Market Outlook: Will the Fed Keep Rates Unchanged in September?

Key Focus

• U.S. inflation shows further signs of cooling

• Markets expect the Fed to keep rates unchanged in September

• USD sentiment turns increasingly bearish

• Gold and other precious metals remain supported

Market Review

U.S. July CPI Rises 0.1% MoM, Annual Inflation at 3.4%

• U.S. inflation continued to moderate in July, potentially reducing pressure on the Federal Reserve to tighten monetary policy further.

• Headline CPI increased 0.1% MoM, while Core CPI rose 0.2%.

• Annual headline and core inflation eased to 3.4% and 2.5%, respectively, both slightly lower than June.

• Despite remaining above the Feds 2% target, the softer data suggests inflationary pressure is gradually losing momentum.

• Energy prices declined 1.5% in July, while food and shelter costs each increased 0.1%.

• Following the release, U.S. stock futures rose and Treasury yields declined.

• CME FedWatch showed the probability of a September rate hike falling to 42%, reflecting reduced expectations for further tightening.

• Concerns over weaker employment growth and volatile energy prices have also lowered the urgency for another rate hike.

Market Impact

USD | Gold | S&P 500

Outlook

Cooling U.S. inflation has strengthened expectations that the Fed will maintain its current policy stance in September. This could weigh on the U.S. Dollar, while providing continued support for gold and other precious metals.

Key Events

• U.K. GDP

• U.S. PPI

The market will closely monitor the latest U.S. PPI data for further clues on inflationary pressure and the Feds future policy direction.

Key Markets

• USD

• Gold | Silver | Platinum

• U.S. Stock Indices

Trading Bias

Bullish on Precious Metals

Market Sentiment

The Fear & Greed Index rose slightly from 36 to 37, indicating that overall risk sentiment remains relatively stable.

As markets gradually digest developments surrounding the Iran conflict, safe-haven demand has eased, putting downward pressure on the USD. Meanwhile, risk assets such as equities and cryptocurrencies have gained momentum.

Technical AnalysisXAUUSD

Gold remains under pressure as safe-haven demand continues to moderate.

Technically, XAUUSD has broken below the EMA 89 and EMA 144 support levels, while the price structure shows a bearish N-shaped formation.

The current setup suggests that downside risks remain, with the technical trend favoring a short-selling bias.