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What happened in the Asia session?

The Asia trading session on September 16, 2025, was dominated by optimism surrounding expected Federal Reserve rate cuts, which drove major stock indices to historic highs in Japan and South Korea. However, China’s disappointing economic data served as a reminder of underlying regional challenges. The combination of Fed dovishness, improving US-China trade dynamics, and strong corporate earnings supported risk assets, while safe-haven flows into gold reflected ongoing global uncertainties.

What does it mean for the Europe & US sessions?

Today’s trading environment is dominated by Fed expectations, with traders positioned for the first rate cut of 2025. While markets appear confident in a 25bp reduction, the real focus will be on Fed guidance for future policy paths. Economic data, particularly retail sales, will provide insights into consumer resilience amid this monetary policy transition. The combination of dovish Fed expectations, record-low yields, and geopolitical uncertainties creates a complex backdrop requiring careful risk management across all asset classes.

The Dollar Index (DXY)

The US Dollar faced its most significant challenge in months on September 16, 2025, as a confluence of factors – including dovish Fed expectations, intensifying political pressure from President Trump, and technical selling momentum – pushed the currency to multi-month lows. With the Fed’s rate cut decision virtually certain, focus has shifted to the magnitude of the reduction and forward guidance about future policy moves. The dollar’s near-term trajectory will likely depend on the Fed’s ability to balance economic data with political pressures while maintaining its independence, alongside upcoming economic indicators that could either support or challenge the current dovish narrative.Central Bank Notes:

Next 24 Hours BiasMedium Bearish

Gold (XAU)

The Euro (EUR)

The Euro demonstrated resilience on September 16, 2025, reaching $1.1778 despite significant regional challenges. The ECB’s hawkish pivot, signaling an end to rate cuts, provided fundamental support for the currency. However, persistent concerns remain around France’s fiscal crisis, German economic weakness, and escalating trade tensions with both the US and China.Central Bank Notes:

Next 24 Hours BiasWeak Bullish

The Swiss Franc (CHF)

The Swiss Franc enters mid-September 2025 from a position of considerable strength, supported by safe-haven flows, contained inflation, and Switzerland’s economic stability. While the upcoming SNB meeting on September 25 is expected to maintain current policy settings, the central bank’s new transparency measures signal an important communication evolution. US trade tensions remain a significant economic challenge, though Switzerland’s diversified economy and the franc’s reserve currency status continue to provide resilience in an uncertain global environment.Central Bank Notes:

Next 24 Hours BiasMedium Bullish

The Pound (GBP)

The Canadian Dollar (CAD)

Tuesday’s developments reflect a Canadian dollar caught between supportive factors like higher oil prices and manufacturing resilience, versus significant headwinds from labor market deterioration and expected monetary easing. The currency’s performance in the coming days will largely depend on the Bank of Canada’s communication strategy and whether policymakers signal a prolonged easing cycle. With both the BoC and Fed expected to cut rates on Wednesday, the relative magnitude and forward guidance from each central bank will be crucial for the USD/CAD direction.Central Bank Notes:

Next 24 Hours BiasMedium Bearish

Oil

Oil markets on September 16, 2025, are caught between conflicting forces. While immediate supply disruption risks from Ukrainian attacks on Russian infrastructure and anticipated Federal Reserve rate cuts are providing near-term price support, fundamental market conditions point to significant oversupply ahead. The EIA’s projection of massive inventory builds and OPEC+’s continued production increases suggest substantial downward price pressure through 2026, with Brent potentially falling to $50 per barrel despite current geopolitical tensions. The market is essentially pricing in short-term disruption risks while bracing for longer-term oversupply challenges.

Next 24 Hours BiasWeak Bearish

Source: IC Markets

Accelerating Decline Rates

Investment Mostly Offsetting Decline

Implications for Markets and Policy

Source: Reuters

Unemployment held steady at 4.7% in the three months to July, for the third month running, though one must continue to interpret the figures with some degree of caution, as the data remains plagued by numerous quality issues.

Earnings growth, meanwhile, remains at a pace incompatible with a sustainable return to the 2% inflation target. Overall pay rose 4.7% YoY in July, while regular pay rose 4.8%, the latter metric dipping below 5% for the first time since the middle of 2022

Turning to the more timely PAYE payrolls metric, data pointed to payrolled employment having fallen by a relatively modest 8k in August, though this still marks the 7th straight monthly decline in payrolls, while also meaning that payrolled employment has now fallen in every month, bar one, since the Budget last year.

Taking a step back, while the employment backdrop looks to have stabilised a touch, risks overall remain tilted to the downside, not only as broader economic momentum remains anaemic at best, but also as the 26th November Budget looms, with uncertainty in the run up to Chancellor Reeves's announcement likely to keep a lid on business activity for the time being.

The figures are also unlikely to meaningfully alter the near-term Bank of England policy outlook, with Bank Rate set to be maintained at 4.00% in a 7-2 vote this Thursday; the MPC will have had advanced sight of today's data in any case. The next 'live' MPC meeting shan't come until November where, providing the current 'gradual and careful' guidance is maintained this week as expected, a 25bp cut remains the base case. That, though, hinges almost entirely on the inflation outlook, most importantly the September CPI print due 22nd October, where a print at, or below, the BoE's current peak 4% forecast will be required in order for further easing to remain on the cards this year.

Source: Pepperstone

Record Exports Defy Predictions

Trade Tensions and Government Concerns

Source: Reuters

WHERE WE STAND – Markets began the new trading week, yesterday, in a very similar vein to how we finished the last, amid a broad lack of conviction across the board, in a continuation of the ‘calm before the storm' vibe that we saw on Friday.At risk of repetition, the cagey and tentative nature of trade makes a lot of sense considering that the week ahead brings 5x G10 central bank decisions, plus a ton of impactful economic data releases. With such a packed slate of event risk looming large, it makes sense to see participants taking down position size, or even choosing to sit on the sidelines altogether.

The lack of impactful news- or data-flow through the day certainly didn't give participants much reason to enter the fray either, besides a brief wobble in risk on news that China have found Nvidia to be violating anti-monopoly laws. Quite why this matters, though, when the Nvidia assume no sales to China in their guidance, and when China are advising firms not to buy Nvidia chips anyway, is beyond me. Still, I struggle to turn my laptop on most mornings, so perhaps am not best placed to comment on the tech sector!

Speaking of Nvidia, though, I did some digging yesterday, given that endless common inches seem to be getting taken up recently on the issue of equity market concentration, and narrow market breadth. For all that brouhaha, the best performing ‘Magnificent Seven' stock this year – Nvidia – is only the 58th best performer in the S&P 500 at large. That hardly screams that we should be panicking about a tightly concentrated market, quite the opposite in fact, with the rally being relatively broad-based in nature.

That said, I do see some cause for caution in the short-term, even as the SPX & NDX hit new record highs. With money markets discounting ~70bp of Fed cuts by year-end, the bar for a dovish surprise from the FOMC tomorrow night is a high one, potentially an impossibly high one to meet. Hence, with a 25bp cut fully discounted, any guidance that J-Pow offers is likely to be interpreted as hawkish relative to how markets are positioned. As a result, it increasingly feels as if Wednesday's FOMC meeting could shape up as a classic ‘buy the rumour, sell the fact' event, especially with spoos having rallied 7% in five weeks since the August lows.

Still, even if some headwinds may crop up in the short-term, my faith in the longer-run bull case remains, hence I'd be viewing any equity dips as a buying opportunity. The underlying economy remains resilient, earnings growth is solid, calmer tones continue to prevail on the trade front, and an easier monetary policy backdrop over the next 6-12 months should also give the rally a nice helping hand. We might, though, if the FOMC proves a ‘sell the news' event, need to get over the hump of typically negative EoM/EoQ seasonality first.

Away from the equity complex, there wasn't overly much signal to be extracted from yesterday's market moves – Treasuries firmed across the curve, albeit remaining inside last week's ranges, while the dollar ticked a touch softer against most DM peers, in turn seeing gold advance once more & print a new record high.Although that USD demand faded somewhat as the day progressed, it was enough to take cable to its best levels since early-July. To be completely clear, this is not some sort of sudden vote of confidence in UK Plc, but almost purely a reflection of a broadly firmer greenback, again helping to re-affirm my longstanding view that the best way to play the ‘bearish UK' theme remains either short GBP in the crosses or, perhaps more simply, being short the long-end of the Gilt curve.

LOOK AHEAD – That deluge of event risk that I've been harping on about, starts today.

Last month's US retail sales figures highlight the docket, with headline sales seen having risen just 0.2% MoM in August which, if realised, would be the slowest monthly rise since May. While the control group metric, which broadly represents the GDP basket, is set to post a healthier 0.4% MoM rise, participants will be watching the release closely for any signs that a stalling labour market may be seeing consumers begin to tighten their belts.

Elsewhere, the US also releases industrial production stats for August today, with production data also due from the eurozone. On this side of the pond, though, focus will fall firstly on this morning's UK employment report, set to show unemployment having held steady at 4.7% in the three months to July, before participants turn their focus to the latest ZEW sentiment figures from Germany.Rounding things out today, we have last month's Canadian CPI which, despite likely rising back to 2% YoY shouldn't derail the BoC from delivering a 25bp cut tomorrow, as well as a 20-year Treasury auction tonight, which should go relatively well given how easily last week's supply was digested.

Source: Pepperstone

Gold's stellar rally to successive record highs shows every sign of continuing for the rest of the year, but a healthy correction is on the cards before breaching the $4,000 per ounce milestone in 2026, traders and industry experts said.

Strong tailwinds such as expectations for monetary easing by the U.S. Federal Reserve, lingering geopolitical tensions, worries over the Federal Reserve's independence, and strong central bank purchases have prompted investors to flock to the precious metal.

"The long-term gold bull run looks intact, as demand, particularly from central banks and ETFs, continues to rise at a faster pace," Renisha Chainani, head of research at Mumbai-based refiner Augmont said, on the sidelines of the India Gold Conference in New Delhi.

"But gold is currently in overbought territory and may see a 5-6% correction in the short term, before consolidating and rising again to reach new highs above $4,200 in 2026," she said.

Spot gold was trading around $3,680 per ounce on Tuesday after hitting a record $3,689.27 earlier in the session, having gained about 40% so far this year, following a 27% jump in 2024.

Nearly all industry participants at the conference were expecting gold's bull run to continue into 2026 on a reduction in U.S. interest rates, strong investment demand and geo-political risks.

"Analysts have been hedging prices to reach $4,000 in 2026. But it's really difficult to say, because every projection that we've looked at the price has gone to that level much faster than we expected," said Nicholas Frappell, global head of institutional markets at ABC Refinery.

The U.S. central bank is widely expected to cut interest rates at the end of their monetary policy meeting on September 17. Trump has been pushing the Fed to cut rates and has repeatedly criticised Federal Reserve Chair Jerome Powell for acting too slowly.

Gold, traditionally known as a favoured hedge against geopolitical and economic risks, also thrives in a low-interest rate environment.

"Gold prices are in uncharted territory, having not spent too much time in the $3,400's and $3,500's," said Philip Newman, managing director at consultancy Metals Focus, adding the firm expects prices to climb to around $3,800 at the end of the year.

"We could see a potential correction ahead after this price rally, but we also see that as a buying opportunity for investors who are waiting on the sidelines to get into the market. We could see gold prices scale above $4,000 in 2026."

Source: Yahoo Finance