Asia & European Sessions:
- Trading remained choppy as the markets continued to assess data and Fed rate cut risks amid uncertainties over the economy.
- US data points released on Thursday were in line with a 25 bps cut from the FOMC next week, with Chair Powell likely to again stress the path remains data dependent. The increase in unemployment claims and a slight rise in August’s producer price index left room for the Fed to consider more aggressive cuts. However, the components relevant to the Fed’s preferred inflation measure remained subdued.
- The ECB cut rates -25 bps as widely expected. While the general expectation is for another -25 bp easing to help sustain a soft landing, there is still an undercurrent for a -50 bp cut next week.
- A WSJ article noting that Fed policymakers are debating -25 bps versus -50 bps helped give Treasuries a boost late in the day after hotter than expected PPI weighed early on. A small rise in jobless claims also provided some support.
- Gold reached a record high, about 25% up this year, driven by the Fed’s moves towards monetary easing. Investors also scaled back expectations of another ECB rate cut next month, after the ECB lowered rates on Thursday. Additionally, central bank purchases, heightened demand for safe-haven assets due to conflicts in the Middle East and Ukraine, and growing interest from retail investors have fueled the metal’s rally.
Financial Markets Performance:
- The USDIndex dropped to 100.64 and is weaker against its G10 peers, with the exception of CHF and CAD.
- Yen retested once again December’s highs, at 140.63 level.
- Wall Street rallied after a mixed start, with the NASDAQ advancing another 1%, while the S&P500 was up 0.75%, and the Dow was 0.58% higher.
- Gold prices marked new record highs to $2570 per ounce as shorts cover.
- Crude oil prices are up 1.05% at $68.68 per barrel due to dollar weakness, risk -on tone and disruption in crude production. Hurricane Francine’s landfall in southern Louisiana on Wednesday led to the shutdown of offshore platforms in the Gulf of Mexico and disrupted refinery operations. The overall bearish tone remains intact, though, and the IEA’s monthly report only added to fears that a slowdown in demand will lead to a supply overhang and continue to weigh on prices.
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Andria Pichidi
Market Analyst
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