Almost No One Doubts the Fed Will Lower Rates

[Ben Graham]

The dollar declined once again against risk assets following statements by Kevin Hassett, director of the National Economic Council. Trump's economic advisor stated yesterday that the Federal Reserve should lower interest rates at its upcoming meeting next week and predicted a 25-basis-point reduction.

"I think we should do this, and I think we are likely to do so," Hassett said, pointing to recent comments from Fed governors and heads of regional banks. "They now seem to be increasingly leaning toward a rate cut."

Hassett also noted that he would like to see much lower rates in the long term. "If there is a consensus on 25 basis points, which apparently there is, then we can expect further steps from the Fed toward easing," the politician remarked.

However, it should be noted that the impact of Hassett's statements on the dollar may be short-term. Further dynamics will depend on the Fed's decision at the upcoming meeting and on incoming economic data. Markets will closely monitor comments from Fed officials after the meeting to assess the likelihood of interest rate reductions and gain a clearer understanding of the future trajectory of monetary policy. Several reports on inflation and the US labor market are also set to be released next week, but all will come out after the Fed meeting.

The President's economic advisor declined to answer a question about how many additional cuts he could implement if appointed as the Fed's head, stating that the chairman's job is to respond very sensitively to data and consider how rate adjustments will affect inflation and employment. "The president has several candidates he's considering," Hassett said. "It's a great honor to be on the list with such wonderful people. Let's see what happens."

Earlier this week, Trump stated that he plans to announce his appointment to the head of the Federal Reserve in early 2026 and that he has already narrowed his finalists. In recent days, he has repeatedly praised Hassett and hinted at his potential nomination. "I believe a potential Fed chair has already been determined," Trump said during an event at the White House on Tuesday.

At this point, buyers need to consider how to regain the 1.1680 level. Only this would allow targeting a test at 1.1705. From there, it could climb to 1.1725, but doing so without support from major players will be quite challenging. The farthest target will be the high of 1.1753. If the trading instrument drops significantly near 1.1650, I expect major buyers to step in. If no one is there, it would be advisable to wait for a retest of the low at 1.1625 or open longs from 1.1590.

In the case of the pound, buyers need to reclaim the nearest resistance at 1.3360. Only this would allow targeting 1.3395, above which breaking through will be quite difficult. The farthest target will be the area of 1.3415. If the pair falls, bears will attempt to take control of 1.3320. If they succeed, breaking through that range will deal a serious blow to bullish positions and push GBP/USD down to the low of 1.3290, with the prospect of reaching 1.3270.

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