The Future of Foreign Exchange Markets 第113回［田嶋智太郎］
Tomotaro Tajima Profile
Economist. President and CEO of Alfintz. Born in Tokyo in 1964. After graduating from Keio University, he shifted careers following his stint at the current Mitsubishi UFJ Securities. He analyzes and studies a broad range from finance and the economy in general to strategic corporate management, and even individual asset formation and capital management. He serves as a lecturer at lectures, seminars, and training sessions hosted by private companies, financial institutions, newspapers, local governments, and various business associations, with about 150 lectures per year. He has contributed to and provided commentary for numerous printed media, including Weekly Gendai “Rules of Online Trading” and Examina “Money Maestro Training Course.” He has also written columns on many websites about stocks, forex, etc., earning high regard as a stock and forex strategist. He has also written the Home Economics section of Freely National Corp.’s “Dictionary of Basic Japanese Terms.” He has become a regular on television (TV Asahi “Yajiuma Plus,” BS Asahi “Sunday Online”) and radio (MBS “Tsuruchi’s Asaichi Radio”), and currently serves as a regular commentator on Nikkei CNBC “Market Wrap” and Daiwa Securities Information TV “Economy Marche.” His major DVDs include “Very Easy to Understand: Tomotaro Tajima’s FX Introduction” and “Very Easy to Understand: Tomotaro Tajima’s FX Practical Technical Analysis.” His major books include “Manual for Revaluing Your Assets” (Paru Publishing), “FX Chart ‘Formula for Profit’” (Alchemix), “Why Can FX Make You Asset Rich?” (Texts), and many others. His latest publication is “How to Profit by Riding the Rising U.S. Economy” (Freely National Corp.).
※This article is a republication and revision of an article from FX攻略.com, September 2019. Please note that market information written in the body may differ from the current market.
The market’s expectations for U.S. rate cuts feel a little excessive
On June 4, Fed Chair Jerome Powell stated in a speech: “We will monitor the impact of trade negotiations on the U.S. economy and take appropriate action to sustain growth.” This sparked a rapid market expectation of U.S. rate cuts, and major U.S. stock indices quickly rebounded from their near-term lows, regaining the declines since early May. At the time of writing, the U.S. stock market felt as if a “moderate-temperature market” had returned.
Since Powell’s remarks, expectations for rate cuts have quickly spread in the market, but personally I think this has gone a bit too far. And that excessive stance did not change much even after the June (18–19) Federal Open Market Committee (FOMC) meeting.
As is known, the June FOMC results were largely in line with market expectations; the statement removed the phrase “be patient,” which signaled a dove-like tone beginning to show. Still, Powell, at a press conference, said, “If needed, we are prepared to take action,” while also noting that “cuts depend on the data” and that “the FOMC wants to watch and see,” indicating at least not an eagerness to cut immediately.
Regarding the dot plot, which showed the projections of participants, among 17 participants, seven saw potential for a 0.5 percentage point cut within the year, while eight saw the policy rate staying the same within the year; opinions split into two camps.
In the market, some expect two to three rate cuts within the year. However, the plurality among FOMC participants (eight) foresee zero cuts this year. This divergence is extreme, and some adjustment is likely in the future.
Moreover, with U.S. stock prices at or near all-time highs, it seems implausible to urge an immediate rate cut at the July FOMC. Powell has suggested that “prevention precedes cure,” but the terms “economic activity” and “illness” carry different meanings.
Nevertheless, there remains a decent chance that the Fed might cut rates “as a preventive measure,” albeit with caveats, which could risk turning the U.S. economy into a bubble. While preventing a “sickness” carries no inherent harm, overly precautionary measures to safeguard the economy could lead to a separate problem—an eventual “bubble.” For President Trump seeking a second term, a late-blooming pre-election bubble might be favorable or even desirable.
