ChainCatcher News: Macro View on Fed Rate Cut - Three Key Signals

Overall, there are three key signals in the Fed's rate cut:

1. The Fed believes the impact of the pandemic on employment and inflation has ended.
2. The era of forward guidance is temporarily over. The Fed is unwilling to reveal all its policy cards. A significant 50BP rate cut was intended to prevent significant fluctuations in US stocks and bonds, which had already priced in such an expectation. Powell's continued wait-and-see approach aims to prevent a repeat of the situation in early August when concerns about a US economic hard landing led to a reversal of the yen carry trade.
3. The Fed also wants to prevent a large-scale outflow of capital from the US capital market due to a significant rate cut and the resulting "虹吸效應" (siphoning effect) on US stocks. As a result, even if the Fed cuts rates significantly, it may not significantly boost all non-US assets until US economic data deteriorates completely. However, it is expected that the US Dollar Index is unlikely to strengthen for now, which could ease pressure on non-US currencies to depreciate. (Gold Ten)