pair trades volatile within the 1.3200-1.3300 range as traders await Fed Chair Jerome Powell's press conference. Fed cuts rates by 50 bps, not unanimously, as Bowman dissents In their monetary policy statement, Fed policymakers acknowledged that economic activity continues to expand solidly, though the unemployment rate has "moved up." They also noted that while inflation "remains somewhat elevated," the Committee "has gained greater confidence that inflation is moving sustainably toward 2 percent" and believes that the risks to achieving its employment and inflation goals are now roughly balanced. The Federal Open Market Committee (FOMC) highlighted that the economic outlook remains uncertain. The Fed's decision was not unanimous, as Governor Michelle Bowman favored a 25-basis point (bps) rate cut. Regarding the Summary of Economic Projections (SEP), Fed officials anticipate another 50 bps of rate cuts by the end of 2024 and an additional 100 bps of cuts projected for 2025.

1-USD/JPY dips on reaction to 50 bps Fed rate cut. 2-Fed's dot plot on rate outlook also declined. 3-Markets await Fed Chair Powell's press conference appearance. USD/JPY plumbed the depths of 140.80 on Wednesday after the Federal Reserve (Fed) dropped a 50 bps rate cut on markets. This marks the Fed's first rate cut in over four years as US central bank policymakers race to catch up to market expectations. Investors had initially hoped for a first rate cut from the Fed in March. The Federal Reserve's dot plot, part of the Federal Open Market Committee's (FOMC) Summary of Economic Projections, has been revised downward from the central bank's previous rate outlook. The median policy expectations from the Fed now indicate that the Fed Funds rate is projected to be 4.4% by the end of 2024 and 3.4% by the end of 2025, down from 5.1% and 4.1% respectively. Digging deeper into the Fed's notes, Fed policymakers now anticipate US Gross Domestic Product (GDP) growth to remain at 2.0% through 2024, down from the previous projection of 2.1% in June. Fed officials also expect the US Unemployment Rate to settle around 4.4% by the end of 2024. With the Fed aligning with market expectations for rate cuts, global markets are now turning their attention to Fed Chair Jerome Powell's press conference scheduled to take place shortly.

The US Federal Reserve (Fed) announced on Wednesday that it lowered the policy rate, federal funds rate, by 50 basis points to the range of 4.75%-5% following the September policy meeting. Although the market forecast was for a 25 bps rate cut, there were growing expectations for a 50 bps reduction. {FED POLICY KEY STATEMENT} "Inflation has made further progress toward 2% objective, remains somewhat elevated." "FOMC has gained greater confidence in inflation moving sustainably toward 2%, judges risks to employment and inflation goals are roughly in balance." "Economic outlook is uncertain, FOMC is attentive to risks on both sides of mandate." "Economic activity expanding at solid pace, job gains have slowed, unemployment rate has moved up but remains low." "Will carefully assess incoming data, evolving outlook and balance of risks in considering additional rate adjustments." "Quantitative tightening continues at previous pace." "Vote in favor of policy was 11-1, with Fed Governor Bowman dissenting; bowman preferred a 25-basis-point reduction."

*Housing Starts and Building Permits in the US rose sharply in August. *The US Dollar Index stays in negative territory below 101.00. US housing starts saw a significant boost in August, rising 9.6% to 1.356 million units, surpassing economists' expectations. This uptick was largely driven by a 15.8% increase in single-family housing starts, which reached 992,000 units. Meanwhile, multi-family starts dipped 4.2% to 364,000 units. Building permits, a key indicator of future housing demand, also showed promising growth, jumping 4.9% to 1.475 million units. Single-family permits rose 2.8% to 967,000 units, while multi-family permits surged 9.3% to 508,000 units. These numbers suggest a welcome rebound in the housing market, particularly in the single-family sector. Experts attribute this growth to falling mortgage rates, which have decreased to their lowest since February 2023, and the anticipated interest rate cut by the Federal Reserve. *Highlights:* - Housing Starts:9.6% increase to 1.356 million units. - Single-Family Starts:15.8% increase to 992,000 units. - Multi-Family Starts:4.2% decrease to 364,000 units. - Building Permits:4.9% increase to 1.475 million units. - Single-Family Permits:2.8% increase to 967,000 units. - Multi-Family Permits:9.3% increase to 508,000 units. The US Dollar Index showed no Reaction to these figures and was last seen staying in negative territory below 101.00.

POINTS TO NOTE *The Federal Reserve is widely expected to lower the policy rate after the September meeting. *The revised Summary of Economic Projections and Fed Chairman Powell’s remarks could provide important clues about the rate outlook. *The US Dollar faces a two-way risk depending on the size of the interest rate cut. The US Federal Reserve (Fed) will announce monetary policy decisions following the September policy meeting and release the revised Summary of Economic Projections (SEP), the so-called dot plot, on Wednesday. Market participants widely anticipate that the US central bank will lower the policy rate, but the size of the cut is up in the air. The CME FedWatch Tool shows that markets are currently pricing in a nearly 60% probability of a 50 basis points (bps) rate cut against a nearly 40% chance of a 25 bps reduction. The market positioning suggests that the US Dollar (USD) faces a two-way risk heading into the event. The US Bureau of Labor Statistics reported last week that the core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose 0.3% on a monthly basis in August. This reading followed the 0.2% increase recorded in July and came in above the market expectation of 0.2%. Following this report, investors saw a diminishing chance of a large rate cut. Overall, the Federal Reserve's September meeting will be a pivotal event for markets, and investors will be watching closely for any signs of future monetary policy direction.

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