The Fed does not need to cut rates quickly

[Ben Graham]

The dollar continues to lose ground against a number of risk assets amid expectations of a looser monetary policy from the U.S. central bank. However, not everyone believes that rapid action is necessary.

Goldman Sachs Group Inc. CEO David Solomon indicated in an interview that the Federal Reserve has no need to cut interest rates quickly, diverging from the Trump administration's pressure on the central bank to ease monetary policy. "I don't think the refinancing rate is excessively restrictive, given the appetite for risk," Solomon said at a Barclays Plc financial services conference. According to him, investor enthusiasm in the markets is currently at its peak.

Solomon noted that the U.S. economy continues to demonstrate resilience, and the labor market remains strong despite recent data, which allows the Fed to maintain a wait-and-see approach. He stressed that premature rate cuts could lead to undesirable consequences, such as rising inflation and destabilization of financial markets.

Futures pricing indicates that Federal Reserve members are expected to cut rates by a quarter of a percentage point at next week's meeting. Expectations of further rate cuts by year-end are also rising.

In Solomon's view, the Fed should carefully assess incoming economic data and make decisions based on actual indicators rather than political pressure. He also emphasized that the central bank's independence is a key factor in maintaining confidence in monetary policy and ensuring the long-term stability of the economy.

Just recently, U.S. Treasury Secretary Scott Bessent said that the Fed needs to carry out a rate-cutting cycle, suggesting that the central bank's benchmark should be at least 1.5 percentage points lower than it is now.

Solomon's former colleague and President of the Federal Reserve Bank of Cleveland, Beth Hammack, also noted that she sees no grounds for cutting interest rates this month, as current data show inflation still exceeding the central bank's 2% target and continuing to rise.

It should be recalled that last month President Donald Trump criticized the Fed for its research on his tariff measures, criticized Solomon for failing to publicly praise his administration's achievements, and even mocked the CEO, saying on social media that Solomon "should focus on his DJ career instead of burdening himself with running a major financial institution."

As for the current technical picture of EUR/USD, buyers now need to take control of the 1.1781 level. Only this will allow them to target a test of 1.1825. From there, the pair could move up to 1.1866, though doing so without support from large players will be difficult. The ultimate target is the 1.1903 high. If the instrument declines, I expect significant buying activity only around 1.1740. If no buyers appear there, it would be better to wait for a retest of the 1.1705 low or open long positions from 1.1668.

As for the current technical picture of GBP/USD, buyers need to take the nearest resistance at 1.3587. Only this will allow them to aim for 1.3615, above which a breakout will be difficult. The ultimate target is the 1.3643 level. If the pair falls, bears will try to seize control at 1.3583. If they succeed, a breakout of the range will seriously hit bullish positions and push GBP/USD toward the 1.3519 low, with a potential move to 1.3484.

The material has been provided by InstaForex Company - www.instaforex.com