Oracle's Gains and Rate Cut Bets Drive Markets Higher

The EUR/USD pair traded flat near 1.1700 on Wednesday, as investors balanced softer U.S. inflation data with rising expectations of a Federal Reserve rate cut and renewed geopolitical risks in Europe. The muted price action reflected a cautious market mood, with traders reluctant to take strong positions ahead of key U.S. Consumer Price Index (CPI) figures due Thursday.

The latest U.S. Producer Price Index (PPI) data for August came in below expectations, offering fresh evidence that price pressures are cooling. Headline PPI slowed to 2.6% year-on-year from 3.3% previously, while core PPI eased to 2.8% from a downwardly revised 3.5% in July. The softer prints strengthened the case for the Fed to begin easing policy, although the reaction in markets was relatively subdued. With CPI and weekly jobless claims still to come, traders preferred to wait for confirmation before repricing the dollar more aggressively.

In Europe, the absence of major data kept attention firmly on the European Central Bank’s upcoming policy meeting. Market pricing continues to signal that the ECB will keep interest rates on hold, with a more than 90% probability of no change and only a slim chance of a 25-basis-point cut.

Geopolitical tensions added another layer of uncertainty. Reports that Russian drones briefly violated Polish airspace sparked a risk-off reaction, weighing on the euro and fueling concerns about the conflict spilling into NATO territory. At the same time, U.S. President Donald Trump escalated trade rhetoric by pressing the European Union to impose 100% tariffs on China and India, positioning the move as a way to increase pressure on Russia to end the war in Ukraine.

Gold prices hovered close to all-time highs on Wednesday, supported by expectations that the Federal Reserve will cut interest rates at its meeting next week following softer-than-expected U.S. inflation data.

The latest U.S. data showed producer prices unexpectedly declined in August, weighed down by lower service costs. The report reinforced market confidence that the Fed is preparing to ease policy, adding to momentum from last week’s weaker nonfarm payrolls report, which pointed to cooling labor market conditions. Revised job growth figures through March also suggested the slowdown began before the recent wave of tariffs on imports.

Markets are now pricing in a 90% probability of a quarter-point rate cut at the Fed’s September 16–17 meeting, with only limited odds of a larger move. With inflation trending lower and labor market signals softening, traders are positioning for further rate reductions before the end of the year.

Gold, a traditional hedge against inflation and uncertainty, has gained more than 39% so far in 2025. Lower interest rates tend to boost demand for non-yielding assets such as bullion, further supporting the rally. Market focus now shifts to Thursday’s U.S. Consumer Price Index (CPI) release, which could provide the final cue for the Fed’s upcoming decision.

Oil prices settled higher on Wednesday, lifted by geopolitical tensions after Poland intercepted drones in its airspace and the U.S. pressed for tougher sanctions on buyers of Russian crude. However, signs of rising U.S. inventories limited further gains.

Geopolitical risk returned to the market after Poland shot down drones during a Russian attack on western Ukraine, marking the first direct military response by a NATO member since the conflict began. The move came a day after Israel said it had struck Hamas leadership in Doha, briefly pushing oil benchmarks nearly 2% higher before prices pared back.

While no immediate supply disruption has been reported, the prospect of heightened instability has injected short-term volatility into energy markets. At the same time, U.S. President Donald Trump called on the European Union to impose 100% tariffs on China and India—both major buyers of Russian crude—as part of broader efforts to increase pressure on Moscow. EU officials, meanwhile, signaled that discussions were underway to accelerate the bloc’s phase-out of Russian fossil fuels, though sweeping tariffs on China and India remain unlikely.

Crude inventories climbed by 3.9 million barrels in the week to September 5, compared with expectations for a draw of 1 million barrels. Gasoline stocks increased by 1.5 million barrels versus forecasts for a decline of 200,000 barrels, while distillate inventories jumped 4.7 million barrels, far exceeding the anticipated 35,000-barrel rise. The data underscored a weakening demand outlook, particularly as the U.S. summer driving season draws to a close.

The US 500 secured a second consecutive record close on Wednesday, driven by strength in technology shares and easing wholesale inflation that bolstered expectations for a Federal Reserve rate cut next week.

Fresh data pointed to potential cracks in the U.S. labor market, with a sharp downward revision to employment figures for the 12 months through March suggesting cooling conditions even before sweeping tariffs were introduced in April.

Oracle shares jumped after the company issued strong earnings and an upbeat outlook fueled by rapid growth in its cloud and artificial intelligence businesses. The company reported a surge in revenue from its MultiCloud database division and projected its cloud infrastructure backlog to surpass half a trillion dollars in the coming months.The strong forecast sparked broader gains across AI-related technology names, lifting stocks such as NVIDIA, Broadcom, CoreWeave, and Dell Technologies.

Elsewhere, GameStop shares rose after reporting a 22% year-on-year jump in second-quarter revenue to $972.2 million, while Apple slipped following the launch of its iPhone 17 lineup.

Attention now turns to Thursday’s Consumer Price Index (CPI) report, a key release that could solidify the Fed’s decision on the pace of easing.