Fed can announce a 25bps Cut to 3.50%, but Signals the 2% Goal Enter - DXY, Gold Silver

[Igor Pereira]

The market expects Jerome Powell to announce today a cut at the interest rate of 25 basis points, bringing it to 3.50%. But make no mistake: That's not a relief. Reading between the lines reveals that this is the "final mercy" before the liquidity doors close.

By Igor Pereira, Financial Market Analyst, Junior Member WallStreet NYSE

The market has already reduced 87% chance of this cut; the real news, which the big media will lose, is the 77% probability of a PAUSA in January. We are witnessing the formal transition from response to crisis to structural acceptance of higher interest rates.

The Void of Data and the Bifurcation of the American Dream

Fed's flying blind. The government shutdown created a data vacuum: there is no official October unemployment rate and November BLS data only arrive in mid-January. Powell is making the most consequent decision of the decade without the full picture. And the numbers we have show a fractured economy:

• Small Enterprises: They bled 120,000 jobs November.

• Big Corporations: Add 90,000 jobs.

• ADP: Monthly amount of 32,000 , lower than April 2020.

• JOLTS: Still shows 7.67 million of vacancies, suggesting that the labor market is not weakening, but dividing. Two Americas emerge: a prosperous (corporate) and a drowning (small business).

The New Reality: Inflation 3% floor

The Fed's 2% target is now a distant memory. Inflation remains anchored at 3%, and that level has become the new floor, not the ceiling. The Dot Plot will probably show only one or two cuts in 2026. Translation: High rates throughout the next presidential cycle. With Powell's term ending in May 2026 and Kevin Hassett waiting behind the scenes, today's press conference could be Powell's last major pivot.

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MARKET IMPACTS (Short and Medium Term)

WARNING: Jerome Powell Press Conference today at 4:30 p.m. (Hourday of Brasilia).

• DOLLAR (DXY) - VIES: HIGH (ALTA)

  • Analysis: Today's cut was already on the price. The narrative of "pause in January" and "high rates in 2026" is fuel for the dollar. If the market realizes that the Fed has accepted 3% inflation and will keep nominal interest high to fight it, the carry The dollar remains attractive against weaker currencies. The resilience of large corporations also attracts foreign capital.

• GOLD (XAU/USD)

  • Analysis: Initially, there may be selling pressure if the market focuses on "pause" and the lack of aggressive future cuts (high real interest is bad for gold). However, tacit admission that 3% inflation is the new floor is the biggest argument bullish possible for long-term gold. Gold is protection against structural monetary devaluation.

  • Strategy: Falls caused by the "hawkish" speech today should be seen as buying opportunities, as the "debasement" thesis (currency) was confirmed.

• PRATA (XAG/USD)

  • Analysis: Silver suffers from duality. The monetary side (inflation of 3%) is positive, but the industrial side is worrying. The fact that small businesses (the backbone of the real economy) have lost 120,000 jobs signals recession in the physical economy. This can weigh on the industrial demand of silver in the short term, making it perform worse than gold.

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