This morning in Europe, gold prices dropped from their record highs as traders awaited the Federal Open Market Committee’s decision. The dollar remained stable after a recent slump, with the EUR/USD pair showing minor recovery. Meanwhile, the Chinese government has instructed tech companies to stop buying Nvidia’s AI chips. The European Central Bank’s de Guindos mentioned that the current interest rate is appropriate, while other ECB officials emphasized the importance of being ready with monetary policy. **Economic Data Overview** Recent economic figures showed that the UK’s Consumer Price Index (CPI) for August met expectations at +3.8% year-on-year, which may lead the Bank of England to pause any policy changes. However, the Eurozone’s CPI slightly missed the preliminary estimate at +2.0%. In the US, mortgage applications jumped by 29.7% for the week ending September 12, up from +9.2% previously. Markets remained mostly stable, with the Japanese yen leading and the euro lagging behind. European stocks showed little movement, and US S&P 500 futures ticked down by 0.1%. Commodities also fell, with gold down 0.7% to $3,665.19 and WTI crude oil down 0.7% to $64.09. Bitcoin decreased as well, settling at $116,347. Investors are cautious, holding off on big moves until the FOMC decision is announced. The Federal Reserve is the center of attention today, creating a calm yet tense environment in the markets. Such situations can lead to volatility, as any unexpected move from the Fed could cause significant price changes. The CBOE Volatility Index (VIX) is trading near 18, indicating this expectation of a breakout. The US 10-year yield is just above 4%, a crucial level that depends entirely on the Fed’s upcoming statements. The remarkable 29.7% jump in mortgage applications is the largest weekly increase since the housing market began its recovery in 2024, giving the Fed reasons to maintain a hawkish stance. It might be wise to consider positions that benefit from higher yields, like buying puts on Treasury futures. **Potential Market Strategies** If the Fed takes a hawkish approach, the dollar could rise, pulling the EUR/USD below the 1.1800 mark. ECB officials appear divided, which could mean they lag behind aggressive moves from the US. This sets up a profitable opportunity to short the euro against the dollar using options or futures. In the equity market, caution is advised as US futures show some weakness. News about China’s ban on Nvidia chip purchases adds a significant headwind for the tech sector. Buying protective put options on indices like the Nasdaq 100 may be a wise strategy ahead of the Fed’s announcement. Gold is pulling back from its recent highs near $3,700, indicating that some traders are taking profits before the Fed’s decision. If the Fed suggests that interest rates will remain high for an extended period, as seen during the 2022-2023 tightening cycle, non-yielding gold could face notable pressure. This presents an opportunity to bet on further declines from these high prices. On the other side of the Atlantic, European data suggests a different path. The final Eurozone inflation rate reached the 2.0% target, a level not consistently seen since before the major inflation surge of the early 2020s. The steady UK inflation reinforces the notion that European central banks will likely hold off on changes, creating a policy divergence with the US. Create your live VT Markets account and start trading now.

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