Money Masters' Market Pulse Week 38

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Dear Money Master,

This week, we explore the Fed’s jumbo rate cut, slashing 50 basis points in its first major move since the pandemic. We also dive into the revival of India’s ed-tech sector with Physics Wallah’s massive $210 million funding round, highlighting the potential in affordable education. Plus, we take a closer look at how currencies react to interest rates and why safe havens like the U.S. dollar and Swiss Franc remain investor favorites in times of uncertainty.

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📰 Your Daily Financial Digest - September 20th, 2024

🌍 Economics:

1. Fed Cuts Interest Rates by 50 Basis Points for First Time Since 2020 🔻
   The Federal Reserve enacted its first rate cut since early in the pandemic, lowering the key borrowing rate by 50 basis points to a range of 4.75%-5%. The move aims to cool inflation while supporting the labor market. Read More

2. China Leaves Lending Rates Unchanged Despite Fed Cut 🇨🇳
   In a surprise move, China kept its lending rates steady, defying expectations after the Fed’s jumbo rate cut. Economic challenges continue, including a slowdown in retail sales and property market issues. Read More

3. FedEx Reports Profit Drop as Customers Shift to Cheaper Shipping Options 📦
   FedEx saw a steep profit decline and lowered its revenue forecast for the year. Customers are trading down from priority shipping to slower, more affordable options, squeezing the company’s profits. Read More

4. Yuan Hits 16-Month High Amid Speculation of New Stimulus 💴
   China’s yuan surged to its strongest level in 16 months, boosted by expectations of fresh economic stimulus following the Fed’s rate cut. However, state banks intervened to prevent further rapid appreciation. Read More

💻 Technology:

1. Alibaba Launches 100+ New AI Models, Including Text-to-Video Generation 🤖
   Alibaba introduced over 100 open-source AI models, including a new text-to-video generator, as it aims to rival U.S. tech giants like Microsoft and OpenAI. These models offer advanced capabilities in math and coding. Read More

2. Apple iPhone 16, Watch Series 10, and AirPods 4 Hit Stores Amid Tepid Demand 📱
   Apple released the iPhone 16, along with the latest Apple Watch and AirPods. However, early reports suggest weaker demand compared to previous launches, with concerns about a lack of "killer apps." Read More

💹Earnings:

1. Oracle Raises 2026 Revenue Forecast, Shares Climb 6% 🚀
   Oracle shares jumped after raising its 2026 revenue forecast to over $66 billion, citing strong growth in its cloud and AI services. The company expects revenue to exceed $104 billion by 2029. Read More

2. Goldman Sachs to Take $400M Hit on Consumer Business Exit 💰
   Goldman Sachs announced a $400 million hit in Q3 due to its exit from consumer banking, including the sale of its GM Card portfolio. The move is part of a broader pivot toward asset and wealth management. Read More

🔍 Deep Dive: How Interest Rates and Safe Haven Currencies Influence the Global Economy 💱🛡️

Low Interest Rates & Currency Value 📉
When central banks lower interest rates, it reduces the returns investors can earn on that country's assets, making the currency less attractive compared to others offering higher rates. As a result, foreign investors often sell off the lower-yielding currency in favor of those with higher returns. This increased selling pressure causes the currency to depreciate in value 💵. For example, after the recent Fed rate cut, the U.S. dollar could weaken as global investors look for better returns elsewhere, impacting everything from imports to international investments.

The Role of Low Rates in Economic Stimulation 💡
Lowering interest rates is often used to stimulate economic activity, making borrowing cheaper for consumers and businesses. While this helps boost spending and investment domestically, it can also lead to inflation if the economy overheats. As inflation rises, the currency’s purchasing power weakens further, especially in international markets where stronger currencies gain a relative advantage. A weaker currency can help a country’s exports become more competitive globally, but it can also increase the cost of imports, adding pressure to consumers.

Safe Haven Currencies in Times of Low Rates 🛡️
During periods of low interest rates, especially when economic uncertainty looms, investors tend to flock to safe-haven currencies like the U.S. dollar 💵, Japanese yen 💴, and Swiss franc 🇨🇭. These currencies maintain value even when domestic interest rates are low because of their perceived stability and resilience. In turbulent times, investors seek these currencies for safety, driving their demand up even as other currencies weaken.

Impact on Investors 💼
For investors, low interest rates can significantly influence currency trades and international portfolios. A weaker currency may hurt returns on foreign investments as currency conversion can eat into profits. On the flip side, for those invested in safe haven currencies, low rates offer protection against volatility. Understanding these dynamics helps investors make more informed decisions in an environment where interest rates are constantly fluctuating 🌐.

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To your financial empowerment, The Money Masters Team

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Disclaimer: This information is for educational purposes only and should not be construed as financial advice. Always conduct your own research or consult with a financial advisor before making investment decisions.