Market sentiment stayed modestly positive early Tuesday, as traders remained optimistic after Friday’s weak U.S. jobs report boosted expectations of Federal Reserve (Fed) rate cuts. Tech stocks led the charge, pushing the Nasdaq to a fresh record high, while the Dow Jones and S&P 500 closed slightly higher. However, the mood was tempered by caution ahead of Apple’s event, political tensions in France and Japan, and developments surrounding U.S. President Donald Trump.
Traders are now pricing in a 0.25% rate cut from the Fed on September 17, with some forecasting two more 0.25% cuts in the remaining meetings this year. This contrasts with the NY Fed's latest data, which showed consumer inflation expectations for the year ahead rose to 3.2% from 3.1%, while the August Employment Trends Index dropped to 106.41 from 107.55, indicating softer labor conditions.
Renaissance Macro Research pointed to a shift in labor market concerns—from layoffs to reduced hiring. The research cites the NY Fed's Survey of Consumer Expectations to state, “While the risk of job loss remains low, the perceived chance of finding a new job if laid off has plunged to 44.9%, the lowest ever recorded.”
The U.S. Supreme Court granted President Trump authority to remove FTC Commissioner Rebecca Kelly Slaughter, temporarily blocking a lower court’s ruling. This raised concerns about the independence of federal agencies, including the Fed, and added downside pressure on the U.S. Dollar. Trump also said he's ready to impose a second phase of sanctions on Russia. Separately, the U.S. and Pakistan signed a $500 million critical minerals deal, including plans for a refinery.
China focused on currency stability and clean energy while holding deep trade talks with Canada to boost economic ties.
In Japan, a full-scale Liberal Democratic Party (LDP) leadership vote is underway, involving both lawmakers and 100,000 grassroots members. Trade negotiator Akazawa noted that U.S. tariffs on Japanese goods, including cars, will be lowered by September 16.
In France, Prime Minister François Bayrou lost a no-confidence vote, and Fitch will review France’s credit rating this Friday.
Israeli Prime Minister Netanyahu said military forces are organizing around Gaza City. Chinese President Xi Jinping called for openness and win-win cooperation, while indirectly criticizing the U.S. trade policies in his comments at the virtual BRICS (Brazil, Russia, India, China, and South Africa) summit.
UK like-for-like retail sales rose 3.1% in August, the fastest pace this year outside of Easter.
Australia posted mixed data: business conditions improved to +7 with profits up 4% and cost pressures easing to 1.1%, but Westpac consumer sentiment dropped 3.1% month-on-month. One major Australian bank announced plans to cut 3,500 jobs by 2026, signaling ongoing economic adjustments. In New Zealand, manufacturing sales volumes fell 2.9% in Q2, after rising 4.8% in the previous quarter.
Gold marked another record high past $3,600, while cheering dovish Fed bets and a weaker dollar, with some analysts eyeing a possible path to $5,000 if concerns over Fed independence grow. The U.S. Dollar Index (DXY) dropped to a three-week low, boosting gold, major currencies, and crude oil, which continued its recovery. Cryptos also edged higher, with BTC extending a two-day rally while ETH remained indecisive. AUDUSD and NZDUSD rose for a third straight day, while USDCAD held steady after a five-day uptrend. Asia-Pacific equities drifted lower despite a strong Wall Street finish. Meanwhile, the Nasdaq set a new record, and the U.S. is considering ending quarterly financial reporting for listed companies.
Even though the U.S. Dollar Index (DXY) fell to a three-week low, marking its third straight day of decline, EURUSD and GBPUSD struggled to hold their gains, only mildly bid early Tuesday despite a three-day uptrend. The hesitation likely stems from political uncertainty in France, cautious comments from European Central Bank (ECB) officials, ongoing concerns over Russia, and mixed domestic data. GBPUSD also failed to fully benefit from strong UK retail sales, as fresh research pointed to weakening job conditions and rising growth concerns in the UK.
Japanese policymakers' decision to hold a “full-spec” vote—rather than just replacing Prime Minister Ishiba after his resignation—sparked fresh political jitters, as it involves over 100,000 grassroots party members. Despite the uncertainty, recent Japanese data continues to show strong growth and rising inflation, strengthening the case for a Bank of Japan (BoJ) rate hike by the end of 2025. Combined with the Yen’s safe-haven appeal and the Fed’s dovish stance, these factors are pressuring USDJPY after a volatile start to the week.
AUDUSD and NZDUSD are rising for a third straight day, supported by China’s stimulus signals and mostly positive data from Australia and New Zealand. However, a broadly cautious market mood ahead of this week’s major events is slowing their upward momentum. Meanwhile, USDCAD holds steady after ending a five-day winning streak, as Canada-China trade talks and a rebound in WTI crude oil—Canada’s key export—limit further gains. The crude rally is also supported by OPEC+ delivering a smaller-than-expected output increase.
Gold extends its rally for a third straight day, hitting a new all-time high near $3,657. The gains are driven by a weaker U.S. Dollar, safe-haven demand amid global trade and political uncertainty, and growing bets on a dovish Federal Reserve. Concerns over Fed independence and rising U.S. political tensions further boost gold’s momentum, especially after last week’s breakout above a key multi-month resistance, now support around $3,490.
Meanwhile, WTI crude oil continues its recovery from a three-week low, also rising for a second day. The rebound is supported by OPEC+’s modest October output increase, seen as low compared to previous months, technical support near $61.50, and stronger demand from U.S. gas refineries.
Broad market optimism continues to lift riskier assets like cryptocurrencies and equities, especially with support from pro-industry developments. In crypto, growing interest in stablecoins and increased use by corporate treasuries helped Bitcoin (BTC) and Ethereum (ETH) stay firm on Monday, though they showed limited momentum early Tuesday.
In equities, tech stocks like Broadcom fueled the Nasdaq’s climb to another record high ahead of today’s Apple event and Oracle’s earnings. The Dow Jones and S&P 500 also edged higher, supported by dovish Fed expectations, though their gains remain more muted.
Looking ahead, key events like Apple’s product launch, Oracle’s earnings, and the annual Bureau of Labor Statistics (BLS) revision of Nonfarm Payrolls (NFP) could drive market momentum. While current conditions support a risk-on mood and continue to pressure the U.S. Dollar, any negative surprises may trigger a sharp reaction, especially as the dollar seeks to recover from recent losses.
Markets will also stay alert to other risk catalysts such as President Trump’s tariff announcements, his ongoing legal battles, and developments in Ukraine-Russia and Gaza. Traders are already positioning for Wednesday’s U.S. Producer Price Index (PPI) and Thursday’s Consumer Price Index (CPI), which could keep the current trend intact and weigh further on the dollar.
This environment may help USDJPY stay under pressure, though other major currencies could struggle due to their own mixed fundamentals. Gold is likely to hold firm, but crude oil and cryptocurrencies could face pullbacks if risk sentiment shifts.
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