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Wall Street Gains Propel Optimism for Fed Rate Cuts; Yen Declines

2 weeks ago

Wall Street surged on Tuesday, buoyed by growing optimism that the Federal Reserve would initiate interest rate cuts later this year. The positive sentiment in the U.S. market led to a decline in the yen, as investors adjusted their positions in response to evolving central bank policies.

The yen weakened after remarks from Japan’s top currency official, Masato Kanda, who indicated that government intervention in the currency market would not be necessary if market functions were stable.

Global equity markets experienced a lift as investors reassessed their expectations regarding Fed policies, particularly in light of softer-than-expected U.S. jobs data. With investors cautiously increasing their bets on Fed easing in 2024, the bond market responded positively to signs of a cooling U.S. labor market.

Following several sessions of decline, the yield on U.S. 10-year Treasuries remained relatively unchanged on Tuesday. Fed Bank of Richmond President Thomas Barkin expressed his expectation that higher rates would further slow the economy and help cool inflation toward the Fed’s 2% target. Meanwhile, his counterpart from the New York Fed, John Williams, emphasized that while rate cuts were inevitable, the timing would depend on comprehensive data analysis.

In Australia, the central bank maintained its interest rates at a 12-year high, a move widely anticipated by market participants. Officials from the Reserve Bank of Australia indicated that they expect it will take some time before inflation stabilizes within the target range.

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