Fed Meeting Drives Markets, Gold & U.S. Stocks At Record Highs

The euro strengthened on Monday as markets fully priced in a 25-basis-point rate cut by the Federal Reserve in September, with only slim odds for a larger 50 bps move. EUR/USD gained 0.32% despite Fitch’s downgrade of France’s sovereign credit rating, as traders focused on Fed policy expectations, US data releases, and commentary from European Central Bank officials.

Market participants shrugged off political concerns in France and instead concentrated on the likelihood of the Fed delivering its first rate cut in nine months. The US dollar came under pressure as investors positioned ahead of a busy economic docket.

In Europe, attention will turn to a speech by ECB policymaker José Luis Escrivá, Italy’s inflation data, the closely watched ZEW sentiment surveys in Germany and the wider Eurozone, as well as bloc-wide Industrial Production figures. Comments from ECB board member Isabel Schnabel also lent support to the single currency after she signaled that interest rates are at “a good place” as inflation converges toward the 2% target and the labor market remains resilient.

Meanwhile, Fitch Ratings projected that the Fed could deliver two 25-basis-point rate cuts this year—in September and December—with additional easing likely in 2026. In contrast, the agency does not expect further rate cuts from the ECB, with policymakers maintaining a cautious, meeting-by-meeting stance guided by incoming data.

Gold prices steadied during the Asian session on Tuesday after a sharp rally to fresh all-time highs, with XAU/USD consolidating ahead of a series of key central bank events. While momentum paused, the downside for bullion remains limited as dovish Federal Reserve expectations, a weaker US dollar, and heightened geopolitical tensions continue to provide strong support.

Weaker-than-expected US Nonfarm Payrolls data for August reinforced market bets on aggressive Fed easing. The US Dollar Index has slid to its lowest level since late July, underpinning demand for the non-yielding metal.

Political developments in Washington added to the backdrop, with the Senate confirming Stephen Miran, a former adviser to President Donald Trump, to the Fed’s Board of Governors. This comes as the FOMC begins a two-day policy meeting, while a federal appeals court ruled that Trump cannot dismiss Fed Governor Lisa Cook.

Geopolitical risks further bolstered safe-haven flows. Russia escalated its offensive against Ukraine with strikes on the southeastern city of Zaporizhzhia, following recent Ukrainian attacks on Russian oil facilities. Meanwhile, tensions in the Middle East deepened as an emergency summit of Arab and Islamic leaders condemned Israel’s strike on Hamas officials in Doha and called for coordinated efforts to suspend Israel’s UN membership.

Oil prices climbed on Monday, supported by escalating disruptions to Russian energy infrastructure and renewed political pressure from Washington on NATO members to curb Russian crude imports.

One of Russia’s largest refineries in Kirishi, with a processing capacity of 355,000 barrels per day (around 6.4% of national output), was forced to halt a key unit following weekend strikes, according to industry sources. Earlier, Ukraine also targeted the Primorsk export terminal, which handles about 1 million barrels per day of crude shipments.

Geopolitics added further fuel after US President Donald Trump said the US could impose additional energy sanctions on Moscow, but only if NATO allies also committed to halting Russian oil purchases.

Beyond supply risks, crude found additional support from robust refinery demand in China last month and a drop in US crude inventories. However, weaker Chinese economic data kept gains in check, UBS analyst Giovanni Staunovo noted.

On the macro side, investors are awaiting the Federal Reserve’s September 16–17 meeting, with markets pricing in an interest rate cut. Expectations of looser US monetary policy have pressured the dollar, making oil cheaper for foreign buyers and underpinning demand.

US stocks extended their record-setting run on Monday, with the US 500 closing above 6,600 for the first time as gains in Tesla and technology names offset jitters ahead of a closely watched Federal Reserve policy meeting.

All three major indices had already touched record territory last week, fueled by rising confidence in a Fed rate cut.

Markets are pricing a near-certainty that the Fed will lower borrowing costs by 25 basis points when it concludes its two-day meeting on Wednesday, with only a slim chance of a larger 50 bp cut, according to CME’s FedWatch Tool. The move would mark the first reduction since December, as signs of a cooling labor market give policymakers cover to act despite lingering inflation concerns.

The New York Empire State manufacturing index fell sharply in September, while last week’s CPI showed stickier price pressures in housing and food. Even so, a rise in weekly jobless claims reinforced bets on a policy pivot. Investors will closely watch the Fed’s updated economic projections and Chair Jerome Powell’s comments for clues on the trajectory of rates through year-end.

Nvidia pared early losses to close flat after Chinese regulators extended an antitrust probe into the US chipmaker. Shares found support as investors bought the dip, while CoreWeave jumped after disclosing a $6.3 billion order tied to Nvidia. Oracle surged after lifting its cloud revenue forecast and announcing large-scale AI contracts, adding momentum to the tech rally.

Tesla shares soared after CEO Elon Musk purchased more than 2.5 million shares, according to a regulatory filing, pushing the stock up 85% since early April and turning it positive for the year.