Week ahead: Stocks climb as Fed cut odds rise

US inflation and jobs data lifted expectations of Fed rate cuts, driving US stocks to record highs. In Europe, the ECB held rates steady, with its upbeat outlook on growth and inflation tempering bets on further cuts. Meanwhile, Trump dropped his nomination of a hawkish China policy adviser, fuelling speculation he may adopt a more dovish stance on China.

KEY INDICATORS

US economy and Fed

US inflation rose in August, with CPI up 0.4% month on month and 2.9% year on year.

Core CPI increased 0.3% month on month and 3.1% year on year.

Jobless claims reached 263,000 in the week ending 6 Sept, the highest level since Oct 2021.

The IMF reported slowing domestic demand and weaker job growth in the US.

The IMF warned that tariffs could add further pressure to inflation.

Europe and global outlook

The ECB kept interest rates unchanged.

Christine Lagarde said economic risks are now more balanced, but inflation remains uncertain.

Inflation in 2027 is projected at 1.9% and core inflation at 1.8%, both below the ECB’s 2% target.

The IMF said the Fed may have room for cautious rate cuts depending on upcoming data.

Looking ahead (15–19 Sept)

The Fed’s rate decision takes centre stage, with markets expecting a cut and guidance closely watched.

Key inflation data from the US and Europe.

Earnings from tech and industrials, and geopolitical risks in the Middle East and Asia, may drive volatility across FX, commodities, and equities.

MARKET MOVERS

EUR/USD

• Primary trend: Bullish, with pullbacks towards 1.1700 expected to attract buyers.
• Support level: 1.1700 (secondary: 1.1725)
• Resistance zone: 1.1780 (secondary: 1.1800)
• Long strategy: Enter longs near 1.1700 support, target 1.1780 initially, extend towards 1.1800, stop-loss below 1.1700.
• Short strategy: Consider tactical shorts on rallies into 1.1780–1.1800 resistance, target 1.1725 initially, extend back to 1.1700 if momentum fades.
• Range trade: Buy dips near support and sell rallies near resistance if price consolidates between 1.1700–1.1800.
• Risk management: Keep stops tight in line with the prevailing bullish bias.

GBP/JPY

• Primary trend: Bullish, though risk/reward is limited at current levels.
• Support level: 199.50 (secondary: 199.80)
• Resistance zone: 200.90 (secondary: 201.30)
• Long strategy: Enter longs near 199.50 support, target 200.90 initially, extend towards 201.30, stop-loss below 199.50.
• Short strategy: Consider tactical shorts on rallies into 200.90–201.30 resistance, target 199.80 initially, extend back to 199.50 if momentum fades.
• Range trade: Buy dips near support and sell rallies near resistance if price consolidates between 199.50–201.30.
• Risk management: Keep stops tight in line with the prevailing bullish bias.

DAX 40 (Germany)

• Primary trend: Bullish, with pullbacks towards 23,600 expected to attract buyers.
• Support level: 23,600 (secondary: 23,750)
• Resistance zone: 24,000 (secondary: 24,100)
• Long strategy: Enter longs near 23,600 support, target 24,000 initially, extend towards 24,100, stop-loss below 23,600.
• Short strategy: Consider tactical shorts on rallies into 24,000–24,100 resistance, target 23,750 initially, extend back to 23,600 if momentum fades.
• Range trade: Buy dips near support and sell rallies near resistance if price consolidates between 23,600–24,100.
• Risk management: Keep stops tight in line with the prevailing bullish bias.

NEWS HEADLINES

AI optimism lifts Wall Street

The S&P 500 and Nasdaq reached new highs as cooling inflation and robust AI demand lifted investor sentiment.

Oracle led gains on strong AI cloud demand, with chipmakers including Nvidia, Broadcom, and AMD climbing alongside.

Tech and power suppliers outperformed, while consumer discretionary and staples lagged behind.

Dollar weakens as Fed cut bets grow

The US dollar weakened as markets priced in a likely 25 bps Fed cut.

The yen strengthened against the dollar after US and Japanese officials emphasised that currency levels are not policy targets.

The euro remained steady, supported by stable risk sentiment.

Oil dips, gold benefits from Fed rate expectations

Oil prices (Brent and WTI) fell on oversupply concerns and weak US demand, despite persistent geopolitical risks.

Gold rose for a fourth consecutive week, supported by softer labour market data and growing expectations of a Fed rate cut.

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