Global stocks and crypto advance on Fed rate cut bets

The euro advanced against the US dollar on Thursday, supported by weaker-than-expected US labor data and in-line inflation figures that reinforced expectations of further Federal Reserve easing.

The US Consumer Price Index (CPI) rose 2.9% year-over-year in August, slightly higher than July’s 2.7%, but broadly in line with forecasts. Core CPI held steady at 3.1%, also matching expectations. The subdued inflation report left rate-cut bets unchanged. Meanwhile, weekly Initial Jobless Claims surged to 267,000—the highest level in nearly four years—well above consensus estimates of 235,000, highlighting renewed cracks in the labor market.

The dollar came under further pressure as markets priced in a 92.5% probability of a 25 basis-point Fed cut in September, with a slim 7.5% chance of a deeper 50 bps move, according to CME FedWatch tool.

On the European side, the European Central Bank left its Deposit Rate unchanged at 2% and reaffirmed a data-dependent, meeting-by-meeting policy approach. ECB President Christine Lagarde said the disinflationary phase has ended, describing monetary policy as “in a good place.” She also noted reduced trade uncertainty but emphasized that risks to growth remain tilted to the downside. The decision was unanimous.

Gold extended its gains on Friday, trading near record highs as softer US labor market data reinforced expectations of aggressive Federal Reserve rate cuts. At the same time, rising geopolitical tensions and trade-related uncertainties fueled safe-haven demand, keeping the precious metal resilient despite a generally upbeat risk mood in broader markets.

US CPI rose in August, with headline inflation at 2.9% and core steady at 3.1%, both in line with forecasts. However, the data was overshadowed by a jump in jobless claims to the highest since 2021, reinforcing signs of labor market weakness and strengthening expectations for Fed rate cuts.

Beyond monetary policy, geopolitical flashpoints are adding to bullion’s appeal. Poland’s interception of Russian drones over its airspace—the first direct NATO military action in the Ukraine conflict—raised fears of escalation. Meanwhile, ongoing conflicts in the Middle East, Japan’s new export restrictions on Russian-linked entities, and reports that Washington will pressure G7 allies to raise tariffs on Indian and Chinese purchases of Russian oil have all heightened investor caution.

Despite an otherwise supportive risk-on mood in equities, gold remains firmly bid, with traders looking to upcoming US consumer sentiment and inflation expectations data for fresh cues.

Oil prices fell sharply on Thursday, pressured by renewed concerns about oversupply and weakening US demand, which outweighed risks to output from ongoing conflicts in the Middle East and Ukraine.

The International Energy Agency (IEA) warned in its monthly report that global oil supply is likely to grow faster than expected this year, driven by planned OPEC+ production increases.

OPEC+ recently confirmed it would raise output from October, though OPEC itself left non-OPEC supply and demand forecasts unchanged, pointing to steady consumption. The market remains caught between geopolitical risks—such as rising tensions in the Middle East and Ukraine—and the reality of rising OPEC+ output and swelling stockpiles.

Saudi Arabia’s exports to China are set to climb sharply in October, with Aramco expected to ship 1.65 million barrels per day, up from 1.43 million in September, according to trade sources. Meanwhile, investors are closely monitoring potential new sanctions targeting Russian crude.

On the policy front, US Energy Secretary Chris Wright met with European Commissioner Dan Jorgensen in Brussels to discuss accelerating restrictions on Russian energy trade. Jorgensen said the EU’s deadlines were ambitious but stressed the urgency of tightening measures.

In broader markets, US inflation accelerated in August at its fastest pace in seven months, led by higher housing and food costs. Weekly jobless claims also rose sharply, reinforcing expectations the Federal Reserve will cut interest rates next Wednesday—a move that could support future oil demand.

US stocks notched fresh record highs for a third consecutive session on Thursday, buoyed by rising confidence that the Federal Reserve will move to cut interest rates next week. Investors largely shrugged off stronger monthly inflation data, focusing instead on signs of a cooling labor market and expectations of looser monetary policy that could support growth into year-end.

US CPI rose 2.9% in August, with core inflation steady at 3.1%, both in line with expectations. However, jobless claims jumped to 263,000, the highest since 2021, signaling further labor market weakness. Together with softer producer prices, the data has reinforced expectations of a Fed rate cut on September 17, with markets pricing in multiple cuts this year.

In corporate news, trading was active across key sectors. Delta Air Lines slipped as it warned of soft demand for economy-class travel, though the carrier raised its Q3 revenue guidance on stronger premium bookings. Retailer Kroger gained after lifting its annual sales forecast, supported by steady demand for value-oriented products as consumers contend with higher living costs. Chipmaker Micron Technology rallied after Citi boosted its price target, citing growing demand from data centers as a key driver for stronger earnings.