To The Moon

As the Federal Reserve’s September meeting approaches, speculation is growing over the magnitude of the expected rate cut. While many traders are pricing in a quarter-point reduction, recent market movements suggest the possibility of a half-point cut is gaining traction. Amid mixed inflation signals and cooling labor market data, all eyes are on how the Fed will respond. This report also highlights developments from the European Central Bank (ECB) and the Bank of Japan (BOJ), alongside key movements in precious metals and technology sectors.

Federal Reserve Speculation and Inflation Data

• Fed Faces Tough Decision

The Fed is set to make a critical decision next week, with the balance shifting toward a quarter-point rate cut. However, a recent decline in Treasury yields and a weakening US dollarsignal that some investors are still betting on a half-point reduction. Former New York Fed President William Dudley has pointed to the potential for a larger cut, given the cooling labor market. The CME FedWatch tool saw the odds for a half-point cut rise from 14% to 28%, suggesting growing belief in a more aggressive move.

Fed Rate Monitor Tool

Global Central Banks – ECB and BOJ

• European Central Bank Holds Back for Now

While the ECB refrained from providing clear guidance on its next rate cut, markets are still watching closely. ECB President Christine Lagarde and other officials are awaiting further economic data to gauge the extent of the eurozone’s economic slowdown. There is a chance that the ECB could opt for a rate cut at its next meeting in Oct, though this decision hinges on how inflationary pressures evolve. Given the eurozone’s fragile economic growth, ECB officials remain cautious about closing the door on more easing.

• Bank of Japan Prepares for December Hike

Bank of Japan (BOJ) is also preparing for a pivotal meeting next week. Most analysts do not expect a rate hike in Sept, but a Bloomberg survey shows that over half of BOJ watchers foresee a rate increase by December. The yen has been one of the best-performing currencies this quarter, gaining 14% against the dollar. Investors, particularly hedge funds, are placing bullish bets on the yen in anticipation of further rate hikes and potential easing by the Fed.

Commodities and Technology Sectors Surge

• Gold Reaches Record High

The precious metal’s appeal has grown amid rising expectations of a rate-cutting cycle by the Fed, as well as its traditional role as a safe haven during global conflicts, including tensions in the Middle East and Ukraine.

GoldvsGVZ

• AI and Tech Stocks Propel Markets

AI and tech stocks continue to fuel the market’s upward momentum. $NVIDIA Corp(NVDA)$ , a bellwether for AI, along with other semiconductor giants like $Broadcom(AVGO)$ and $Advanced Micro Devices(AMD)$ , have seen substantial gains.

Meanwhile, OpenAI is preparing to launch its new AI model, code-named "Strawberry," which promises to improve human-like reasoning and problem-solving capabilities. In addition, Oracle remains bullish on its future, signaling confidence in its cloud infrastructure business. These developments, coupled with strong investor interest, have kept tech stocks buoyant despite broader economic concerns.

OpenAI

Conclusion: Balancing Central Bank Decisions and Market Optimism

As the Fed meeting draws near, market participants remain divided over the size of the impending rate cut, though the consensus leans toward 25 bp. Recent inflation data supports the case for a smaller reduction, but persistent calls for a more aggressive 50 bp cut highlight ongoing uncertainty…

Thanks for reading, supporting. You’re welcome.

@TigerStars @CaptainTiger @Tiger_SG

This analysis is for informational purposes only and should not be construed as financial advice. Market conditions are fluid, and investors should consult a financial advisor before making any decisions. Past performance is not indicative of future results.