Fed Preview and FX Outlook (with Vonnie Quinn)

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DZ Bank 7.0
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Sonya Marten 7.5

Fed Preview and FX Outlook (with Vonnie Quinn)

dxy

We've seen the dollar weaken pretty much across the board as the market focuses on this upcoming Fed rate cut. The strategist attributes recent dollar weakness to anticipation of the Fed cut, suggesting a near-term downward bias.

2 calls

no reliable edge (random outcomes)

yields

The fact that the yields have risen again... The yield, 10 year yield, the US is going to continue to rise a moderate... reflecting fiscal concerns.

5 calls

+10

slightly better than random

8/25/2025 2:04:17 PM	medium term down	20 days later	-5.26%	+5.26%

Sonya Marten

The Fed is likely to cut. The best strategy for Jerome Powell is to accompany this with very cautious wording, highlighting that the future path is not set and the market should not expect successive rate cuts.

This is designed to make clear the Fed acts data-dependently and will not be pressured into more aggressive cuts, also by the White House.
Sonya Marten

A Kevin Hassett nomination as Fed Chair would be seen as dovish and close to Trump, adding uncertainty. The market had other preferences.

There are concerns Trump may try to influence the rotation of regional Fed members.
Sonya Marten

Rising yields reflect some optimism on the U.S. economy, pricing out of aggressive cuts, and fiscal concerns. The curve will steepen as the short end sees more Fed cuts coming.

Fiscal spending is an issue in the U.S. and will remain so for years to come.
Sonya Marten

Euro strength is mainly a dollar move. The euro has little strength of its own given a difficult economic situation in the Eurozone, particularly in Germany.

A big reform agenda doesn't seem tackled at all. It's easy to be dollar-bearish, much harder to be euro-bullish.

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