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In an interview conducted by Alarabiya TV, Mohamed Hashad, Head of Research and Development at Noor Capital and a member of the American Association of Technical Analysts, commented and analyzed the performance of financial markets.
Q: Will the Fed cut interest rates in September? And if so, will it be 25 or 50 basis points? What’s your view, especially after producer price data came in below expectations?
A: U.S. inflation data, particularly the Producer Price Index, showed an unexpected decline in August. The actual reading came in much lower than forecast, at -0.1. This creates more room for the Fed to begin cutting rates at next week’s meeting. Since the start of the year, Jerome Powell has been cautious, holding off on cuts because he wanted to fully assess the negative effects of Trump’s tariffs and closely monitor macroeconomic data. His focus has mainly been on producer prices and labor market trends. Even the latest jobs report showed the U.S. economy added only 22,000 jobs. All of these factors point toward a likely rate cut at the upcoming meeting. According to the FedWatch tool, there is a 93% probability of a 25 basis point cut and just a 7% chance of a 50 basis point cut. Personally, I view a 25 basis point cut to start with.
Q: If today’s CPI numbers surprise to the upside, could that change the Fed’s decision? Or were Powell’s recent remarks clear that the focus is more on labor market weakness?
A: I think a surprise CPI reading could reshape the outlook. Remember, Powell has kept the door open instead of committing to a cut, a hold, or a hike. If inflation comes in above expectations, the Fed may delay cutting rates. Powell’s strategy relies on monitoring several months of economic data and inflation trends—not just a single month’s reading.
Q: What does this mean for the U.S. dollar, which has already fallen 10% on the dollar index since the start of the year? Do you expect losses to continue?
A: Yes, the decline could continue if Powell moves ahead with rate cuts. That would keep downward pressure on the U.S. dollar, which is already at its weakest level since January 2022. A cut would likely push it lower against the major currency basket.
Q: And what about U.S. stock markets, which are hitting fresh record highs? How do you view the outlook there?
A: U.S. markets are still on a winning streak. The Nasdaq Composite is at record levels and the S&P 500 is soaring. Equities have benefited enormously from expectations of rate cuts, since lower borrowing costs improve the operating environment for companies and boost profitability. Today’s market is firmly in positive territory, driven by Oracle’s strong performance on the back of robust AI-powered cloud computing results. Investors are also paying close attention to the infrastructure race. Meanwhile, GameStop shares surged more than 15% after strong Q2 earnings and the announcement that the company now holds $528 million in Bitcoin, which has drawn significant investor interest. Overall, it’s a bullish environment for U.S. equities.
