Easing financial conditions raise doubts about Fed's rate-cutting capacity | MarketTalk: What’s up today? | Swissquote

Show notes

The US bond and stocks extended their rally on the back of soft US economic data and another strong US bond auction. The US dollar fell sharply against most majors, allowing the euro, sterling, and the yen to extend gains into the year end. The rally in the sovereign space looks overdone, hence the rally in stocks and the selloff in US dollar looks overstretched; there is a rising risk of a wild correction when the euphoria comes to an end.
Because the US has recorded the biggest two-month easing in financial conditions in its history because of the impressive US sovereign rally on rising Fed rate cut expectations. It appears that the latest easing in the US financial conditions has been more powerful than the ones observed following the announcements of the Quantitative Easing programs from the Fed. And the rapidly loosening financial conditions are hardly compatible with a sustainably low inflation… even less so as the geopolitical tensions started to disrupt global trade ways in a way that could be inflationary.
One good news is oil’s inability to ensure a sustained price rise. The barrel of US crude snapped back below the $74pb after testing the $76pb on rising Red Sea tensions.
Listen to find out more!