• Fed cut rates by 25bps to 4.00-4.25%, as expected, citing a shift in risk balance. Bowman and Waller joined consensus, calling for a 25bps reduction; new Governor Miran dissented, preferring a 50bps cut.
• Nine of the 19 Fed officials see two additional cuts in 2025, two see one cut, and six see no more reductions.
• Fed Chair Powell said he doesn't feel the need to move quickly on rates, and that “you could think of the cut as a risk management cut”, and that decisions will be taken on a meeting-by-meeting approach.
• Markets saw an initial dovish reaction to the FOMC statement followed by a hawkish reversal heading into and during Chair Powell's press conference. Fed rate cut in December still fully priced in.
• APAC stocks traded mixed following the choppy reaction to the FOMC meeting; European equity futures indicate a positive cash market open with Euro Stoxx 50 futures up 0.5%.
• Looking ahead, highlights include US Jobless Claims, New Zealand Trade Balance (Aug), BoE Announcement, Norges Bank Announcement, SARB Announcement, Speakers include ECB’s Lagarde, de Guindos, Nagel & Schnabel, US President Trump & UK PM Starmer press conference, Supply from Spain, France & US, Earnings from FedEx & Lennar.

SNAPSHOT

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FOMC

STATEMENT

• Fed cut rates by 25bps to 4.00-4.25%, as expected, citing a shift in risk balance. Bowman and Waller joined consensus, calling for a 25bps reduction; new Governor Miran dissented, preferring a 50bps cut. Nine of the 19 officials see two additional cuts in 2025, two see one cut, and six see no more reductions. Fed adjusted guidance to state that "in considering additional adjustments to the target range for the federal funds rate..." from "in considering the extent and timing of additional adjustments". It also tweaked its labour market view, downgrading the language which is no longer 'solid', while it stated unemployment has edged up but 'remains low' and that 'job gains have slowed', as well as noted that inflation has moved up, and remains 'elevated'.
• FOMC Summary of Economic Projections showed Fed Funds Rate was projected for 2025 at 3.625% (exp. 3.875%, prev. 3.875%), 2026 at 3.375% (exp. 3.375%, prev. 3.625%), 2027 at 3.125% (exp. 3.125%, prev. 3.375%), 2028 at 3.125% (exp. 3.125%) and the Longer run at 3.00% (exp. 3.125%, prev. 3.00%). Furthermore, this year's unemployment rate forecast, PCE and core PCE were unchanged; for next year, unemployment was revised lower, while PCE and core PCE were raised.

PRESS CONFERENCE

• Fed Chair Powell (post-meeting statement) said inflation has risen recently and remains somewhat elevated, while a moderation in GDP growth largely reflects a consumer spending slowdown, and the balance of risks has shifted, although he added that the Fed is well-positioned to respond in a timely way. Powell also said that payroll job gains have slowed significantly, reflecting lower immigration and lower participation.
• Fed Chair Powell (Q&A) said they welcomed new Committee member Miran, while the Committee is united in pursuing dual mandate goals, and is strongly committed to the independence of the Fed. Powell said it is possible that tariffs are a reason for some slowing in the labour market, as well as noted that over this year, policy has been at a restrictive level, and can no longer say the labour market is solid. Powell also noted that risks are moving toward equality, and the change in balance of risks suggests a need to move in the direction of neutral. Powell stated there was no widespread support for a 50bps cut today and he doesn’t feel the need to move quickly on rates, while he added the Fed was right to wait. Powell commented we could think of the cut as a risk management cut and they need to remain fully committed to restoring 2% inflation, and at the same time, need to weigh risks to the two Fed goals, while he added that risks of higher inflation are less than in April and that they are in a meeting-by-meeting situation, and are going to be looking at the data, as well as stated that markets are pricing in a rate path, though not blessing that path.

REACTION

• Markets saw an initial dovish reaction to the statement followed by a hawkish reversal heading into and during Chair Powell's press conference. (More details below)
• Markets price in ~44bps worth of cuts in through year end vs ~41bps (excluding yesterday's cut) pre-Fed.

US TRADE

EQUITIES

• US stocks finished mixed with two-way action seen following the FOMC, SEPs and Fed Chair Powell's presser. An initial dovish reaction was seen after the Fed cut rates by 25bps, as expected, which was accompanied by dovish SEPs, as 50bps of further rate reduction is now seen in 2025, against the prior, and expected, 25bps of additional cuts. Do note, it was a tight call as 10/19 saw 50bps (or more) of cuts, while the other 9 saw 25bps (or less). The Fed also adjusted its guidance to signal a clearer path of easing ahead. In reaction, the Dollar was sold while Equities and Treasuries saw upside; however, the moves had started to pare as participants awaited the Powell presser. In the press conference, he was notably more hawkish than the statement and SEPs implied, which saw these moves reversed. The Fed Chair said he doesn't feel the need to move quickly on rates, and that "you could think of the cut as a risk management cut", and that decisions will be taken on a meeting-by-meeting approach.
• SPX -0.10% at 6,600, NDX -0.21% at 24,224, DJI +0.57% at 46,018, RUT +0.18% at 2,407.
• Click here for a detailed summary.

TARIFFS/TRADE

• China is reportedly dropping the Google (GOOG) antitrust probe during US trade talks, according to FT.
• US House China Panel Chair said he's concerned regarding the TikTok deal.
• Brazilian President Lula said he has no relationship with US President Trump, while he described US tariffs as 'eminently political' and said US consumers would be facing higher prices for Brazilian goods as a result, according to a BBC interview. It was also reported that Lula signed an executive order that exempts some data centre equipment from federal taxes.

NOTABLE HEADLINES

• US House cleared the procedural hurdle for a floor vote this week on the stopgap funding measure to avert a government shutdown.
• US President Trump's administration is drawing up plans to use tariff revenue to fund a program to support US farmers, according to FT citing US Agricultural Secretary Rollins.

APAC TRADE

EQUITIES

• APAC stocks traded mixed following the choppy reaction to the FOMC meeting, where the Fed cut rates by 25bps, as expected, and just about signalled two further rate cuts this year, although Fed Chair Powell provided some hawkish-leaning comments during the presser.
• ASX 200 declined with underperformance in energy as Santos shares suffered a double-digit percentage drop after the XRG consortium abandoned its USD 18.7bln takeover bid, while sentiment was also not helped by a surprise contraction in employment data.
• Nikkei 225 rallied back above the 45k level and printed a fresh all-time high amid currency weakness and with the index unfazed by disappointing machinery orders, while the BoJ kick-started its 2-day policy meeting where it is widely anticipated to remain on pause.
• Hang Seng and Shanghai Comp were mixed with continued tech strength seen after China's CAC reportedly informed firms such as Alibaba and ByteDance to terminate their testing and orders of NVIDIA's RTX Pro 6000D, in order to focus on China's domestic semiconductor industry, while Huawei unveiled its new AI chip tech to rival the AI darling. Nonetheless, the Hong Kong benchmark faded early gains despite the HKMA cutting rates in lockstep with the Fed, with a pullback seen after it briefly breached the 27,000 level for the first time in four years.
• US equity futures gradually edged higher overnight after the dust settled from the dovish FOMC and hawkish presser (ES +0.5%, NQ +0.7%).
• European equity futures indicate a positive cash market open with Euro Stoxx 50 futures up 0.5% after the cash market closed flat on Wednesday.

FX

• DXY ultimately strengthened in the aftermath of the FOMC with initial selling seen in reaction to the Fed's decision to cut interest rates by 25bps, which was as expected, and as the SEPs showed projections for two more cuts this year. However, the dollar rebounded during the post-meeting press conference, where Powell provided hawkish-leaning comments in which he noted that he feels they don't need to move quickly on rates and argued the need for further data to ensure higher inflation from tariffs is a one-time rise, while he called the cut a risk management cut amid labour market concerns and noted a meeting-by-meeting situation.
• EUR/USD took a breather after recent fluctuations, with two-way price action seen during US trade as all focus was centred on the Fed decision and presser.
• GBP/USD faded the knee-jerk reaction to the FOMC and reverted to sub-1.3700 territory, while attention turns to the BoE.
• USD/JPY swung between gains and losses in reaction to the Fed, with USD/JPY eventually reclaiming the 147.00 status, while the Japanese currency was not helped by disappointing Machinery Orders, and the BoJ also kick-started its 2-day policy meeting, where it is widely expected to keep rates unchanged.
• Antipodeans retreated with AUD/USD briefly pressured after disappointing jobs data which showed a surprise decline in headline Employment Change, while NZD/USD underperformed following weak GDP data for Q2 in which the economy contracted by 0.6% Y/Y (exp. 0.0%) and resulted in money markets fully pricing a cut at the RBNZ meeting in October with an off chance for an oversized 50bps reduction.
• PBoC set USD/CNY mid-point at 7.1085 vs exp. 7.1113 (Prev. 7.1013).
• Brazil Central Bank maintained the Selic rate at 15.00%, as expected, with the decision unanimous. BCB removed the reference to the continuation of the interruption of the rate hiking cycle and said it will remain vigilant, while it will evaluate whether maintaining the interest rate at its current level for a very prolonged period will be enough to ensure the convergence of inflation to the target. Furthermore, it stated that future monetary policy steps can be adjusted, and it will not hesitate to resume the rate hiking cycle if appropriate.

FIXED INCOME

• 10yr UST futures marginally rebounded off the prior day's lows after declining post-FOMC as the initial dovish reaction to the decision and dot plots was counterbalanced by a hawkish presser, although prices have since found a floor around 113.00.
• Bund futures languished beneath the 129.00 level following recent fluctuations and supply, while the data calendar for Europe is light today although there are several ECB speakers scheduled, including Lagarde, de Guindos, Nagel & Schnabel.
• 10yr JGB futures followed suit to the subdued performance in global counterparts as the BoJ kicks off its 2-day policy meeting.

COMMODITIES

• Crude futures were subdued after declining yesterday in a choppy fashion, despite the larger-than-expected draw in EIA crude stockpiles.
• Peru's President signed a modification contract, allowing Chevron (CVX) and Westlawn's formal entry into Peru.
• Spot gold was contained after ultimately retreating as the dollar strengthened due to Fed Chair Powell's hawkish tone at the post-FOMC presser.
• Copper futures struggled for direction following the mixed reaction to the Fed announcement and press conference.

CRYPTO

• Bitcoin rallied overnight with upward momentum picking up after climbing back above the USD 117k level.
• US SEC voted to approve generic listing standards for new crypto ETFs, which clears the way for a flood of new ETFs.

NOTABLE ASIA-PAC HEADLINES

• Hong Kong Monetary Authority lowered its base rate by 25bps to 4.50%, as expected, while HKMA Chief Executive Yue said the interest rate cut will have a positive impact on the property market and the economy.
• Huawei unveiled its new AI chip tech to rival NVIDIA (NVDA), with the Co. to launch its Ascend 950PR chips during Q1 2026 and plans new AI chips through 2028, while Huawei's Vice Chairman said the Co. will launch Taishan 950 SuperPod for general-purpose computing in Q2 2026.
• Japan is to revise investment rules for startups to woo foreign capital, according to Nikkei.
• New Zealand Finance Minister Willis announced the appointment of Haley Gourley to the RBNZ Monetary Policy Committee.

DATA RECAP

• Japanese Machinery Orders MM (Jul) -4.6% vs. Exp. -1.7% (Prev. 3.0%)
• Japanese Machinery Orders YY (Jul) 4.9% vs. Exp. 5.4% (Prev. 7.6%)
• Australian Employment (Aug) -5.4k vs. Exp. 21.5k (Prev. 24.5k, Rev. 26.5k)
• Australian Full Time Employment (Aug) -40.9k (Prev. 60.5k)
• Australian Unemployment Rate (Aug) 4.2% vs. Exp. 4.2% (Prev. 4.2%)
• Australian Participation Rate (Aug) 66.8% vs. Exp. 67.0% (Prev. 67.0%)
• New Zealand GDP Prod Based QQ SA (Q2) -0.9% vs. Exp. -0.3% (Prev. 0.8%, Rev. 0.9%)
• New Zealand GDP Prod Based YY SA (Q2) -0.6% vs Exp. 0.0% (Prev. -0.7%, Rev. -0.6%)

GEOPOLITICS

MIDDLE EAST

• Israel Secretary of State Dermer was scheduled to meet with White House envoy Witkoff in London last night to discuss the possibility of renewing negotiations on a comprehensive deal for the release of all hostages and an end to the war, via Axios' Ravid citing sources. Furthermore, Qatari officials are also in London and will likely hold separate meetings with the US envoy.
• Syrian President al- Sharaa told reporters that security talks with Israel could lead to results in the "coming days" and if a security pact succeeds, "other agreements" could be reached but "peace, normalisation" is not currently on the table, while he added there is no pressure on Damascus to reach a deal with Israel from Washington.

RUSSIA-UKRAINE

• Ukrainian President Zelensky said Russia continues to strike civilian targets, hitting energy infrastructure and railway facilities.

EU/UK

NOTABLE HEADLINES

• UK talks to join EU defence fund reportedly stalled over the participation fee, according to FT.
• ECB's Nagel said they are well advised to remain cautious given the uncertainties, and its approach of making decisions based on data and on a meeting-by-meeting basis has proven successful. Nagel added that with the current monetary policy stance, the ECB are well positioned to respond to unexpected changes.