An eventful week has concluded, with markets digesting numerous central bank meetings, primarily the Federal Reserve's decision. A surprising sense of stability may have emerged in financial markets. Despite a murky outlook, mixed data signals, and political pressure in the United States, the interest rate decision did not cause significant volatility in the broader financial environment. That said, US bond yields edged higher before the end of last week, and the US dollar has fully recovered despite the Fed's policy rate cut.

Both the Bank of England and the Bank of Japan kept interest rates unchanged, in line with market consensus, but the Bank of Japan's decision was hawkish. The Bank of Japan announced a gradual reduction in its holdings of exchange-traded funds and real estate investment trusts, with two members dissenting from the rate hike. Currently, pricing is almost fully priced in for a rate hike in January.

Meanwhile, the call between the leaders of China and the United States has become a key focus in the market. The latest round of negotiations resulted in a TikTok agreement, satisfying Trump's demands. China has not confirmed the TikTok agreement. Trump also revealed that the two will meet in South Korea in six weeks and will visit each other next year.

Despite pressure from the Fed's rate cut and the appreciation of the RMB, the People's Bank of China maintained its 7-day reverse repurchase rate at 1.40%. The one-year and five-year loan prime rates will likely remain unchanged on Monday. The housing market needs support from interest rate cuts, but the central bank may want to observe the economic boost from the National Day Golden Week holiday before deciding whether to adjust.

Last Week's Market Performance Review:

Last week, US stocks closed higher, with the Dow Jones Industrial Average, S&P 500, and Nasdaq hitting record highs for the second consecutive trading day. Investors continued to digest the Federal Reserve's policy signals of resuming interest rate cuts this week. The technology sector saw mixed gains and losses, with performance of popular stocks diverging. All three major indices reached new highs: the Dow Jones Industrial Average rose 1.05% for the week to 46,315.27; the S&P 500 rose 1.22% to 6,664.36; and the Nasdaq Composite rose 2.21% to 22,631.48.

Gold prices retreated after hitting a new record high of $3,707.70 per ounce during intraday trading last week, but overall remained in a high range. Following the Fed's rate cut, the market refocused on easing expectations and macroeconomic data. In late New York trading, spot gold rose to $3,685 per ounce, marking a 1.15% gain for the week. COMEX gold futures closed up 1.11% at $3,719.30 per ounce, a 0.89% gain for the week.

Silver rose over 2.5% last week to $43.100 per ounce, recovering from losses earlier in the week as investors weighed the prospect of a Federal Reserve rate cut. Earlier, it hit a 14-year high of $43.110. Strong industrial demand from solar, electric vehicles, and electronics, coupled with supply constraints, continued to support silver.

Last week, the US dollar rebounded from its lows. The US dollar index rose sharply during intraday trading, extending its gains for the third consecutive trading day after rebounding from a multi-year low of 96.22 earlier in the week. This rebound occurred following the Federal Reserve's rate cut, and traders are closely monitoring technical indicators and US Treasury yields for potential future trends.

The US dollar index surged from a low of 96.22 to 97.81, approaching the psychological level of 98.00. The range between 98.23 (89-day simple moving average) and 98.50 is seen as potential resistance, where bears could regain control. A confirmed breakout of this range would be technically significant and could shift market sentiment, but traders remain cautious in the absence of a resistance level.

EUR/USD rose slightly last week, closing at 1.1746, up 0.08%, as the dollar rebounded from a three-year low following the Federal Reserve's rate cut. Political turmoil in France and rising US Treasury yields boosted the dollar, causing the pair to fall. USD/JPY consolidated around 148.00 amid anticipation of the Bank of Japan's decision, closing at 147.90, up 0.20%.

The market generally expects the key interest rate to remain at 0.5%, but given the resilience of the Japanese economy, the likelihood of a 25 basis point rate hike in October is increasing.

The British pound was one of the worst-performing G10 currencies, reflecting investor concerns about UK Chancellor of the Exchequer Reeves' ability to control the budget. The British pound fell 0.65% to $1.3470, its biggest two-day drop since early April. The Australian dollar fell to around $0.6593 last week, down 0.85%, retreating from an 11-month high reached mid-week. The Australian dollar is also on track for its first weekly decline in four weeks.

International oil prices fell slightly last week as concerns about oversupply and declining demand offset optimism that the Federal Reserve's first interest rate cut of the year would stimulate consumption. WTI spot crude oil closed down $0.04, or 0.07%, at $62.32 per barrel for the week. Brent crude oil settled down $0.50, or 0.76%, at $66.12 per barrel.

During last week's trading, Bitcoin continued to consolidate above $117,000. Following the Federal Reserve's rate cut, Bitcoin remains in a delicate balance, with $115,200 seen as crucial to determining its next move. Bitcoin is currently trading around $117,500, up approximately 6.1% in two weeks. However, the latest data from Binance shows that Bitcoin's current price trend is primarily driven by retail investors, while "whales" are noticeably absent.

The 10-year U.S. Treasury yield rose 3 basis points to 4.13% on Friday, its highest level in two weeks, and is expected to rise 6 basis points this week as investors weigh the Federal Reserve's first rate cut of the year and its updated economic outlook.

Weekly Market Outlook:

This week (September 22-26), global financial markets will witness a wave of policy speeches following the end of the Federal Reserve's quiet period. The intensive statements from FOMC voting members will be the core market focus. Combined with key economic data such as European and American PMIs and the U.S. core PCE reading, as well as developments from multiple central banks, the U.S. dollar index is expected to remain in a highly volatile range.

Non-U.S. currencies such as the euro and pound may diverge based on data and policy signals. Traders can then monitor the Reserve Banks of Canada and Australia to capture trading opportunities in the Canadian and Australian dollars.

Gold, supported by inflation and policy uncertainty, has the potential for a volatile upward trend, while crude oil needs to closely monitor the interplay between inventory data and demand expectations.

Overall, if Federal Reserve officials signal a dovish tone, it will suppress the US dollar and benefit gold. A strong hawkish tone could exacerbate divergence in the foreign exchange market and volatility in risky assets. Investors should also monitor the "expectation gap" between economic data and policy statements from major economies, and be wary of short-term fluctuations caused by sudden public opinion.

Will history repeat itself: Will the US dollar replicate its 2024 surge after the US rate cut?

Last week, the Federal Reserve announced its interest rate decision, lowering the federal funds rate to 4.00-4.25%. The US dollar index initially fell 50 points from 96.71 to 96.21. Subsequently, after Powell's post-meeting press conference revealed some of the monetary policy path and rationale, the market voted with its feet, interpreting the Fed's monetary policy as falling short of expectations. The US dollar index quickly rose, re-entering above 97.00.

This same intraday trend reminds me of the Fed's unexpected 50 basis point rate cut on September 18, 2024. With two nearly identical intraday charts, will the US dollar rebound again, as it did last year?

On September 18, 2024, the Federal Reserve initiated a policy shift with an unexpected 50 basis point rate cut. However, the US dollar index bucked the trend, climbing from 100.15 to 110.16 by the end of the year, reaching a four-year high. This unusual phenomenon of "strengthening the dollar after a rate cut" is essentially the result of the confluence of multiple unique conditions.

Although the US unemployment rate rose to 4.4% in 2024, core PCE inflation remained stable at 2.6%, significantly higher than the Eurozone's 2.1% and Japan's 2.1%. More importantly, US GDP growth remained at 2%, far exceeding the Eurozone's 0.9% and Japan's 0.5%. This combination of "growth resilience and inflation stickiness" led the market to believe that the Fed's rate cuts were "precautionary easing" rather than "crisis response," and that the attractiveness of US dollar assets remained undiminished. This made the US dollar a relatively strong currency in the global monetary easing race.

Strong economic growth, coupled with the interest rate differential created by the absolute value of interest rates, led to a steady rise in the US dollar index following the Fed's rate cut.

In contrast, on September 18, 2025, the Fed cut interest rates by 25 basis points, but the US dollar index rebounded briefly before fluctuating, and it may be difficult to replicate the unilateral rise seen in 2024.

In 2025, the US economy exhibited characteristics of "stagflation." This combination of "rebounding inflation and deteriorating employment" forced the Fed to acknowledge for the first time in its policy statement that the "risk-free path has disappeared," weakening market confidence in monetary policy. More importantly, the pass-through effect of tariffs became apparent, with housing and energy prices becoming new engines of inflation and weakening expectations of the dollar's purchasing power.

The strengthening of the US dollar index in 2024 due to the Fed's rate cut marked the dollar's last glorious period in the afterglow of its "unipolar hegemony." The rate cut in 2025 marked the beginning of a new era of "multipolarity" in the global monetary system. As previously mentioned, the US dollar may begin a rebound along its range when the Federal Reserve announces its interest rate. This rebound could be quite aggressive, currently trading above 97.00. However, the US dollar index needs to break through the psychologically important 98.00 level. Otherwise, this could be the dollar's "last dance."

The conclusion is: This wave of the US dollar index won't be a rally like it did in 2012, but rather a mere rebound.

Powell's "risk-management" rate cut caused a "flash crash" in gold prices.

Spot gold prices quickly fell from a record high of $3,707.70 per ounce last week to a low of $3,634 per ounce. This reversal of momentum stemmed from Fed Chairman Jerome Powell's remarks, which were interpreted by the market as signaling uncertainty and prompting investors to take profits. Gold, a traditional safe-haven asset, has risen 39% year-to-date and over 6% this month. However, Powell's "meeting-by-meeting" approach has bulls considering whether it's time to exit the market.

Powell's speech triggered a pullback in gold prices. He characterized the rate cut as a "risk-management" measure and reiterated that the Fed would make decisions "meeting by meeting" and was not in a rush to act quickly. While this statement continued the dovish tone, it also injected a hint of uncertainty, giving the market a hint that the Fed might slow the pace of rate cuts.

Regarding this subtle shift: The Fed's signal of uncertainty triggered some understandable profit-taking. In an environment of falling interest rates, the opportunity cost of gold decreases, making it generally more attractive. However, Powell's caution has investors concerned about whether the rate-cutting cycle will be as robust as expected.

On the other hand, the ripples of the Fed's rate cut quickly spread to the US dollar and Treasury markets, indirectly amplifying pressure on gold. While the Fed's "risk-management" rate cut sparked a short-term pullback in gold, in the long run, the low interest rate and employment-first policy logic will inject stronger upward momentum into gold. From profit-taking at highs above $3,700 to a potential test of $3,600 support, gold's bull run is far from over. Investors should remain vigilant, monitor signals from the October meeting, and seize safe-haven opportunities amid uncertainty.

The Federal Reserve's rate cut boosts demand expectations, but rising oil inventories are putting pressure on oil prices!

The Federal Reserve cut its benchmark interest rate by 25 basis points last week and hinted at continued easing this year to address signs of a slowing job market. Generally speaking, lower borrowing costs help stimulate economic activity and energy consumption. This rate cut, along with two more expected cuts this year, will be a positive factor for crude oil, partially offsetting supply pressures from the gradual lifting of OPEC+ production cuts.

Data from the U.S. Energy Information Administration (EIA) showed that U.S. crude oil inventories fell significantly last week due to declining imports and exports near a two-year high. However, distillate inventories unexpectedly rose by 4 million barrels, far exceeding market expectations of 1 million barrels, raising concerns about weak end-use consumption.

According to market surveys, global oil demand averaged 104.4 million barrels per day (bpd) by September 17, an increase of 520,000 bpd year-on-year. Year-to-date demand growth has been 800,000 barrels per day, slightly lower than the previous forecast of 830,000 barrels per day.

Overall, the Federal Reserve's interest rate cuts have provided some support to oil prices, but the unexpected increase in US refined product inventories suggests volatility in downstream demand. While global demand has maintained moderate growth, regional differences are evident. Going forward, oil prices will continue to find a balance between expectations boosted by policy easing and inventory and supply pressures.

Conclusion:

This week, the core conflict in global financial markets lies in the interpretation of Fed policy signals and the verification of key economic data. Investors should focus on next week's US employment and inflation data. Fed officials' differing statements on the duration of interest rate maintenance and the inflation target are key to predicting the medium-term trend of the US dollar. Seize opportunities in foreign exchange and gold markets arising from fluctuations in the US dollar index.

Overall, this week's market volatility will focus on both policy signals and data verification, with opportunities coexisting on both sides. Investors should be wary of fluctuations caused by unexpected data and speeches, seeking certainty amidst the volatility.

Overview of Important Overseas Economic Events and Events This Week:

Monday (September 22): UK September CBI Industrial Orders Balance; Eurozone September Preliminary Consumer Confidence Index; RBA Governor Bullock's testimony to the House Standing Committee on Economics

Tuesday (September 23): Australia ANZ Consumer Confidence Index for the week ending September 21; Eurozone September Preliminary SPGI Manufacturing PMI; UK September Preliminary SPGI Manufacturing PMI; US September Preliminary SPGI Manufacturing PMI; Speech by Bank of England Governor Bailey

Wednesday (September 24): Australia August CPI (Seasonally Adjusted) (Annual Rate); US August Building Permits (Revised Monthly Rate); US August Seasonally Adjusted New Home Sales (Annualized Rate, 10,000 Units); US EIA Gasoline Inventory Change (10,000 Barrels) for the week ending September 19; Speech by Bank of Canada Governor Macklem

Thursday (September 25): UK September CBI Retail Sales Balance; Final annualized quarterly rate of real GDP for the second quarter of the United States (%); preliminary monthly rate of durable goods orders for August (%); initial jobless claims for the week ending September 20 (10,000); preliminary monthly rate of wholesale inventories for August (%); Swiss National Bank interest rate decision.

Friday (September 26): Japan's Tokyo CPI (year-on-year rate) for September; US PCE price index (year-on-year rate) for August; US University of Michigan Consumer Confidence Index (final value) for September; Canada's seasonally adjusted GDP (month-on-month) for July.

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