Data vacuum filling is imminent, heated debates in the U.S. Treasury market: Will the Federal Reserve cut interest rates again next year?
A wave of data is coming! After three consecutive interest rate cuts this year, will the Federal Reserve choose to hold back next year, or will it be forced to adopt a more aggressive easing policy?
As a series of key economic data is about to be released, intense debates in the U.S. Treasury market regarding the future interest rate cuts by the Federal Reserve are reaching a fever pitch.
These reports will help answer a core question: After three consecutive interest rate cuts, is the Federal Reserve's easing policy nearing its end, or must it take more aggressive action?
Traders are building options positions, which will profit if market sentiment shifts to betting on the Federal Reserve cutting rates in the first quarter of next year.
Data is king
All of this has intensified the market's focus on the upcoming data releases. The U.S. may add 50,000 jobs in November.
The employment data released this week may carry less weight, as the government shutdown complicates data collection.
The focus has shifted to the report that will be released at the beginning of next month.
If the November data is comparable to September, it could trigger a sell-off, pushing the 10-year Treasury yield up to 4.25%.
They expect the Federal Reserve to end this round of easing when rates reach around 3.2%.
New Chair
Officials also have differing views on the policy path, and like investors, they are waiting for data to indicate direction.
As Powell's term is set to end in May next year, investors' attention may soon shift from economic data to his successor.
A new chair "means the Federal Reserve will be more dovish, regardless of whether the economy is running a bit too hot.
The labor market may eventually become the excuse for rate cuts; although we expect the unemployment rate will not rise significantly, if the labor market looks a bit weak, that could be the reason for the new chair to cut rates.