Kevin Hassett, an economic adviser at the White House, believes the Federal Reserve can lower interest rates this month. There may even be a chance for a larger cut of 50 basis points based on recent strong economic data. In the coming weeks, the President will announce a new Chair of the Federal Reserve, with Kevin Hassett as a possible candidate. Current data shows mixed performance for the US Dollar against major currencies, particularly a strength against the Australian Dollar.

Currency Performance Updates

The updates outline how major currencies are moving against one another. The US Dollar has weakened by 0.27% against the Euro and by 0.29% against the British Pound. However, it has risen by 0.42% against the Swiss Franc. This information serves as a guide, but it’s important to note that market conditions are changing. Investors should do their own research before making any financial decisions, keeping in mind the risks involved. FXStreet points out that it does not provide personalized investment advice, and any opinions shared are those of the author only. With a prominent White House adviser advocating for a 50 basis point cut, expect greater volatility in interest rate derivatives. The markets are still adjusting to the three rate cuts from the Fed this year, but this new push hints that the easing cycle could speed up. Traders might want to consider options on Secured Overnight Financing Rate (SOFR) futures, preparing for rates to decline faster than expected through the first quarter of 2026.

Impact on Financial Markets

The US Dollar is showing signs of weakness, a trend likely to continue if the Fed makes significant cuts. The CME FedWatch tool suggests there is nearly a 90% chance of a cut at the next meeting, a notable increase from last week. This creates a buying opportunity for call options on pairs like EUR/USD and AUD/USD, anticipating further decline of the dollar into the new year. This dovish outlook supports equity markets, which have already seen gains. Call options on the S&P 500 and Nasdaq 100 indices could be appealing, as lower borrowing costs are expected to enhance corporate earnings. The VIX, a measure of market volatility, has dropped to a yearly low of 13.4, signaling traders expect a smoother upward trend, bolstered by Fed liquidity. Looking back, a potential 50 basis point cut would be a significant increase from the three consecutive 25 basis point cuts we observed between September and December 2025. This bold approach comes even as core inflation remains steady at 3.2% in the latest report from November. However, a slowdown in wage growth shown in the latest jobs report gives the Fed justification to act. For those trading commodities, this situation is very favorable for gold. As nominal rates decrease while inflation expectations remain stable, real yields are lower, making gold—a non-yielding asset—more appealing. It’s a good time to consider long positions in gold futures or call options, particularly as gold is currently trading above $4,200 an ounce. Create your live VT Markets account and start trading now.

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