Despite the unprecedented actions taken by the Federal Reserve, Treasury, and FDIC this morning, fed fund futures continue to price in a 25bp rate cut to 1.25 percent on October 29. While the actions spurred optimism in the markets initially, they have failed to translate into larger moves throughout the day. Indeed, considering the probable negative impact of the financial crisis on economic growth in the US and signs of easing inflation pressures, the members of the Federal Reserve may find themselves cutting rates again before year-end, which leaves downside risks open for the US dollar.
Source: Bloomberg