The S&P/Case-Shiller Home Price Indices in the U.S. reported a 1.6% increase for August compared to last year, which is lower than the expected 1.9% rise. The financial scene is changing quickly, with the Federal Reserve and the Bank of Canada likely to adjust their interest rates soon. The AUD/USD remains steady as we await Australia’s Q3 inflation data and a potential Fed decision.

Currency And Oil Dynamics

The USD/JPY approached 152.00, boosted by a stronger yen due to progress in U.S.-Japan trade talks. The EUR/USD gained slightly as the Federal Reserve prepares for its interest rate decisions. An increase in OPEC+ production has caused WTI oil prices to fall, but support lingers from sanctions on Russia. The GBP/USD is now below 1.3300, reflecting US Dollar weakness and concerns about the UK economy. Gold, which faced early selling pressure, is climbing back toward $4,000 per troy ounce. In the cryptocurrency market, Bitcoin is trying to rise past $114,000, while altcoins like Ethereum and Ripple hold steady amid potential ETF inflows. Additionally, Pump.fun (PUMP) has recovered, rising above $0.0050, suggesting a positive end of the month. The August Case-Shiller data confirms our observations in the housing market, showing slower price growth than anticipated. This slowdown, along with last week’s report of declining Existing Home Sales for three straight months, gives the Federal Reserve a reason to act. We think this weak data is why markets are now preparing for an interest rate cut.

Anticipated Federal Reserve Decision

With the Fed’s decision expected tomorrow, a shift in policy seems likely. The CME FedWatch tool suggests an 85% chance of a 25-basis-point rate cut, as core inflation has decreased to 2.8% from earlier highs this year. This trend is pushing down the US Dollar and boosting riskier assets. For traders, this signals the need for strategies that benefit from a falling dollar. Buying call options on the EUR/USD, currently around 1.1660, could be promising. Selling at-the-money put spreads on the AUD/USD may also be appealing as the pair gains strength ahead of its inflation data. The British Pound stands apart, dropping below 1.3300 due to significant local fiscal issues. Unlike the U.S., the UK’s challenges may compel the Bank of England to make deeper cuts, which weighs heavily on the currency. Caution is warranted for long GBP positions until the new budget offers more insight. Gold is finding support around the key $4,000 mark thanks to the drop in U.S. Treasury yields. An actual rate cut could add momentum for gold, presenting a clearer picture compared to the volatility seen in early 2020 during trade disputes. In the cryptocurrency arena, Bitcoin’s ability to stay above $114,000 shows the bulls are confident ahead of the central bank’s announcement. A more accommodating Fed would likely be a bullish signal for assets with limited supply. Recent increases in ETF inflows indicate that institutional investors are expecting a positive conclusion to the month. Create your live VT Markets account and start trading now.

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