White House Senior Advisor Kevin Hassett spoke at a conference about the economy, focusing on GDP forecasts and the government shutdown. He estimated GDP growth could be between 1.5% and 2% for the current quarter but warned that the shutdown would affect these figures. Hassett also mentioned that the Federal Reserve is unlikely to cut interest rates by 50 basis points. Although the US dollar is strong, inflation levels still need improvement. He predicted a GDP growth of around 2% for the year.

Fiscal Outlook and Currency Trends

He forecasted a $600 billion drop in the deficit due to higher tariff and tax revenues and reduced spending. The US trade and fiscal deficits are decreasing. He confirmed the dollar’s historical strength but cautioned that using inflation to tackle the deficit might lead to financial problems. The currency table shows how the US Dollar changed against major currencies. The dollar was stronger than the Japanese Yen but weaker compared to several others in certain pairings. FXStreet provides market insights and stresses the importance of doing your own research for investment decisions. They offer newsletters and market analysis but do not give direct investment advice. There are strong signs for a 25 basis point rate cut, but a 50 basis point cut seems unlikely for now. This comes after the Federal Reserve kept rates above 5.25% for much of 2024 to control inflation. Using derivative plays on interest rate futures could help investors prepare for this expected change.

Economic Stability Amid Challenges

The prediction for annual GDP growth around 2% indicates we are achieving the soft landing many thought was impossible in 2023. Although the government shutdown adds short-term uncertainty, the overall economic situation appears to be stabilizing. This environment indicates strategies for range-bound markets with some volatility, possibly using options on major indices. The US Dollar remains historically strong, a trend seen since the aggressive rate hikes of 2022-2023, with the Dollar Index (DXY) typically staying above 103. However, with Fed rate cuts on the horizon, this long-standing strength might change. It’s essential to watch for potential weakness, making options on currency ETFs or trading forex futures on pairs like EUR/USD very appealing. The strong US Dollar against the Japanese Yen shows a significant policy gap that has been profitable for years. In March 2024, the Bank of Japan ended its negative interest rate policy after eight years. Any further tightening from the BOJ, along with cuts from the Fed, could lead to a major reversal in USD/JPY. Rising gold prices approaching $4,200 reflect market expectations of lower interest rates, which make holding gold more attractive. Concerns about unresolved inflation also support gold as a hedge. Traders may want to consider call options on gold futures or related mining ETFs to capitalize on this trend. Create your live VT Markets account and start trading now.

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