The USD is stable against major currencies like the EUR, JPY, GBP, CHF, and CAD, all fluctuating within 0.10% of their prior levels as the US session begins. The AUD has risen by 0.30% against the USD, while the NZD is up by 0.19%. Market changes are being affected by geopolitical tensions, particularly Israel’s actions in Qatar and Poland’s response to Russian drones.

Expected Rate Cut

The US Producer Price Index (PPI) is expected to increase by 0.3% for both overall and core figures, with year-over-year estimates of 3.3% and 3.5%. There’s a 92% chance that interest rates will be cut in September due to signs of a weakening US labor market. Recent BLS revisions show a decline of 911,000 jobs from March 2024 to March 2025. This situation has led to lower yields, supporting the idea of a rate cut. At the start of the US session, yields have slightly increased. The 2-year yield is at 3.55%, along with small rises in long-term yields. In the stock market, the Dow is down while the S&P and NASDAQ are up, with the latter two reaching record highs recently. Oracle shares have jumped 31% in premarket trading thanks to a positive growth forecast, focusing on AI and cloud infrastructure. Shares of Nvidia, AMD, and Broadcom are also rising. In contrast, Apple shares have dropped by 0.71%, following a previous decline. Crude oil prices have increased by $0.82 to $63.46, and gold is up $25.86, now at $3649.44, having previously hit an all-time high. Bitcoin has risen by $1,111, now trading at $112,648.

Current Market Concerns

Markets are currently hesitant due to fears over escalating international conflicts in the Middle East and Eastern Europe. Today’s PPI and tomorrow’s important Consumer Price Index will be key points of focus ahead of the Fed meeting next week. These inflation figures will provide crucial hints about future market direction. Traders are grappling with the contradiction of betting on a Fed rate cut while inflation remains above 3%, which is significantly higher than the Fed’s 2% target. The driving force behind this expectation is a rapidly weakening labor market, as evidenced by a major downward revision that eliminated 911,000 jobs from last year’s data. Such a significant adjustment is rare and presents the Fed with a strong reason to reduce rates, despite high inflation. In the stock market, we’re noticing a major shift toward companies fueling the AI surge. Oracle’s stock increased over 30% based on future contracts for its cloud services, now worth $455 billion, indicating robust long-term AI demand. This trend has also boosted shares of Nvidia and other chip manufacturers, while older tech giants like Apple are lagging. With increased geopolitical risks and anticipations of lower interest rates, gold has become a key safe-haven asset, trading near its record high of over $3,600 per ounce. This price reflects a mix of fear and the belief that the Fed will soon loosen its monetary policy. Traders are betting on further gains using options, but the current high price indicates that many are already involved in this trade. Major currency pairs are exceptionally quiet, signaling a potential major move ahead. This stillness is due to traders waiting for US inflation data and next week’s Fed decision to drive market action. As a result, options strategies are being put in place to profit from a significant price swing, regardless of direction. Create your live VT Markets account and start trading now.

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