Markets are starting the week with a mix of caution and conviction. Gold surged to fresh record highs, Treasuries advanced, and the dollar slipped for a second straight session as investors weighed the twin risks of US political brinkmanship and a cooling labor market against firm expectations of further Federal Reserve easing.
Washington in Focus: Shutdown Deadline Nears
The immediate risk to sentiment comes from Washington, where congressional leaders meet President Donald Trump today in a final attempt to avoid a government shutdown. Federal funding expires at midnight Tuesday, and unless a stopgap bill is passed, nonessential services will close, hundreds of thousands of federal workers will be furloughed, and the release of key economic data including Friday’s all important payrolls report would be suspended.
For traders, the stakes are clear, a shutdown would inject fresh uncertainty into markets, undermine growth prospects, and delay critical inputs for gauging the Fed’s policy path. While history suggests a last minute deal is likely, the political risk premium is being priced into FX and rates markets this week.
Fed Outlook: Easing Still in Play
Despite fiscal noise, markets remain positioned for another Fed rate cut in October, with traders seeing monetary easing as essential insurance against labor-market weakness. The jobs report if released will be pivotal in shaping expectations for the pace and scale of further cuts.
Uncertainty over data timing complicates positioning. Investors loathe blind spots, particularly when labor market signals are central to risk sentiment. The Fed’s balancing act supporting employment without reigniting inflation remains the dominant theme heading into the new month.
Global Watch: RBA and China in Focus
- Australia: The Reserve Bank of Australia is expected to keep rates steady this week, with attention turning to Governor Michele Bullock’s commentary for clues on whether additional cuts are still on the table.
- China: PMI data on factory and services activity will provide critical insight into whether the world’s second-largest economy is stabilizing after months of uneven growth.
SARACEN MARKETS VIEW
Traders head into the final days of September facing a convergence of political and economic risk. The Fed remains on track to cut, but the timing and scale could hinge on whether Washington averts a shutdown and whether Friday’s payrolls report is released. For execution strategy, the focus is clear, position defensively around US dollar volatility, lean into gold strength on safe haven demand, and monitor RBA and China data as secondary catalysts.
This is not a week for complacency Washington’s showdown could dictate the tone across global assets.
Disclaimer: This report is for informational purposes only. It does not constitute investment advice or represent the official views of any central bank or regulatory body.