???? Fed Ready for Rate Cut in September?

Hala,

?? According to a LendingTree survey, 45% of parents are ready to go into debt for Disney(1), but hey, what's a little debt when you're investing in family magic, right? ?? ?????

amana’s Take

• The euro hit a one-year high against the dollar in August, riding the wave of expectations that the Federal Reserve might soon start cutting interest rates. The buzz in the euro-dollar market has been electric, with money managers and robo-traders piling in on the dollar’s weakness.
• But as central bankers converge at Jackson Hole, the euro’s joyride could hit a speed bump. If Fed Chair Jerome Powell plays it safe in his Friday speech, the euro’s gains might quickly evaporate, especially with the eurozone’s lingering economic woes.
• A more hawkish stance from Powell could reignite the dollar’s allure, putting the euro’s recent rally in jeopardy. With the eurozone still facing headwinds, a stronger dollar could easily steal the show, leaving the euro’s uptrend in the dust.

Stock Market Update

???? US stocks rallied on Wednesday as Fed minutes fueled hopes for rate cuts. The S&P 500 advanced 0.42% to 5,620.85, the Dow nudged up 0.14% to 40,890.49, and the Nasdaq 100 climbed 0.53% to 19,824.84.(2) Hump day turned into pump day at Wall Street! ????

??? Similarly, most Mideast stocks rose largely for the same reason. Abu Dhabi added 0.3% to 9,348, and Dubai gained 0.9% to 4,295.(3) ????

???? Fed Officials Walk a Tightrope Toward September Rate Cut

Fed officials are carefully balancing on a tightrope as they prepare for a potential interest rate cut in September.(4) Minutes from the July 30-31 meeting reveal that “several” officials saw “a plausible case” for a 0.25 percentage point cut, citing cooling inflation and rising unemployment. While some advocated for an immediate cut, the majority chose to keep their balance until September, awaiting more economic data. ????

?? Key Balancing Acts:

• Rate Cut Debate: Several officials were ready to cut rates in July, but most preferred to wait.
• Economic Indicators: Signs of slowing inflation and a weakening job market fueled discussions.
• Market Odds: Traders are betting on a 0.25-point cut with a 2-in-3 chance, while a 0.5-point cut has 1-in-3 odds.

??? Waiting for the Right Moment

As the Fed prepares for its Sept. 17-18 meeting, officials are more likely to debate the size of the cut rather than whether to cut at all. With economic data still rolling in, they’re taking each step cautiously, aware that any misstep could send the economy tumbling. For now, they’re staying steady on the tightrope, eyes fixed on the September horizon. ???

Closer to Home?

• ?? Breaking: Tether, the titan behind the world’s top dollar-pegged stablecoin (USDT), announced a new stablecoin pegged to UAE dirham, aiming to tap into Gulf demand and give the dollar a run for its money.(5) ??
• ?? Saudi's Arabian Mills is putting 30% of its capital up for grabs in a Tadawul IPO. The flour giant, second in Saudi market share, is selling 15.39 million shares, with HSBC Saudi Arabia and Alrajhi Bank among the ones handling the retail crowd.(6) ??
• ?? Meanwhile, Dubai’s Magellan Capital Holdings is launching a $700 million hedge fund next month, one of the UAE’s biggest. With a focus on equity and credit strategies, it's ready to make waves in the financial scene.(7) ??

What Else Is Trending

• ?? The pound held firm near its one-year high on Wednesday, keeping the dollar on the ropes as Fed rate cut chatter weighed on the greenback. Sterling settled at $1.3025, just shy of Tuesday’s peak since July 2023 at $1.3054.(8) ??
• ??? Meanwhile, oil prices dropped by around $1 after a sharp revision in US employment stats, with Brent slipping 1.49% to $76.05 and WTI down 1.69% to $71.93.(9) ?
• ?? Lastly, gold prices glimmered near record highs as Fed minutes hinted at a September rate cut. Spot gold shined 0.1% to $2,516.01.(10) ?

??Quote of the Day

“Almost all participants remarked that while the incoming data regarding inflation were encouraging, additional information was needed…before it would be appropriate” (to lower interest rates) — Fed Meeting Minutes

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Sources: (1) Lending Tree, (2) CNBC, (3) (9) (10) Reuters, (4) The Wall Street Journal, (5) (6) (7) (8) Zawya