EURUSD
- EUR/USD Performance: The EUR/USD pair is holding steady above the 1.1100 level in the early European session on Thursday, benefiting from continued weakness in the US Dollar (USD). The recent downward pressure on the USD comes in the wake of the Federal Reserve's (Fed) decision to implement a 50-basis-point (bps) interest rate cut, which has softened the greenback.
- Federal Reserve Decision: The Fed's rate cut, and accompanying guidance have triggered a significant repricing of the USD. The Fed's latest projections signal a notable shift in its monetary policy outlook. Officials now anticipate the Fed Funds rate to sit at 4.4% by the end of 2024, a reduction from the previous estimate of 5.1%. The outlook for the following years also saw downward revisions, with the median forecast for the end of 2025 set at 3.4% (from 4.1%), and 2026 expected at 2.9%, down slightly from the previous projection of 3.1%.
- Powell's Comments: At his press conference, Fed Chair Jerome Powell emphasized the central bank's increased confidence in the US labour market, which supported the decision to lower interest rates more aggressively. Powell highlighted that the labour market's resilience has been a key factor in maintaining broader economic stability, despite rising inflation and other headwinds.
- ECB Outlook: Meanwhile, on the European side, policymakers at the ECB are adopting a more cautious approach toward further rate cuts. While market participants are speculating about a potential rate cut in October, Bundesbank President Joachim Nagel expressed concerns that Eurozone inflation is still too high and has yet to fall to an acceptable level. Nagel warned that the ECB must keep rates high enough to manage persistent inflationary pressures.
| SMA (20) | Rising |
|
|
| RSI (14) | Slightly Rising |
| |
| MACD (12, 26, 9) | Slightly Rising |
|
Closing statement: The EUR/USD pair continues to gain traction as the USD weakens following the Fed's rate cut and dovish forward guidance. The contrasting stances between the Fed and ECB are keeping the market in a state of flux. While the Fed appears ready to ease monetary conditions further, the ECB is maintaining a more cautious, data-driven approach, particularly in light of lingering inflationary risks in the Eurozone. Investors will be closely monitoring future data releases and comments from central bank officials to gauge the next moves from both sides of the Atlantic, particularly as inflation remains a critical concern in the Eurozone, while US labour market strength provides a backdrop for potential additional Fed action.
GBPUSD
- GBP/USD Performance: The GBP/USD pair found support around the 1.3150 level on Thursday, stalling its recent decline from the 1.3300 mark—its highest level since March 2022, which it touched the previous day.
- Federal Reserve Impact: The US Federal Reserve (Fed) commenced its policy-easing cycle on Wednesday, reducing interest rates by 50 basis points (bps). However, Fed officials tempered expectations for additional oversized cuts in the near term, dampening the US Dollar (USD) and offering some relief to the pair.
- BoE Outlook: Support for the British Pound (GBP) remains, underpinned by expectations that the Bank of England’s rate-cutting cycle will likely be slower than that of the Fed. This expectation has limited the downside for the GBP/USD pair, as investors expect a more cautious approach from the BoE in easing monetary conditions.
- UK Inflation Data: The UK Consumer Price Index (CPI) report released on Wednesday highlighted stronger-than-expected inflation in the services sector for August, reinforcing the notion that inflationary pressures persist in the UK.
- BoE Policy Meeting: The market anticipates that the BoE will keep the key interest rate at 5.0% in its upcoming September policy meeting. Investors will pay close attention to the Monetary Policy Committee’s (MPC) voting breakdown and the policy statement's language for clues on the future rate path.
| SMA (20) | Rising |
|
|
| RSI (14) | Rising |
|
|
| MACD (12, 26, 9) | Slightly Rising |
|
Closing statement: The GBP/USD pair seems poised for consolidation above 1.3150, with potential upside momentum if the BoE maintains a cautious approach to rate cuts compared to the Fed. However, market sentiment will largely hinge on the BoE's messaging post-meeting and how it frames its inflation outlook and policy stance. A hawkish tone from the BoE could push the pair back toward the 1.3300 mark, while dovish language may lead to further declines.
GOLD
- Gold Price Movement: Gold is taking a breather on Thursday following the heightened volatility seen after the US Federal Reserve (Fed) monetary policy announcements. Gold hit fresh all-time highs but has since moderated as markets digest the developments.
- Fed Rate Cut: The Fed announced a 50-basis point (bps) rate cut on Wednesday, lowering the fed funds rate to the 4.75%-5.0% range. Additionally, the Fed’s Dot Plot indicated that a further 100 bps in rate cuts are expected throughout this year and next, which initially supported Gold due to the lower-yield environment.
- Powell’s Dovish Tone: In his press conference, Fed Chair Jerome Powell emphasized that this recalibration of monetary policy aims to maintain economic and labor market strength, while allowing continued progress on reducing inflation. His dovish remarks provided additional tailwinds for Gold, which thrives in an environment of lower rates and a weaker US Dollar (USD).
- Geopolitical Tensions: Ongoing geopolitical tensions in the Middle East continue to lend support to Gold as a safe-haven asset, keeping it well-bid despite some profit-taking.
- Key Data Ahead: Traders are now turning their attention to the upcoming US Jobless Claims and Existing Home Sales data. These releases will provide insights into the health of the US economy and could influence the future path of Fed rate cuts, thereby affecting both the USD and gold.
Closing statement: The XAU/USD pair is expected to remain supported in the near term, especially if geopolitical risks escalate and US economic data points to a weaker recovery. However, with Gold already at all-time highs, the potential for a short-term pullback exists, especially if the US Dollar stabilizes. Traders may continue to monitor Fed signals and economic data for fresh catalysts, with Gold likely to stay elevated as long as expectations for further rate cuts persist.
CRUDE OIL
- Current Price Action: West Texas Intermediate (WTI) Crude Oil prices have retraced recent losses and are trading around $70.30 per barrel during Thursday's European session, showing signs of recovery from the previous session's declines.
- Fed Rate Cut Impact: The US Federal Reserve's larger-than-expected 50 basis points interest rate cut has provided some support to Oil prices, as looser monetary policy often boosts commodities by weakening the US Dollar. However, the overall market reaction has been somewhat muted, as traders weigh other factors influencing demand.
- EIA Report: Support for WTI came from the US Energy Information Administration's (EIA) report showing a much larger-than-expected decline in Crude Oil inventories. Stocks dropped by 1.63 million barrels, significantly exceeding the forecasted 0.1 million barrel draw, indicating tighter supply which is generally bullish for Oil prices.
- China's Economic Concerns: Despite some support from the EIA data, sentiment remains dampened by recent weaker-than-expected economic data out of China. Concerns over a low-for-longer growth outlook in the world’s second-largest economy continue to weigh on expectations for future oil demand.
- Middle East Geopolitical Risks: Markets are also monitoring developments in the Middle East after a series of explosions involving communication devices used by Hezbollah. Although the impact on oil prices has been limited, geopolitical risks in this region often create uncertainty around potential supply disruptions.
| SMA (20) | Falling |
|
|
| RSI (14) | Slightly Rising |
| |
| MACD (12, 26, 9) | Slightly Rising |
|
Closing statement: The near-term outlook for Crude Oil remains mixed. While the larger-than-expected EIA inventory draw offers support, ongoing concerns about China's economic slowdown and its implications for oil demand may cap gains. Additionally, if geopolitical tensions in the Middle East escalate, Oil prices could see further volatility. Traders will likely continue to monitor economic data from key markets and potential geopolitical developments for fresh price direction.
DAX
- Market Movers: Siemens Energy AG led the DAX higher with a 2.77% rally, driven by expectations of a sizeable Federal Reserve rate cut. BASF also gained 2.37% on reports that the company plans to IPO its agri-chemical business, sparking investor optimism.
- Eurozone Inflation Data: The finalized Eurozone inflation figures for August showed that the annual rate fell from 2.6% in July to 2.2%, in line with preliminary data. However, these figures failed to heighten expectations of a near-term European Central Bank (ECB) rate cut in October. .
- Nagel’s Comments: Bundesbank President Joachim Nagel commented that inflation remains "not where we want it to be," indicating the ECB's continued cautious stance on further monetary easing.
- Upcoming ECB Speeches: Investors are closely watching for comments from ECB policymakers, with Isabel Schnabel, an ECB Executive Board Member, scheduled to speak on Thursday. Any indications of future policy shifts could influence market sentiment.
- US Federal Reserve: The Fed's decision to cut interest rates by 50 basis points after Wednesday's European market close took the market by surprise, but the Economic Projections offered relief, suggesting that the Fed is maintaining a cautious approach toward its easing cycle. This is seen as a positive signal for risk assets, including the DAX.
| SMA (20) | Rising |
|
|
| RSI (14) | Rising |
|
|
| MACD (12, 26, 9) | Rising |
|
|
Closing statement: The DAX could see continued upward momentum as it reacts to the Fed's rate cut, which supports global equity markets by reducing borrowing costs. However, the lack of fresh signals from Eurozone inflation data and the ECB’s cautious tone could limit gains. Investors will keep a close watch on upcoming ECB speeches and potential Eurozone economic data to gauge whether further monetary easing might be on the horizon, which could provide additional fuel for the DAX rally.