Global markets are entering the week with risk appetite on the rise, fueled by a surge in bets that the Federal Reserve will cut rates this month and ease further into year end. Equities extended gains as investors embraced the prospect of looser financial conditions, while haven demand pushed gold to fresh record highs and weighed on the dollar.
Fed Cut Bets Dominate Sentiment
Cooling US labor data has emboldened expectations that the Fed will deliver multiple rate cuts this year, with markets nearly fully priced for the first move in September. The immediate focus now shifts to this week’s inflation data, where the core CPI print on Thursday is projected to show a second consecutive monthly increase of 0.3%. While unlikely to derail a September cut, a firmer print could raise the odds of a “hawkish cut,” in which the Fed tempers easing with warnings about inflation risks.
Tech Momentum Keeps Risk Bid Alive
Investors continue to rotate into the technology sector, underpinned by optimism around growth potential despite macro headwinds. The sector remains a magnet for risk on flows, with traders betting easier Fed policy will further boost earnings resilience in high-growth names.
Japan in Focus After Ishiba’s Exit
The resignation of Prime Minister Shigeru Ishiba has spilled into Japanese markets, firming government bonds after Monday’s selloff. Investors see the political shift as reinforcing expectations for looser fiscal policy, adding another layer of uncertainty for the Bank of Japan as it balances policy normalization with fragile domestic sentiment.
Market Dynamics
- Treasuries: Benchmark yields inched higher, though still anchored by rate cut bets.
- Dollar: Extended losses as traders positioned for an aggressive Fed easing cycle.
- Gold: Notched another record, drawing strength from both haven demand and lower rate expectations.
- Asia: Regional sentiment is largely being driven by US data cues, with limited local catalysts.
SARACEN MARKETS VIEW
The coming days are all about sequencing: Tuesday’s US labor revisions, Thursday’s inflation data, and next week’s FOMC meeting. Traders should prepare for volatility around the CPI release, which could define whether the Fed delivers a straightforward cut or a hawkish one. The broader trajectory remains clear markets expect easing, but the scale and pace of that easing will dictate positioning across FX, gold, and equities.
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.