Dollar Weakens as Gold Hits Record High Amid Fed Rate Cut Speculation
Global financial markets were mixed on Tuesday as the U.S. dollar wobbled near five-week lows and gold surged to a record high. Investors are closely watching economic data due later this week, which could strengthen expectations for the Federal Reserve to cut interest rates in September. Market participants have priced in an 89% chance of a 25-basis-point cut, but weaker-than-expected labor data could fuel speculation of a larger reduction.
The spotlight now shifts to Friday’s U.S. nonfarm payrolls report, along with job openings and private payroll figures, which are expected to provide clearer insight into the labor market. Analysts say the Fed is weighing whether the economy is slowing at a manageable pace or facing sharper deterioration. Meanwhile, U.S. inflation data set for release on September 11 will play a pivotal role in shaping the central bank’s final decision.
Global stocks reflected investor caution. Wall Street remained near record highs on the prospect of lower borrowing costs, while Asia-Pacific shares traded flat. China’s CSI300 index fell 0.9% after hitting a three-year high in recent sessions, and Hong Kong’s Hang Seng slipped 0.6% as investors locked in profits from recent gains. European futures dipped slightly, and Nasdaq futures slipped 0.1% after the U.S. holiday left few overnight trading cues.
Currency markets also saw volatility. The euro weakened to $1.1692, sterling slipped to $1.3526, and the yen fell 0.3% against the dollar after Bank of Japan officials signaled caution over further rate hikes. The dollar index edged up 0.2% to 97.847, though it remained close to Monday’s five-week low. U.S. 10-year Treasury yields inched higher at 4.249%, underscoring investor uncertainty ahead of Fed action.
In commodities, gold soared to an all-time high of $3,508.5 per ounce, driven by expectations of lower U.S. interest rates and a softer dollar. Oil prices also advanced, with Brent crude rising 0.4% to $68.44 per barrel and U.S. West Texas Intermediate climbing 1.42% to $64.92, amid escalating tensions between Russia and Ukraine. Meanwhile, concerns over the Fed’s independence resurfaced as President Donald Trump’s efforts to fire Fed Governor Lisa Cook drew criticism, adding further uncertainty to the outlook for U.S. monetary policy.
Source: Reuters