Global Economic Fundamentals

Where is the talk of raising rates? Central banks, the major currencies at least, have been focused on lowering rates, as far as I know.



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to make it more clear what im talking about i made a detailed breakthrough:
While some central banks are focusing on lowering interest rates, the U.S. Federal Reserve remains in a unique position due to ongoing global and domestic challenges. Here’s why the Fed has raised interest rates significantly over the past few years and why the recent rate cuts are most likely a temporary adjustment rather than the start of a long-term easing cycle:

1. Reasons for Increased Interest Rates
The current era of high interest rates didn’t emerge randomly—it was shaped by a series of extraordinary global events:
a) COVID-19 Pandemic

1. The pandemic caused unprecedented economic disruptions worldwide. Governments, including the U.S., responded with massive fiscal stimulus packages, injecting trillions of dollars into the economy to avoid collapse.
2. This surge in spending and liquidity, combined with supply chain disruptions, created significant inflationary pressures.
3. As the economy recovered, demand outpaced supply, driving prices higher and forcing the Federal Reserve to respond by raising interest rates aggressively starting in 2022.

b) War in Ukraine

1. The war in Ukraine in early 2022 caused further economic instability, particularly by disrupting energy and food markets.
2. Energy prices soared as a result of sanctions on Russia, one of the world’s largest energy exporters. This added to inflationary pressures globally, including in the U.S.
3. Rising costs of essential goods like oil, gas, and wheat further pushed the Federal Reserve to tighten monetary policy to combat inflation.

c) Structural U.S. Economic Challenges

1. Persistent deficit spending by the U.S. government and reliance on borrowing to fund it have added to inflationary pressures.
2. A strong labor market with rising wages has further supported consumer demand, keeping inflation from falling to the Fed’s 2% target.

2. Why the Recent Rate Cuts Are Temporary
The Fed’s strategy of raising rates to combat inflation hasn’t fully achieved its objectives yet. Here’s why the recent cuts are likely just a temporary adjustment rather than a long-term policy shift:
a) Inflation Is Still a Threat

1. Although inflation has cooled from its peak of 9.1% in 2022 to 2.9% in late 2024, it’s still above the Fed’s target of 2%. Recent rate cuts could be seen as tactical, but they don’t signal the end of the tightening cycle.
2. Factors like rising energy prices, geopolitical risks, or supply chain disruptions could easily reignite inflation. If that happens, the Fed will likely resume raising rates.

b) “Higher for Longer” Policy

1. The Federal Reserve has repeatedly emphasized its “higher for longer” stance, meaning it intends to keep rates elevated for an extended period to ensure inflation is fully under control. Cutting rates prematurely could undermine this goal.

c) The “Game” Is Not Over Yet

1. The Fed’s battle against inflation is a long-term process, and we are only partway through it. The recent rate cuts are more of a tactical pause, allowing the Fed to assess the economy’s reaction.
2. Given the strong labor market, high deficit spending, and potential for global shocks (e.g., energy price spikes or geopolitical conflicts), the game is not finished. The Fed’s primary goal remains price stability, and it will act if inflationary pressures return.

d) Lessons from the 1970s

1. History has shown that cutting rates too early can cause inflation to return stronger, as seen during the 1970s “stagflation” era. The Fed is cautious to avoid repeating this mistake, which is why any easing is likely temporary and closely monitored.

3. Why Rates May Rise Again

1. Strong Economy: The U.S. economy remains resilient, with a strong labor market and robust consumer spending. These factors provide the Fed with room to raise rates further if needed.
2. Global Uncertainty: Events like the war in Ukraine and energy market disruptions continue to pose inflationary risks. The Fed will act preemptively if these risks materialize.
3. Deficit Pressures: The U.S. government’s reliance on borrowing makes higher rates essential to attract investors to Treasury bonds.

Detailed Breakthrough
To make this clearer, here’s a structured breakdown of why the Federal Reserve’s tightening cycle isn’t over yet and why the recent rate cuts are likely a temporary measure:

1. The Problem Began with COVID-19: Trillions of dollars in stimulus packages flooded the economy, creating a massive surge in demand while supply chains struggled to recover. Inflation surged as a result.
2. The War in Ukraine Amplified Inflation: Energy and food prices soared due to sanctions on Russia, disrupting global trade. This created additional pressure on the Federal Reserve to act.
3. Inflation Is Sticky: Even though inflation has dropped from its peak, it remains above the 2% target. Cutting rates too soon could allow inflation to reaccelerate, which the Fed wants to avoid.
4. The Labor Market Is Too Strong: Low unemployment and rising wages continue to fuel consumer spending, which can sustain inflationary pressures.
5. The “Game” Isn’t Finished: The Federal Reserve’s rate hikes since 2022 have achieved progress but haven’t fully solved the problem. The recent rate cuts are a tactical adjustment, not a sign of policy reversal.

The recent rate cuts are not the end of the tightening cycle—they are a temporary recalibration. Inflationary risks, a resilient economy, and global instability suggest that the Federal Reserve may raise rates again if necessary. The "game" of addressing inflation and stabilizing the economy is still in progress, and the Fed remains prepared to act.

I want to clarify that my news overviews are not focused on predicting short-term movements like today or tomorrow. Instead, I analyze the broader picture to identify the general main trend—where it's heading and what we can expect over time.
During certain periods, there might be corrections or pullbacks, and that's completely normal. However, these are not signs of a trend reversal but rather temporary adjustments within the larger trend. My goal is to understand the bigger picture to navigate the market with a clear perspective.

Personally, I don’t give much attention to what will happen today or tomorrow, nor do I base my trading decisions on what TV or mainstream media say. Their narratives are often designed to calm the public and prevent panic, rather than to truly prepare you or help you make money.
To succeed in this market, you need to think differently from the majority of traders and investors. It’s this alternative perspective that allows you to join the 1-2% of winners instead of the crowd of losers. By focusing on the bigger picture and understanding the deeper trends, you can navigate the market with clarity and make informed decisions that set you apart.
In this context, the news calendar should never be treated as a trading signal. Instead, it should be used to calculate the approximate volatility during upcoming news events. This allows you to adjust your strategy, such as widening your grid step before the data is released.
What matters isn’t whether the market moves up or down during those moments, but how many pips it could potentially move. By preparing for volatility instead of chasing direction, you position yourself to manage the market’s behaviour effectively and profitably.

The market is not closed tomorrow.

US30 closes at 6.00pm GMT

Gold closes at 7.30pm GMT