5 Things You Need to Know to Start Your Day: Americas

Good morning. The dollar drops to the lowest level in eight months, traders are divided on how big a cut in interest rates the Federal Reser [View in browser]( [Bloomberg]( Good morning. The dollar drops to the lowest level in eight months, traders are divided on how big a cut in interest rates the Federal Reserve will deliver this week and coffee prices soar. Here’s what’s moving markets. — [David Goodman]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Dollar drops Traders kicked off a big week for markets by selling the dollar, with Bloomberg’s gauge of the currency dropping Monday to [its lowest level in more than eight months](. The move was driven by strength in the yen, which touched the [highest since July 2023]( amid speculation this week’s slew of central bank decisions will lead to a narrowing interest rate differential between the US and Japan. 25 or 50? For markets, the [big question]( going into the week is whether the Fed will opt for a 25- or 50-basis-point cut on Wednesday. Traders see that as a very close call, although they slightly boosted bets on a larger move today after virtually discounting the possibility entirely last week. That brought the yield on two-year US bonds back toward the lowest level in two years and weighed on the dollar. Analysts at Edmond de Rothschild summed up the mood, writing that “there has rarely been so much uncertainty over central bank intentions.” Steady stocks Still, stocks started the week in muted fashion, with Europe’s benchmark Stoxx 600 index and US equity futures keeping to narrow ranges after handy gains last week. There was little reaction in markets to news of a [second attemptÂ]( assassinate former President Donald Trump. Shares of Trump Media & Technology rose as much as 10% in premarket trading after the candidate said he has “absolutely no intention of selling” his stake when a lockup expires this week. Growth matters Beyond this week, [US economic growth]( not rate cuts, will be key to keeping the stock rally going, says Morgan Stanley’s Mike Wilson. The strategist says that "if the labor data weaken from here, markets can trade with a risk-off tone regardless of whether the Fed’s first move is 25 or 50 basis points." Goldman and JPMorgan also warn rates alone are less important for stocks, given the cloudy economic outlook. Meanwhile, Citigroup says the [platforms]( of both Trump and Kamala Harris appear negative for US equities, with the Democratic candidate’s plans to raise corporate tax seen having the biggest impact. Coffee surges A [cup of coffee]( is set to get even pricier as persistent supply disruptions push costs for premium arabica beans to the highest in 13 years. Futures surged as much as 2% to $2.6475 per pound in New York, the highest since 2011. Prices are up roughly 40% this year as shortages of the cheaper robusta beans stoke demand for the arabica variety favored by specialty chains. What we’ve been reading This is what’s caught our eye over the past 24 hours. - US [crackdown on cheap Chinese goods]( to Temu, Shein woes. - UK home-sellers [raise asking prices]( at twice the usual pace. - HSBC’s new CEO gets busy with[$2 billion in costs still to trim](. - [China’s deepening slowdown]( Xi’s tolerance for growth miss. - UK moves to shut down London firm in [Iran oil kingpin’s network.]( And finally, here's what Joe’s interested in this morning Good morning, and welcome to Fed week. I'm writing this from Huntington Beach, California, where my podcast co-host Tracy Alloway and I will be doing a live episode of Odd Lots at the Future Proof conference, with John Rogers, the founder of Ariel Investments. As I type this, the odds of a 50-basis-point rate cut on Wednesday have narrowly crept into the lead, but it's still a coinflip. This is the first Fed rate decision in a long time where there's really some drama and ambiguity about what Powell & Co. are going to do. What's remarkable is how fast things have changed in the last few days. A week ago, odds of a 50-basis-point cut were at 30%. A month ago they were closer to 25%. But last week's inflation reports translate into a cool reading for the central bank’s preferred gauge of price pressures, the core personal consumption expenditures price index. And the various Fed watchers have picked up dovish signals from the media. Anyway, we'll know soon enough. If we do get 50, it will further cement how weird this whole cycle has been. One of the reasons people have been skeptical of an aggressive start is that historically, a move like 50 is associated with crisis. But right now, stocks are within a whisker of all-time highs. The economy still seems to be showing decent growth. And the unemployment rate, while rising, is still at historically low levels. The problem with almost any study of Fed cycles is that we just don't have that many to go on. The data set is small. And not only is it small, the circumstances are always different. 2020 was very different from 2008, which was very different from 2000. It's obviously useful to know history, but history guides people astray all the time. When inflation really started taking off in 2021, people looked back to the 1970s, since that was the last time the US really had a serious inflation problem. But the conditions and causes were very different. And when the Fed started hiking aggressively, there was a widespread view that it would cause a recession (as during the Volcker shock) but again, that didn't play out as expected. For various reasons (which will be discussed for decades to come) the dynamics turned out to be very different. Just in all kinds of ways, the last 4.5 years have been unlike anything that really came before it. And so while it may seem weird to be going 50 at a time when there's no crisis (and probably not even a recession under way) it's important to remember that for years now, the past just hasn't been a particularly useful guide. Joe Weisenthal is the co-host of Bloomberg’s Odd Lots podcast. Follow him on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Stay updated by saving our new email address Our email address is changing, which means you’ll be receiving this newsletter from noreply@news.bloomberg.com. 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