What signal? Traders are once again crazy betting on the Fed cutting interest rates by 50 basis points this week.

Bond traders once again believe that the possibility of the Federal Reserve policy makers cutting interest rates by 50 basis points at this week's meeting is greater than 25 basis points. Interest rate swap pricing related to the Federal Reserve's local time rate decision on Wednesday shows that after almost completely ruling out the option of a 50 basis point rate cut last week, the probability has once again exceeded 50%. This has pushed the two-year U.S. Treasury yield back to its lowest level in two years, dragging the U.S. dollar index to its lowest level since January. The pricing reversal in the past few trading days has increased the risks of the decision on September 18. Investors are conflicted about how much policy support the economy needs and what signal the Federal Reserve's decision to significantly cut interest rates will send. Senior U.S. strategist at Rabobank, Philip Marey, wrote: "This is a tough call." He expects the Federal Reserve to cut rates by 25 basis points. "Powell's lack of guidance may indicate that the FOMC has not reached a consensus yet. More importantly, Tuesday's retail sales could still change this calculation." Macro strategist at French Industrial Bank, Kit Juckes, said the market could force the Fed to cut rates by 50 basis points. He added that upcoming U.S. retail sales and industrial production data in the coming days could influence people's views. He said that if weak retail sales push pricing higher, the FOMC may be concerned about falling behind the curve. However, some major banks remain cautious about a 50 basis point rate cut by the Federal Reserve. Standard Chartered Bank issued a statement on Monday saying that a 50 basis point rate cut by the FOMC at the upcoming meeting could be worse than a 25 basis point cut. The institution pointed out: "There is no convincing reason in economic data to justify a 50 basis point rate cut at the upcoming meeting." Standard Chartered Bank then added: "A 50 basis point rate cut and getting it wrong could be worse than a 25 basis point rate cut and getting it wrong." The bank emphasized that Powell and the Federal Reserve cannot disappoint the market. The company believes that the risks of a 50 basis point rate cut are greater because it could lead to an increase in the unemployment rate in September. Standard Chartered Bank believes that a 25 basis point rate cut could have an impact and attached a clear message: "The FOMC will closely monitor the situation if a 50 basis point rate cut is implemented." Market turmoil All of this is happening against the backdrop of increasing tension in U.S. politics. The FBI is investigating a apparent assassination attempt against former President Trump, just two months after the Republican presidential candidate was shot at a rally in Pennsylvania. On Monday, the two-year U.S. Treasury yield fell by 4 basis points to 3.54%, continuing its rise after a sharp drop from highs above 5% at the end of April. U.S. stock index futures showed mixed movements. As Federal Reserve members are in a blackout period ahead of the policy meeting from September 17 to 18, traders have little data to rely on, including August retail sales data released on Tuesday. Meanwhile, repricing expectations have also affected the U.S. dollar, which has weakened against most major currencies over the past month. The yen is one of the currencies that has seen the largest gains, breaking through the key level of 140 yen per dollar on Monday. Strategist at National Australia Bank, Rodrigo Catril, said: "We believe that the Federal Reserve is about to enter a new period of easing, which is a major negative factor for the U.S. dollar. As the Federal Reserve eases monetary policy next year, lowering the funding rate to neutral or even below neutral, the dollar will start to decline cyclically." Although a technical indicator shows that the dollar will be supported as momentum turns bearish, the market mostly expects the dollar to weaken. A survey of analysts shows that by this time next year, the euro, yen, Canadian dollar, and Australian dollar are all expected to strengthen against the dollar.