Early Thursday, markets displayed typical caution ahead of key economic data, except in Japan, where the Nikkei surged to a record high, despite persistent inflation, tracing strong overnight gains in the S&P 500 and Nasdaq.
The mood remains cautiously optimistic, supported by softer U.S. Producer Price Index (PPI) data and weak labor signals, reinforcing expectations for Federal Reserve (Fed) rate cuts despite ongoing geopolitical and trade tensions.
In August, the U.S. PPI fell to a four-month low of -0.1% Month-over-Month (MoM), below expectations of 0.3% and down from 0.7% previously. Year-over-Year (YoY), PPI eased to 2.6% versus a forecast of 3.3% and a downwardly revised 3.1% prior. Core PPI, excluding Food & Energy, also declined to -0.1% MoM and 2.8% YoY, both missing estimates and down from previous readings of 0.7% and 3.4%.
Wholesale sales in July rose 1.4%, beating the 0.2% forecast and stronger than the prior 0.3% gain. Inventories increased by just 0.1%, slightly below expectations. Meanwhile, the Atlanta Fed’s GDPNow estimate for Q3 edged up to 3.1% from 3.0%.
These figures boosted market bets on a 0.25% rate cut at each of the Fed's three remaining policy meetings in 2025, with a 10% chance of a 0.50% cut in September.
The dovish outlook pressured the USD and drew sharp criticism from U.S. President Donald Trump, who once again targeted Fed Chair Jerome Powell, tweeting: “No Inflation!!! ‘Too Late’ must lower the RATE, BIG, right now. Powell is a total disaster, who doesn’t have a clue!!!”
The U.S. Treasury’s $39 billion auction of 10-year notes saw strong foreign demand, with international investors taking 83.13%—well above the 71.1% six-month average.
Elsewhere, oil prices rose after President Trump claimed Russia violated Poland’s airspace. South Korea’s exports and imports surged in early September, potentially linked to the U.S.–South Korea trade deal.
In Japan, wholesale inflation accelerated to 2.7% YoY in August from 2.5% prior, driven by food costs. This keeps pressure on the Bank of Japan ahead of its September 18–19 policy meeting, as markets watch for hawkish signals. Meanwhile, Japanese companies are resisting tighter foreign labor rules amid rising bankruptcies tied to labor shortages.
UK house prices saw their broadest decline in over 18 months.
In New Zealand, RBNZ Governor Christian Hawkesby reaffirmed that the central projection for the Official Cash Rate (OCR) is a 50 basis-point cut, bringing it to around 2.50% by year-end.
U.S. Energy Information Administration (EIA) data showed a surprise build in crude oil inventories, with a rise of 3.939 million barrels versus an expected draw of 1.040 million. The market now awaits OPEC’s monthly oil report.
In the crypto space, Belarus continues its shift toward digital assets, with President Alexander Lukashenko calling crypto “strategic” and urging banks to bypass sanctions to stabilize the economy.
Against this backdrop, the U.S. Dollar Index (DXY) edged higher after Wednesday’s dip, while gold and oil retreated. Asia-Pacific equities climbed, led by Japan, and cryptocurrencies remained strong amid growing institutional adoption and technical momentum.
In forex, EURUSD extended its pullback from a seven-week high, marking a third day of losses. GBPUSD and USDJPY remained flat, while AUDUSD and NZDUSD eased slightly from recent highs, but USDCAD maintained a three-day uptrend, hitting three-week peaks.
Despite reaching a seven-week high earlier this week, EURUSD is on track for a weekly loss, following two straight days of decline. The latest pressure on the pair stems from underwhelming EU data and cautious comments from European Central Bank (ECB) officials. Political uncertainty in France, rising Russia-Ukraine tensions now involving Poland, and ongoing EU–U.S. trade concerns are also weighing on the Euro. While markets expect the ECB to avoid rate cuts, the potential cautious tone from ECB President Christine Lagarde continues to drag on EURUSD.
While EURUSD continues to decline, both USDJPY and GBPUSD remain subdued amid mixed domestic data. USDJPY stays near recent lows as strong Japan PPI data supports Bank of Japan (BOJ) rate hike expectations. However, political tensions in Tokyo and concerns over employment conditions limit further gains for the Yen.
Meanwhile, GBPUSD lacks clear direction as UK house prices see their sharpest fall in 18 months. The recent jump in inflation and mixed retail sales data add pressure on Bank of England (BoE) policymakers, who face growing challenges in justifying current interest rates amid rising economic uncertainty and public criticism of the government’s fiscal strategy.
AUDUSD has pulled back from a 10-month high, while NZDUSD also eased after reaching a one-month peak. The decline in both pairs reflects the market's cautious tone and the U.S. Dollar’s resilience ahead of key U.S. CPI data and the European Central Bank (ECB) decision. Additional pressure comes from concerns over China’s economic outlook and a growing dovish bias around the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ). Earlier today, RBNZ Governor Christian Hawkesby reiterated expectations for a 0.50% rate cut by year-end.
Meanwhile, USDCAD extended its gains for a third straight day, reaching a three-week high. This strength comes despite a recent three-day rally in crude oil prices, which pulled back slightly early Thursday. The Canadian Dollar's weakness is likely due to rising U.S.–Canada tensions and disappointing Canadian jobs data, which have boosted expectations of rate cuts from the Bank of Canada (BoC).
WTI Crude Oil has snapped its three-day winning streak, pulling back from the weekly high, though without strong downside momentum. The recent rally in oil was driven by escalating geopolitical tensions involving Russia and Israel, following attacks in Doha and Poland. This surge came despite a third straight weekly inventory build, as reported by both industry and official sources—now possibly weighing on prices. The slight retreat in WTI may also reflect market positioning ahead of today’s monthly OPEC report.
Gold, meanwhile, hovers near mid-$3,650 levels for a third day, posting mild losses after failing to extend this week’s record high. The precious metal’s pullback is likely tied to challenges in India and China—its two largest consumers—amid U.S. President Donald Trump's push for heavy tariffs on both countries over their energy trade with Russia. Still, gold remains close to its all-time high and continues to draw bullish sentiment. Many expect it could reach $5,000 if the Federal Reserve announces a 0.50% rate cut in September, rather than the widely expected three 0.25% cuts across the remaining 2025 policy meetings.
Despite an uncertain overall market mood, U.S. equities remain strong, with the S&P 500 and Nasdaq continuing to post record closes. Japan’s Nikkei has also reached an all-time high (ATH). This resilience appears to be driven by strong earnings and order updates from major tech firms like Oracle, along with growing optimism over potential Fed rate cuts. In Japan, mixed Producer Price Index (PPI) data and uncertainty around a Bank of Japan (BoJ) rate hike—despite expectations for one more hike in 2025—have supported the Nikkei. Hopes for further stimulus under Japan’s new government, which opted for a full-scale leadership vote rather than simply replacing Prime Minister Ishiba, also add to the positive sentiment.
In the crypto space, Bitcoin (BTC) and Ethereum (ETH) regained bullish momentum after a slow start to the week. Their rebound is supported by technical breakouts, increasing institutional interest in crypto treasury reserves, stronger demand for ETFs, firmer equities, and a volatile U.S. Dollar. This marks a recovery after a weak August for the crypto market.
Thursday brings key market-moving events, with the European Central Bank’s (ECB) monetary policy meeting, U.S. Consumer Price Index (CPI) for August, and weekly Jobless Claims all in focus. The ECB is widely expected to keep interest rates unchanged, likely citing global uncertainty—adding pressure on the Euro. Meanwhile, if U.S. CPI remains sticky and jobless claims ease after recent increases, the U.S. Dollar could rebound.
Market consensus expects U.S. CPI to rise by 0.3% MoM for both headline and core readings. Year-on-year, headline inflation is seen at 2.9% (up from 2.7%), while core is expected to remain steady at 3.1%.
Aside from macro data, quarterly earnings from Adobe, geopolitical developments in Doha and Poland, and U.S. President Donald Trump’s legal and tariff battles will also influence market sentiment.
Overall, Thursday is likely to be highly volatile—potentially a “Turnaround Thursday”—with chances of a U.S. Dollar recovery that could trigger pullbacks in gold, equities, and other commodities.
In the currency space, EURUSD may continue to decline unless ECB President Christine Lagarde delivers a hawkish surprise, which appears unlikely. USDJPY may stay firm as the Yen struggles to assert its haven appeal, while GBPUSD could drift, and AUDUSD and NZDUSD are likely to remain under pressure. Cryptocurrencies may pare some recent gains if risk sentiment sours, though they still appear set to post weekly advances.
May the trading luck be with you!
