All eyes are on the Federal Reserve, that is preparing to cut interest rates for the first time in over four years, with markets anticipating either a 25 or 50 basis point reduction. This decision comes as inflation approaches the Fed's 2% target and concerns about job market weakness grow, in spite of overall positive economic indicators. It marks a significant shift in monetary policy and could have far-reaching implications for millions of Americans' finances. Fed Chair Jerome Powell's post-meeting press conference will be crucial in providing insight into the central bank's outlook and future rate decisions. The timing of this policy pivot is particularly noteworthy, occurring less than two months before the US presidential election and stock indexes at an all-time high.
EQUITY
Tuesday saw U.S. stock markets holding its breath as investors await a monetary policy shift, mainly focussing on its size and outlook. Oracle and Nvidia are among those that dragged the market lower along with Walmart and Costco even with higher-than-forecast retail sales figures. Historically, recession and eventual market downturn came after yield inversion normalised and the fed cut rate.
GOLD
Gold prices are hovering around $2,570 per ounce as markets anticipate the Federal Reserve's imminent rate decision, with investors increasingly expecting a 50-basis-point cut. However, stronger retail sales data could lead to a less dovish stance. Gold's appeal as a safe-haven asset is boosted by mounting political risk ahead of the U.S. presidential election. Technically, gold has not retraced for an unusual amount of time compared to other commodities.
OIL
Oil prices are in a volatile wide-range uptrend as Hurricane Francine and Middle East tensions supported prices, although U.S. inventories point toward lower demand. Markets expect a Federal Reserve rate cut to offer some boost to demand. Chevron's CEO criticised Biden's natural gas policies, emphasising Permian gas's importance for AI growth.
CURRENCY
The Fed is set to cut interest rates for the first time in four years, with markets expecting a slight cutback. This has weakened the dollar against other currencies, especially the yen, yet it is still holding above 100 on its index. Recent positive U.S. economic data may influence the Fed's decision on the smaller size of the cut. The Bank of Japan decision is of great importance as its last rate hike stirred the market.
