[Chart Update] The end of preventive rate cuts! Fu Peng interprets the signals from Powell's Federal Reserve meeting【Fu Peng's Article】

In addition, the class representative also announced the establishment of a dedicated community for purchasing users. In addition to daily content from Fu Peng, members will receive daily trading focus briefings, noteworthy research reports, recommended electronic reading lists, and extended reading materials. Everyone is encouraged to ask questions and engage in discussions within the community to improve together. Users who join the column can scan the QR code in the image below to add the assistant and enter the exclusive group chat for "Fu Peng Says."

Early this morning, the Federal Reserve announced the results of its interest rate meeting, lowering the benchmark interest rate by 25 basis points to 3.75%-4.00%, and will stop balance sheet reduction on December 1.

It is noteworthy that Powell stated in the press conference: even with missing data, the economy appears to show no significant changes and remains stable, with no signs of a worsening labor market. The current interest rate level is within the range of many estimates for the "neutral rate," and the current monetary policy is slightly restrictive, with the balance sheet expected to remain stable for some time.

"There are no issues on the economic front, and we currently see no signs of worsening in the labor market; the interest rate is already at a reasonable 'neutral' level."

Powell said that the rate cut is a risk management consideration, essentially making it clear that this is a preemptive rate cut, not one triggered by existing economic employment issues.

This statement is particularly crucial for U.S. Treasury yields, especially the 10Y, returning to around 4.1% rather than breaking below the converging triangle that has persisted for three years (which I have mentioned multiple times in my column group chat as a break below the converging triangle indicating recession);

Ultimately, this suggests that this is the last rate cut, with significant internal divisions within the Fed, and Powell repeatedly mentioned the upward risk of inflation in his remarks, which is a significant shift from the previous quarter when there was more concern about employment (this time it is clear that there are no signs of worsening employment) and the renewed emphasis on upward inflation risks has shifted the focus back.

He repeatedly dispelled market expectations for further rate cuts in December. Of course, this is definitely a precautionary rate cut, and if there are no substantial economic issues and no problems in employment, the market's excessive expectations will certainly inflate bubbles. This also emphasizes the current question of whether AI is in a bubble:

• Investment in artificial intelligence has become a clear source of economic growth.
• The current situation is different from the "internet bubble" era, which had obvious bubbles.
• At that time, many were just concepts rather than actual operating companies; it was indeed a clear bubble. This time, companies have actual revenues and profits.
• There is no significant leverage seen in banks and the financial system.

Of course, it mainly states that there is currently no obvious bubble, and it is different from the 2000 internet bubble, with not much financial leverage. This is certainly a way to support the market, but it is evident from the market's reaction that if there are no further "rate cuts," the market is more inclined to amplify volatility.

Clearly, regardless of whether there is a bubble, the super-concentrated structure of the market makes its vulnerability and sensitivity to interest rate expectations very high, and the response is very direct; if there is no support, then there is less courage to act Somewhat restrictive policies also serve as a form of protection for the market. With increased investment, decent consumption, inflation not meeting expectations, and no major issues in employment, taking action too quickly and too early would fuel the AI stock market bubble, which is not the right choice.

Latest Outlook on Major Asset Classes

Overall, the Federal Reserve's preemptive interest rate cuts have ended, and we will have to wait until 2026 to see how things unfold.

As a result, the market's reaction has seen the core 10Y U.S. Treasury yield return to 4.1%, still converging within that large triangle.

Gold (XAU) needs attention; last week I mentioned the easing of geopolitical tensions and the reduction of risk premiums from the U.S.-China thaw, which has quickly dissipated prices.

The shooting star candlestick pattern has formed, and in this context, it is certainly not a favorable technical formation for bulls. Each time the volatility decreases during sideways movement, when volatility expands again, it leads to a breakdown and decline. This rhythm observed is indicative of a bearish trend.

If the U.S. Dollar Index can stand around 100 today, the morning star pattern will have formed, which is also a signal of a strengthening U.S. Dollar Index (DXY).

Since July, the U.S. Dollar Index (DXY) has been consolidating, during which the European Central Bank has clarified its logic regarding a high exchange rate (previously mentioned in community discussions).

It has started to strengthen during the Federal Reserve's vacuum period; if the U.S. 10Y Treasury yield returns to 4.3, the U.S. Dollar Index (DXY) could reach 103-104.

Outlook on Bank of England Monetary Policy Signals

Will the Bank of England unexpectedly cut rates on November 6? The Bank of England will make changes starting in November, providing a more detailed explanation of its interest rate and other monetary policy decisions. The Monetary Policy Committee will add explanatory boxes and chapters on risks and assumptions in the quarterly monetary policy report to clarify the broader information used in discussions.

Currently, the Federal Reserve's attitude has entered an observation period, dispelling further expectations, while the Bank of England's stance in November may lead to a rapid decline in the GBP. From a technical analysis perspective, the pound is at a critical moment in November.

UK inflation is currently below market expectations, and there are some concerns in the labor market. If we consider the fiscal risk factors in the UK, there may be a period of divergence in monetary policy between the UK and the U.S. (BOE cutting rates while the FED remains unchanged).

The GBP/USD exchange rate fluctuates, with the focus shifting from inflation to the dynamics of interest rate differentials when the market pays attention to the economy/employment. Specifically, when inflation factors are emphasized, the inflationary pressure in the UK is more significant, leading to a convergence of interest rate differentials and supporting the appreciation of the pound; conversely, when the focus shifts to economic growth and employment, the relative weakness of the UK prompts an expansion of interest rate differentials, benefiting the dollar and suppressing the pound.

An exchange rate level of 1.4 implies a peak in the UK-US interest rate differential. Currently, recent data from the UK and the US (September 2025 UK CPI at 3.8%, US at 3.0%, and unemployment rates at 4.8% and 4.2% respectively) shows that the UK's CPI is below expectations, while the unemployment rate is above expectations, and this dynamic is beginning to drive fluctuations in the exchange rate.

Currently, gold has come down from a high, as shown in the 4H left chart and daily chart, along with the corresponding volatility. The rhythm of the short cycle is quite evident, moving down and correcting step by step. The current gold volatility GVZ has decreased but has not yet reached a low volatility level, and it is expected that the daily level platform may still require time.

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk