Vanguard goes short on the US dollar and buys in, pointing directly to the over-betting on the Fed's rate cut

Vanguard bought the US dollar this week because the global leading asset management company believes that the market's bet on the Fed rate cut has gone too far. The actively managed fund with a size of up to $1.7 trillion closed out its newly established short interest in the US dollar in July, expecting that the Fed's easing cycle will not be as aggressive as the market expects. Ales Koutny, Vanguard's head of international rates, stated that this move is not related to whether the decision-makers will cut rates by 25 or 50 basis points on Wednesday. "We see a lot of short positions in the US dollar, but US data remains strong," Koutny said. "Unless the data significantly deteriorates, we believe that the number of rate cuts by the Fed will be lower than the market expects." Koutny expects the rate cut on Wednesday to be 25 basis points. He also mentioned that the US economy does not support rate cuts aimed at avoiding a recession. Swaps prices indicate a 52% probability of a 50 basis point rate cut by the Fed, with a total reduction of 114 basis points by the end of the year. (Bloomberg)