The Federal Reserve may "coo" to make up for the impact of cutting less than 50 basis points!

Charu Chanana, global market strategist and head of forex strategy at Saxo Markets, stated that overall, the message being clearly conveyed by global data is that we are entering an economic slowdown.

What we need to focus on is whether this slowdown will occur suddenly, which is what makes the market in a more difficult position. If this is a more moderate slowdown, and the Federal Reserve is prepared to take action and respond to it, then the market may continue to remain in a relatively comfortable position.

Chanana pointed out that even after the Fed starts cutting rates, in most cycles, a recession often comes after the first rate cut. Therefore, people should proceed with caution and not immediately buy on dips, because every time the U.S. economy slows down, it initially appears to be entering a soft landing phase, but in reality, achieving a soft landing is very difficult.

Chanana mentioned that certain areas of the U.S. economy are showing signs of slowing down and are being impacted by high interest rates. However, other areas of the U.S. economy are also demonstrating strong resilience. Some surveys by the Fed suggest an economic slowdown, but other hard data still remains strong on the margin, which explains why the information we received in last Friday's employment report was so confusing.

Of course, the U.S. economy is indeed slowing down. The impact of high interest rates is gradually spreading to more and more social sectors, but a comprehensive collapse does not seem imminent.

Chanana noted that another factor to watch is how the artificial intelligence theme will develop, as it has been driving the U.S. stock market for the past few months. We have seen a slight decline in spending on AI projects, as there have been doubts raised about it, and investments have not yet translated into returns.

Regarding the outlook for the U.S. dollar and its current performance, Chanana stated that the dollar has reacted to expectations surrounding the Fed possibly starting easing policy as early as next week, "We have also seen some pressure. If you look at speculative dollar positions, data from the past two weeks has turned net short. So there are some reasons to be concerned, but I wouldn't be bearish on the dollar right now."

If the U.S. economy has issues, the situation in the Eurozone economy is even more severe. It will be difficult for funds flowing out of the dollar to find alternatives, coupled with the approaching U.S. elections, the dollar may continue to receive support. She said, "Therefore, I don't think the dollar will see sustained declines."

Regarding the upcoming Fed meeting in September, Chanana said, "My inclination is a 25 basis point rate cut, as I mentioned, there is no reason to panic. If the Fed were to cut rates by 50 basis points immediately, it could cause some panic."

She added, "I think they will use very dovish language and leave room to cut rates by 50 basis points in November or December if necessary. A 25 basis point rate cut along with very dovish remarks will offset the impact of not cutting rates by 50 basis points now."