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source : investinglive

According to the latest market reports, traders are pricing in a quarter-point rate cut at the October 29 FOMC meeting with 90% probability according to CME’s FedWatch tool. This is a turn from recent rate-hike anxiety.

Prediction markets like Polymarket and Kalshi are also betting the Fed will cut from 4.00-4.25% to 3.75-4.00%. If they do, rate-sensitive assets like Bitcoin, tech stocks, and high-yield credit could breathe a sigh of relief.

How Big Is the Fed rate Cut Odds?

CME’s FedWatch tool shows 90.8% chance that the Fed will lower rates by a 25 bps cut, with only 9.2% chance of no change. Other platforms show 91.9% implied probability. Some sources show slightly lower but still dominant odds around 89.8% for the cut.

These odds define how far the markets have leaned into this expectation. They’ve priced in a near-certainty for a 25 bps move, leaving little room for surprises.

What’s Driving the Consensus?

Several factors are driving the consensus. First, fed futures markets have moved sharply and expectations for future rates have shifted towards easing.

Second, Fed officials have said they have room to ease. Chicago Fed’s Austan Goolsbee recently said the Fed has “room to cut rates,” in response to softening labor signals.

Third, many analysts and institutions now expect multiple cuts this year. Some updated their forecasts to expect cuts in both October and December.

Fourth, the Fed’s own dot plot and statements have hinted at room for further easing to support a soft landing.

What It Would Mean Across Markets

According to market experts; if the Fed cuts rates by 25 bps, it would lower borrowing costs, ease pressure on credit-sensitive sectors and potentially re-ignite inflows into equities, growth sectors and crypto. Rate-sensitive markets react quickly, although it might not be uniform.

The forward guidance which refers to how the Fed signals the future path, could matter more than the cut itself. Markets are set to watch the post-meeting press conference and dot plot update for clues on more easing.

Conversely, a decision to hold rates would likely spook markets, increase volatility and force risk assets to adjust downward quickly. With odds at 90%, surprises would be amplified.

Risks That Could Upend the View

Despite the strong consensus, there are still risks. A hot economic print (e.g. CPI, PCE, jobs) before or after the meeting could change the math.

The Fed might sound dovish but hold back on action, preferring flexibility in the face of inflation uncertainty. Internal FOMC disagreement could lead to dissent or a more cautious cut. External shocks ike geopolitical, fiscal or credit events, could blow up policy confidence.

Powell has warned to be cautious; if inflation is sticky the Fed might not cut too fast.

Conclusion

Based on the latest research; Markets are fully pricing in a 25 bps Fed rate cut in October with 90% probability. This has big implications for equities, credit and crypto. But the Fed’s discretion is not gone.

A surprise twist from inflation prints, internal disagreement or cautious tone, could shock markets. Market participants are to be prepared for both the expected and the unexpected.

Summary

A Fed rate cut in October is highly likely but not guaranteed. Markets are fully on board with a quarter-point move. What matters next is how the Fed frames its path forward and whether data forces a rethink. Though consensus is clear, history shows central banks can still surprise.

Source: CryptoSlate

Daily Gold Chart

How Is The Potential U.S. Shutdown Influencing Gold Prices?

What Are Other Factors Influencing Gold Prices Right Now?

The Federal Reserve’s Shift Toward Lower Interest Rates

Rising Political Pressure on the Federal Reserve and the U.S. Dollar

Central Banks Building Strategic Gold Reserves

Geopolitical Tensions and Trade Conflicts

Bottom Line

Source: fxempire

Oil prices dip as supply concerns resurface

Kurdistan pipeline restart and OPEC+ output plan weigh on sentiment

Technical levels in focus as WTI pullback eyes key support zone

Daily Light Crude Oil Futures

Russia, Iran sanctions and China stockpiling add upside risk

Saudi Aramco to raise Asia crude prices but hikes may be limited

Oil prices forecast: Bullish trend intact, but upside capped by supply headwinds

Source: fxempire

Yen held firm as the strongest performer heading into the US session, supported by mounting speculation that the BoJ is moving closer to a rate hike. Traders seized on a hawkish shift from a known dove on the Policy Board, a sign that internal momentum is building for further normalization.

This shift in tone from the BoJ was partly balanced by a cautious note from the Japanese government. In its September monthly report, the Cabinet Office kept its basic economic assessment unchanged, describing the recovery as “moderate” while highlighting the drag from US trade policies, particularly in the automotive sector. Officials also warned that attention should remain on downside risks linked to external headwinds.

Still, the currency’s next major driver will be global risk sentiment. Heavyweight US releases this week — highlighted by Friday’s non-farm payrolls — will be decisive for both stocks, bonds and currencies. Any data surprise strong enough to sway Fed expectations will inevitably spill over into USD/JPY and broader Yen crosses.

In the upcoming Asian session, attention is shifting to the RBA’s policy decision. The RBA is expected to keep rates on hold at 3.60%, but the outcome carries added weight after August CPI accelerated to 3.0% from 2.8%. While consensus sees a year-end rate of 3.35%, a handful of analysts have delayed their calls for a November cut in light of the firmer inflation print.

Australia’s largest banks are split: ANZ, CBA, and Westpac forecast a 25bps reduction in November, while NAB expects no easing until May. A Reuters poll found more than 80% of respondents still see a cut to 3.35% by year-end, though the number expecting no change has risen since August.

For the day so far, Dollar is the weakest major currency, followed by Swiss Franc and Loonie. Yen sits at the top of the ladder, ahead of Sterling and Aussie, with the Kiwi and Euro trading in the middle of the pack.

In Europe, at the time of writing, FTSE is up 0.54%. DAX is up 0.02%. CAC is up 0.26%. UK 10-year yield is down -0.038 at 4.72. Germany 10-year yield is down -0.023 at 2.731. Earlier in Asia, Nikkei fell -0.69%. Hong Kong HSI rose 1.89%. China Shanghai SSE rose 0.90%. Singapore Strait Times rose 0.09%. Japan 10-year JGB yield fell -0.013 to 1.647.

Eurozone economic sentiment inches higher to 95.5, jobs outlook softer

Economic sentiment in the Eurozone improved slightly in September, with the Economic Sentiment Indicator rising 0.2 points to 95.5. The broader EU also gained 0.6 points to the same level. Despite the uptick, sentiment remains below the long-term average of 100.

The modest gains were driven by stronger confidence in industry, services, and among consumers, offset partly by weaker retail sentiment and stable conditions in construction.

By contrast, labor market expectations slipped, with the Employment Expectations Indicator dropping -0.9 points in the EU and -1.3 points in the euro area, suggesting hiring momentum is fading.

Country-level trends were uneven. Spain led with a notable 3-point jump, followed by Italy (+0.7), while sentiment weakened in the Netherlands (-0.7) and Germany (-0.4). France (+0.3) and Poland (+0.1) saw little change.

BoJ dove Noguchi signals hawkish shift

BoJ board member Asahi Noguchi, long seen as one of the most dovish voices on the Board, struck a notably hawkish tone today. He argued that Japan is making steady progress toward its 2% inflation goal, citing stronger wage momentum and greater corporate willingness to pass on rising costs.

Noguchi said the “need to adjust the policy interest rate is increasing more than ever,” highlighting that upside risks to prices and growth now outweigh the downside. He noted the labor market is “close to full employment” and the output gap has “almost reached zero”, warranting a shift in policy perspective to address rising inflation risks.

His comments mark a significant departure from his usual stance, adding to expectations that the BoJ could deliver another rate hike in the near future. Noguchi did caution that U.S. tariffs remain a source of downside risk, but the overall message suggests growing consensus within the Board for normalization.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 149.28; (P) 149.62; (R1) 149.83;

Intraday bias in USD/JPY stays neutral for the moment and some more consolidations could be seen below 149.95 temporary top. Further rally is expected as long as 147.45 support holds. Corrective pattern from 150.90 should have completed at 145.47. Above 149.95 will bring retest of 150.90 first. Firm break there will target 151.22 fibonacci level. However, sustained break of 147.45 will dampen this bullish view and bring deeper fall back to 145.47 support instead.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

Source: ACTIONFOREX

Markets

Consensus-matching August PCE deflators (headline 0.3% M/M and 2.7% Y/Y from 2.6%, core 0.2% and 2.9%) halted a technical rebound both in US yields and of the dollar last Friday. Personal income (0.4% M/M) and spending (0.6%) remained solid. Even so, with markets looking forward to this week’s labour data, the PCE provided little reason to further price out Fed rate cuts this year and early next year. US yields changed one bp or less across the curve. US yields in the meantime have created some ‘breathing space’ vis-à-vis the technical levels that were tested around the time of the September 17 Fed meeting (2-y 3.64% vs 3.50% area, 10-y 4.15% vs 4% support area). German yields in technical trading slightly outperformed with yields easing up to 2.7 bps at the belly of the curve. Risk sentiment remained constructive, with little overall impact from the new sector tariffs the US announced on Thursday. The S&P 50 gained 0.59%. The Eurostoxx 50 even added 1%. The (yield-driven) USD rebound on Wednesday and Thursday ran into resistance. DXY failed to test 98.83 resistance and even made a small step back to close the week in the established ST trading range (close 98.15). USD/JPY approached the 150 barrier (close 149.49). EUR/USD finished the week near the 1.17 big figure (vs a week low of 1.1646 on Thursday).

Asian risk sentiment stays constructive this morning. Aside from key eco data, markets also keep a close eye at a meeting between president Trump and Congressional leaders as they seek to reach an agreement on a short-term spending bill (by October 01) to avoid a government shutdown. Regarding the data, first national EMU CPI data will be published today (Spain, Belgium) and tomorrow (France, Germany, Italy …) to be summarized into Wednesday’s EMU release (expected 0.1% M/M and 2.2% Y/Y for headline, 2.3% for core). The EMU data most likely won’t challenge a prolonged ECB status-quo. In the US, the focus evidently stays on labour market data (JOLTS , tomorrow), ADP on Wednesday, jobless claims on Thursday and the payrolls on Friday (if they are not delayed by a US government shutdown). The picture from the labour data will be complemented by the ISM’s (Wednesday manufacturing, Friday services) and by the conference board consumer confidence release. Data probably will have to be materially stronger than expected for markets to leave the idea of a follow-up Fed rate cut end next month. A halt in the US yields’ rebound and maybe some noise on a US government shutdown might also abort the most recent USD rebound. EUR/USD could return higher in the 1.1574/1.1919 range. In Japan, we keep an eye at the Tankan survey, as the BOJ MPC internally debates the timing of the next rate hike, potentially coming as soon as the October 30 meeting. The yen last week tested key support near USD/JPY 150, with EUR/JPY (currently 174.5) only a whisker away from the 175.43 2024 multi-year top. In the UK, the Labour Party Congress in Liverpool will highlight the difficult fiscal balancing act of Chancellor Reeves, with key EUR/GBP resistance at 0.8769 still within reach.

News & Views

People familiar with the plans said that OPEC+ is likely to raise oil output again in November. The oil cartel is considering adding the same amount as they plan to do in October, i.e. 137k barrels a day. It’s technically restoring a layer of previous output curbs (of 1.66 million b/d) that was originally planned to remain in place through the end of this year. It has prompted warnings of a supply glut from the oil industry. So far, though, oil prices withstood the extra supply relatively well with OPEC+ delegates saying that the actual restored output is less than the amounts announced due to production constraints in some countries. Brent this morning holds steady around a two-month high just shy of $70. OPEC+ meets this Sunday.

Moldova’s pro-European ruling Party of Action and Solidarity secured 50% of the votes in yesterday’s ballot, putting president Maia Sandu on track for a second term in office. With the projected 54 seats in the 101-seat parliament, PAS doesn’t rely on support from other parties to form a government. The pro-Russian Patriotic Electoral Bloc won a little over 24% of the votes. Moldova, squeezed between Romania and Ukraine, has a population of just 2.4 mln but with an outsized geopolitical importance. The former Soviet state was granted EU candidate status, along with Ukraine, four months after the Russian invasion in 2022. Its goal is to join the EU by the end of the decade.

Source: ACTIONFOREX