HSBC stated that if the Federal Reserve cuts interest rates by 25 basis points on Wednesday (September 18) and signals further gradual policy easing, the US dollar index may rise. Standard Chartered Bank warns that the Federal Reserve should not cut interest rates by 50 basis points as it may see an increase in unemployment rates in September.

Paul Michael, a foreign exchange analyst at HSBC, said in a report that it is still difficult to say whether the Federal Reserve will cut interest rates by 25 basis points or 50 basis points. HSBC Economics expects the Federal Reserve to start with a 25 basis point interest rate cut, while hinting at further policy easing in the future, but not significantly

Michael said that this situation will lead the US dollar to "shift towards a better foundation," especially considering the market's overpricing of interest rate cuts and signs of excessive short positions in the US dollar.

Standard Chartered Bank stated on Monday that a 50 basis point rate cut by the Federal Open Market Committee (FOMC) could be worse than a 25 basis point cut.

The economic data did not fully explain the consequences of cutting interest rates by 50 basis points at the upcoming meeting

Standard Chartered Bank also added, "Making a mistake while cutting interest rates by 50 basis points may be worse than making a mistake while cutting interest rates by 25 basis points

The bank emphasized that Federal Reserve Chairman Powell and the Fed cannot disappoint the market. The bank believes that there is a greater risk of a 50 basis point interest rate cut, as it could lead to an increase in the unemployment rate in September.

What about after that?

Standard Chartered Bank believes that a 25 basis point rate cut is effective, with a clear message that the FOMC will pay attention to reasonable conditions for a 50 basis point rate cut.

For market participants who pay close attention to interest rate changes, they may also want to pay attention to treasury bond and bonds, because these instruments are directly affected by the basic position of interest rates.

Steven Englander, Managing Director and Global Head of G10 Forex Research and North American Macro Strategy at Standard Chartered Bank, predicts that the stock market will remain resilient due to strong risk appetite.

He pointed out that investors expect the Federal Reserve funds rate to fall by 235 basis points in the next year and drop below 3% by September 2025.

The timing of interest rate cuts, whether starting from September or January, is not as important as the general trend of loose monetary policy. He believes that market confidence in the Federal Reserve's ability to manage inflation helps maintain risk appetite.

The elasticity of the market reflects the fact that what really matters is that the Federal Reserve will begin a series of interest rate cuts, and the inflation outlook is optimistic enough to give them the confidence to persevere. Therefore, this will be a resilient market where interest rates will converge and risk appetite will remain strong, "he said.

He expects the US dollar to weaken by the end of this year or early next year, further supporting the market's risk appetite.

He holds an optimistic attitude towards the Indian stock market, believing that its steady growth has created a favorable investment environment for global investors.

Economic growth will slightly slow down, but not significantly. The market environment should continue to be very positive, but I believe global investors will consider investing their funds in India, "he said.