The stock markets are mixed after the hawkish rate cut by Fed overnight but treasury yields are back under pressure. Dollar rose mildly after the announcement but there was no follow through buying. Yen surges broadly today, riding on falling yields, followed by Swiss Franc. Australian Dollar is the weakest one on rise in unemployment rate, followed by New Zealand Dollar.

Technically, AUD/USD’s break of 0.6807 minor support suggests completion of corrective rebound from 0.6677. Further fall should be seen to retest this low. EUR/AUD’s rebound from 1.5905 is accelerating and break of 1.6308 could pave the way back to 1.6786 high. USD/JPY lost momentum well ahead of 109.31 resistance. Focus is back on 107.45 minor support and break will bring deeper fall back towards 104.45 low.

In Asia, Nikkei is up 0.52%. Hong Kong HSI is down -1.24%. China Shanghai SSE is flat. Singapore Strait Times is down -0.20%. Japan 10-year yield is down -0.0348 at -0.217. Overnight, DOW rose 0.13%. S&P 500 rose 0.03%. NASDAQ dropped -0.11%. 10-year yield dropped -0.026 to 1.786.

Fed cut the policy rate by -25 bps to 1.75-2.00% as expected. The decision was not unanimous as three voters dissented. Boston Fed President Rosengren and Kansas City Fed President Esther George voted to maintain the policy rate unchanged. This has been expected as they did the same previously. The surprise came from St. Louis Fed President James Bullard who proposed a deeper cut of -50 bps.

The economic projections were little changed from June, although the members expressed greater concerns about the trade war uncertainty. The median projections of federal funds rate are at 1.9% in 2019 and 2020, then rises to 2.1% in 2021. Just based on this median figure, with federal funds rate at 1.75-2.00%, Fed is already done with it’s “mid-cycle” adjustments.

However, based on the dot plot, it’s not totally certain and there is still risk of further rate cut this year. 7 members have penciled in another cut to 1.50-1.75% this year. 10 members have penciled in rate between 1.75 and 2.25%. Some of the “hawks” could switch if outlook worsens.