Dollar Rebounds on Hawkish Powell

Group 1: Federal Reserve Actions and Economic Outlook - The FOMC voted 11-1 to cut the federal funds target range by -25 basis points to 4.00%-4.25% and indicated downside risks to employment have increased while inflation remains elevated [3] - The Fed's dot plot projects the fed funds target at 3.625% by the end of 2025, signaling another -50 basis points of rate cuts this year, with a target range of 3.375% for the end of 2026 [3] - The FOMC raised its 2025 US GDP estimate to +1.6% from +1.4% and maintained its core PCE inflation estimate at +3.1%, which is above the Fed's target of 2% [4] Group 2: Labor Market and Inflation Insights - Fed Chair Powell noted that revised job numbers indicate the labor market is no longer solid, and the Fed's interest rate cuts aim to achieve a more neutral position to support the labor market [5] - Powell also mentioned that higher goods prices are contributing to inflation and are expected to continue rising into next year [5] Group 3: Currency Market Reactions - The dollar index rose by +0.22% after recovering from a 3.5-year low, initially retreating after the FOMC's rate cut announcement but rebounding on hawkish comments from Fed Chair Powell [1] - Concerns over Fed independence may undermine the dollar, as potential political actions could lead foreign investors to divest from dollar assets [6] Group 4: Housing Market Data - In August, US housing starts fell -8.5% month-over-month to 1.307 million, below expectations of 1.365 million [2] - Building permits also unexpectedly declined by -3.7% month-over-month to a 5.25-year low of 1.312 million, contrary to expectations of an increase to 1.370 million [2]