The Fed Should Move Slowly And Make No Promises

Samantha Luan

Economic

Forex

Political

Summary:

Investors are confident that the Federal Reserve will lower its policy interest rate on Wednesday for the first time this year.

Investors are confident that the Federal Reserve will lower its policy interest rate on Wednesday for the first time this year. Recent data support a modest cut, but the Fed would be wise to avoid signaling more reductions to come or pivoting decisively toward easing. For now, the data is too muddled for any such shift, and the central bank needs to keep an open mind.

The labor market is weaker than the Fed believed when its policymakers last met. Recent data revisions give much lower estimates of employment for the year to March, while the latest weekly jobless claims showed an increase to 263,000, the highest in four years. Those numbers are notoriously noisy, but the jobs market is plainly weakening.

That might seem to call for strong monetary stimulus. The problem is that inflation isn’t yet credibly on track toward the Fed’s 2% target. In August, the consumer price index excluding food and energy — so-called core CPI — rose 0.3%, for a year-over-year increase of 3.1%. This was roughly as expected, and it gave investors no reason to doubt that the policy rate would be trimmed this week. The fact remains: Higher-than-target inflation is stubbornly refusing to subside.

The Fed continues to assume that, at 4.25% to 4.5%, the current policy rate is gently tamping demand, enough to bring inflation back to target in due course. Maybe so. But again, caution is warranted. The neutral rate of interest — the level that neither adds to nor subtracts from demand — is unknown, one of many uncertainties clouding the outlook.

In particular, new tariffs don’t yet seem to be driving inflation higher: Importers are mostly absorbing the higher costs. That’s unlikely to last. Uncertainty over future tariffs, moreover, may itself prove to be inflationary, if it dents confidence enough to suppress supply more than demand. The administration’s crackdown on illegal immigration is yet another supply-side shock — and one that makes measures of labor-market tightness especially hard to read. Sluggish employment might reflect a shrinking supply of labor as much as a shortfall in demand.

A persistent combination of faltering supply and above-target inflation, otherwise known as stagflation, is a real possibility under these conditions. It’s a scenario that the Fed is ill-equipped to manage. The central bank’s dual mandate calls for maximum employment and stable prices — and stagflation means it cannot achieve both. Striking the right balance is especially difficult if its operational independence is in question, as it now is. The stage is set for rising inflation expectations, higher long-term borrowing costs and, eventually, an abrupt tightening of policy to get prices back under control.

For the moment, expectations seem reasonably well-anchored, a tribute to the Fed’s credibility, given the turbulence it’s being asked to navigate. In the meantime, the balance between labor-market cooling and persistent inflation has shifted — enough to warrant a quarter-point cut in the policy rate. A bigger cut, let alone promises of more to come, would be a mistake.

Source: Bloomberg Europe

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Glendon

Economic

Forex

Investor confidence in Germany’s economic prospects unexpectedly improved in September, supporting hopes that Europe’s largest economy is leaving behind a prolonged downturn.

An expectations index by the ZEW institute rose to 37.3 from 34.7 the previous month. Analysts in a Bloomberg survey had expected another decline to 25 following a sharp drop in August. A measure of current conditions deteriorated as expected.

“Financial market experts are cautiously optimistic and the ZEW indicator has stabilized, but the economic situation has worsened,” ZEW President Achim Wambach said in a statement. “There are still considerable risks, as uncertainty about the US tariff policy and Germany’s ‘autumn of reforms’ continues.”

ZEW highlighted that the outlook improved in particular for export-oriented industries, in particular the automotive sector, the chemical and pharmaceutical industry and the metal sector.

After a strong start to the year, Germany’s economy has run into trouble, recording a 0.3% contraction in the second quarter in a blow to Chancellor Friedrich Merz. Output shrank in 2024 and 2023, weighed down by weak global demand and long-standing issues like aging workers and too much red tape.

Analysts expect it to gain momentum in the coming quarters thanks to higher government spending and lower European Central Bank interest rates. But some still worry that Germany is yet to feel the full force of higher US tariffs.

Business confidence improved in August, with an expectations index by the Ifo institute even hitting the highest since 2022. Recent hard data has been mixed: Industrial production increased more than expected in July, while factory orders slumped.

Source: Bloomberg Europe

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Gerik

Economic

EU Postpones Sanctions Proposal Amid U.S. Demands

On September 16, 2025, the European Union (EU) announced it would delay formally introducing its latest sanctions package against Russia, following strong pressure from U.S. President Donald Trump. The EU’s executive body, the European Commission, had initially planned to present its 19th sanctions proposal this week. However, the U.S. requested that European nations take stronger actions, especially with regards to Russia's oil trade, before it would move forward with its own penalties.

The delay comes after the U.S. put significant pressure on its allies in the Group of Seven (G-7) to impose tariffs up to 100% on Chinese and Indian purchases of Russian oil. The aim is to force Russian President Vladimir Putin to negotiate an end to the ongoing conflict in Ukraine. The G-7 countries are working on a new sanctions package, with the goal of finalizing a text within the next two weeks, as reported by sources familiar with the matter.

Sanctioning Key Players in the Oil Trade

As part of the new sanctions discussions, the European Union is considering targeting companies in India and China that facilitate Russia’s oil trade. Both nations have been significant buyers of Russian energy, playing a key role in financing Putin’s war efforts. Despite Trump's demands, which included the imposition of tariffs on Russia’s oil partners, he has not yet implemented direct sanctions on Russia, despite several missed deadlines and Putin’s ongoing refusal to negotiate.

The U.S. proposal seeks to further restrict Russia’s oil trade by targeting Russian oil companies and the networks that enable the movement of Russian crude. Although Trump has imposed higher tariffs on India (raising them to 50% due to its continued Russian oil purchases), the U.S. is still in trade talks with both India and China, making it a delicate issue for the European Union.

Challenges and EU's Position on Russian Energy Imports

The EU’s decision to delay its sanctions package highlights the ongoing balancing act the union faces between aligning with U.S. priorities and safeguarding its economic interests. Many European nations, especially Germany, are heavily reliant on export markets like India and China, making direct sanctions on these countries a challenging proposal. However, certain measures outlined in the U.S. proposal align with the EU's existing plans, particularly those targeting Russian oil trade and financial networks.

Notably, the EU has already adjusted its stance on Russian energy imports. While the union initially planned to phase out Russian gas by 2027, it has allowed some countries, such as Hungary and Slovakia, temporary exemptions from its oil sanctions. Despite these exemptions, Russian crude has dropped significantly in the EU market, falling from 27% of total imports before the war to around 3% last year. The EU’s current sanctions package focuses on additional financial measures, including targeting Russian banks, energy companies, payment systems, and further restrictions on Russia’s oil industry.

The delay in the EU’s sanctions proposal underscores the tension between geopolitical objectives and economic realities. While the U.S. seeks stronger measures against Russia’s oil trade to expedite peace talks with Ukraine, the European Union must carefully navigate its own priorities and economic dependencies. The outcome of this ongoing negotiation will likely have significant implications for global energy markets and the future of EU-Russia relations.

Source: Bloomberg

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Olivia Brooks

Cryptocurrency

Key Points:

●Bitcoin's rare technical signal indicates significant price movement.

●Institutional adoption supports predicted 40% surge.

●Impact reflects on global financial markets and crypto sectors.

Bitcoin's Rare Technical Signal & Institutional Adoption

Bitcoin's rare technical signal, historically linked to price surges, emerges as institutional funds reach $100 billion in assets under management after ETF approval in January 2025.

This rare signal's emergence suggests a potential 40% price increase, significantly impacting Bitcoin's market position and fostering bullish sentiment amidst strong institutional participation.

Bitcoin has shown a rare technical signal historically linked to price surges. Past similar setups resulted in significant value increases, with key previous levels marked at $76K, $49K, and $16K, according to historical Bitcoin data. Institutional involvement reinforces market confidence.

Major institutional actors are accumulating Bitcoin following the ETF debut in 2025. These institutions now hold substantial Bitcoin amounts, showing growing confidence. BlackRock emphasizes Bitcoin's role in diversified portfolios, highlighting its acceptance as a store-of-value asset.

Impact on Cryptocurrency Market

This signal is affecting the cryptocurrency market, particularly Bitcoin. Institutional acquisition of 120,000 BTC since ETF approval marks a notable shift. ETF assets have reached $100B, demonstrating Bitcoin's increasing legitimacy in global finance. https://x.com/magacoinfinance

The financial landscape shifts as institutional flows elevate Bitcoin's position. Ethereum and altcoins might exhibit correlated movements but are not currently driven by Bitcoin’s technical signal. Blockchain exchanges observe reduced balances, noting strong institutional holding.

Expert Analysis and Projections

Expert analysis aligns with historical trends, where past signals like the golden cross led to substantial price increases. The current signal might result in a potential 40% surge, supported by strong institutional backing and .

Bitcoin's surge potential from this signal underlines the importance of institutional influence in the cryptocurrency market. On-chain data, including exchange balances and HODL waves, strongly suggest a bullish price scenario, marking a pivotal moment for investors.

Source: CryptoSlate

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Gerik

Economic

Commodity

Gold Prices Hit Record High Amid Rate Cut Expectations

As of September 16, 2025, gold prices have surged to new all-time highs, with bullion surpassing the previous record of $3,685 an ounce. This surge is largely attributed to growing investor speculation that the Federal Reserve will implement a rate cut during its upcoming meeting. The anticipation surrounding the Fed's decision has significantly impacted the gold market, which is traditionally viewed as a hedge against economic uncertainty and low interest rates.

The rise in gold prices comes as the U.S. dollar weakens, falling to its lowest level in over seven weeks. This decline in the dollar, combined with expectations of a dovish monetary policy from the Federal Reserve, has further supported gold’s rally. While markets have priced in the possibility of a rate cut, the focus now shifts to the Fed’s updated economic and rate forecasts, which will be revealed in the upcoming quarterly "dot plot" update. Additionally, Federal Reserve Chairman Jerome Powell’s post-decision press conference is expected to provide further clarity on future monetary policy, particularly concerning the scope for additional easing.

Inflation and Labor Data Boost Gold Outlook

One of the key drivers of gold's rally this year has been the combination of weak labor market data and the lack of significant inflationary pressures. These factors have increased the likelihood of further rate cuts by the Federal Reserve, which could be beneficial for gold, as it does not generate interest income. Furthermore, a strong push for more accommodative monetary policies from U.S. President Donald Trump, including his efforts to influence the Fed's leadership, has reinforced market expectations of continued dovish actions from the central bank.

Goldman Sachs has forecast that gold prices could potentially reach $5,000 an ounce if a small percentage of privately-held U.S. Treasury bonds were shifted into the precious metal. This projection is based on the ongoing demand from central banks, which have increased their gold reserves in response to persistent geopolitical and trade uncertainties. Additionally, gold-backed exchange-traded funds (ETFs) have seen significant inflows, further contributing to the precious metal's strong performance this year.

Strong Performance Amid Economic Uncertainty

In 2025, gold has outperformed many other major assets, including the S&P 500 index, rising by more than 40% year-to-date. The metal's performance has also recently surpassed its inflation-adjusted peak reached in 1980. As investors continue to seek refuge in safe-haven assets, gold remains a key beneficiary of the current global economic environment, which is marked by uncertainty surrounding trade tensions, geopolitical risks, and inflation concerns.

While silver has also seen a notable increase in price, approaching a 14-year high, platinum has experienced a slight decline, and palladium has edged higher. As of the latest trading data, gold has risen by 0.2% to $3,686.39 an ounce, continuing its positive momentum from the previous trading day.

The gold market’s recent surge underscores the strong correlation between expectations of monetary policy shifts and the behavior of safe-haven assets, highlighting the ongoing impact of global economic uncertainty on investor sentiment.

Source: Bloomberg

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FXOpen

Economic

Forex

Technical Analysis

As the GBP/USD chart shows, the pair is trading this morning above 1.3620 – its highest level since the beginning of July.

The bullish sentiment is driven by the divergence in central bank policies:

→ United States: Traders are betting on an interest rate cut, supported by President Trump. The Federal Reserve will announce its decision tomorrow at 21:00 GMT+3, and the market expects a reduction of at least 0.25%, from 4.25%–4.50% to 4.00%–4.25%.

→ United Kingdom: Traders anticipate the rate will remain at 4.00%. The Bank of England will announce its decision on Thursday at 14:00 GMT+3.

Although the rates of the two central banks are comparable, the situation differs: in the UK, inflation is more persistent and rate cuts are seen as risky, while in the US, President Trump is exerting pressure on the Fed’s leadership.An additional boost for the pound comes from a wave of investment optimism linked to US President Donald Trump’s state visit to the UK. According to media reports, agreements worth around $10 billion are expected to be announced during the visit.

GBP/USD Technical Analysis

Looking at the price movements earlier this month, we noted lower highs and lower lows forming a bearish A→B→C→D structure. We also assumed that:
→ bulls could rely on support at the psychological level of 1.3400;
→ but if bearish pressure intensified, GBP/USD could fall towards the median of the descending channel.

Since then, the situation has changed considerably: bears failed to consolidate below 1.3400, and after a bullish double bottom pattern (1–2) formed, the price surged upwards.

At the same time, the GBP/USD chart highlights key signs of strong demand:
→ the descending (red) channel has been broken, and the bearish A→B→C→D structure is no longer relevant;
→ higher highs and higher lows confirm buyer dominance – providing grounds to outline a rising (blue) channel.

On the other hand, the RSI indicator is close to overbought territory, which suggests a possible pullback.

Potential support levels:
→ 1.34900: the breakout point where bulls started their advance;
→ 1.35890: a level that lost its resistance role this week;
→ the upper boundary and median of the blue ascending channel.

Taking all this into account, we could assume that in the near term, bulls may aim to lift GBP/USD towards the upper boundary of the yellow channel. It is also possible that news from the Fed and the Bank of England will aid them on this path.

Source: FXOpen

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Gerik

Economic

Investor Sentiment Shifts

Foreign interest is being driven by China’s progress in artificial intelligence, semiconductor production, and innovative drug development. The U.S.-China tariff truce and domestic monetary easing have further buoyed confidence. Early foreign entrants are focusing on the onshore A-share market, which offers lower correlation to global equities.

Brett Barna, managing two New York-based family offices, highlighted China as an “uncorrelated” investment and plans a platform to channel U.S. and European capital into China. Allianz Global Investors’ Zheng Yucheng noted China is increasingly treated as a standalone asset class rather than being excluded from indices.

Evidence of Renewed Capital Interest

August 2025 saw the largest monthly hedge fund purchases of Chinese stocks in six months, according to Morgan Stanley. Polar Capital increased its China allocation to over 30% from low 20% within its emerging market portfolio, reflecting strong investor appetite. Demand for emerging market funds excluding China has cooled, underscoring China’s growing appeal.

Cambridge Associates reported roughly 30 client inquiries about China-focused funds this year, a stark contrast to 2023. Many non-Asian investors are planning visits to China and Hong Kong to explore opportunities in tech, AI, biotech, and robotics.

Caveats and Structural Concerns

Despite the optimism, China’s broader economy shows signs of weakness. Factory output, retail sales, and foreign direct investment (down 13.2% in the first five months of 2025) remain subdued. Analysts warn that early inflows have not yet translated into sustained capital, and the AI boom must benefit the broader economy to maintain market momentum.

CLSA strategist Alexander Redman cites deflationary pressures as a reason to avoid overweighting the market. Polar Capital’s Jerry Wu emphasizes that while innovative sectors are booming, broader economic improvement is crucial for long-term gains.

Foreign capital is “standing at the door,” evaluating China’s long-term competitiveness and potential returns. Early signs suggest a rerating of Chinese innovative assets, but significant, sustained inflows may depend on economic stabilization and tangible benefits from technology and industrial advances.

The overall picture is one of cautious optimism: markets are attracting attention, but structural challenges persist.