Danske Bank analysts note that as per expectations, the Fed last night cut its target range for the Fed funds rate by 25bp to 1.75-2.00% and the interest on excess reserves was lowered by 30bp to 1.80%.

“Crucially, the Fed still did not want to pre-commit to more easing. As a guide to future Fed decisions, Powell hinted to monitor (1) political/trade uncertainty, (2) global data and (3) US inflation. Thus the outcome of trade negotiations in early October will be key for the Fed's next decision. We continue to expect a cut at each of the next four Fed meetings, which are not fully priced by the market that looks for around three more into 2020. During the press conference, Powell faced several questions on the issue of the recent USD liquidity squeeze. The market was left disappointed, however, as the Fed seems surprised about the recent turmoil and expects it to be temporary. In our view, the factors behind this week's funding pressure are not extraordinary and will likely return in December. The market notably seems concerned that the Fed will be fine with a reactive approach to this.”