Markets Rally as Fed Dovish Shift Seen Certain, TikTok Framework Struck – Action Forex
Risk appetite in the U.S. stayed strong overnight, with both S&P 500 and NASDAQ closing at fresh record highs. Traders leaned further into risk assets as confidence grew that the Federal Reserve will restart its easing cycle this week. Additional support came from news that Washington and Beijing had reached a “framework” agreement over TikTok, easing one source of bilateral tension.
The Fed narrative remains central. Markets are almost certain the FOMC will cut rates, a view reinforced by Monday’s confirmation of Trump nominee Stephen Miran to the Fed Board. His participation in this week’s meeting makes a rate cut even more certain.
At the same time, a U.S. appeals court ruled that Trump cannot remove Governor Lisa Cook before the decision. While that ensures her vote is also in play, it shouldn’t deter Fed from the expected rate move.
Currency markets reflected the dovish Fed theme, with broad Dollar weakness persisting. The selloff helped propel Gold to a fresh record high too. Among majors, Aussie and Kiwi traded slightly softer, the Loonie showed surprise strength, and Yen found support. European currencies were mixed in the middle. Though positioning remains fluid heading into event-heavy sessions.
On the trade front, Treasury Secretary Scott Bessent announced that the U.S. and China had reached a “framework” agreement on TikTok, which could pave the way toward U.S.-controlled ownership of the platform. Chinese negotiator Li Chenggang confirmed the framework, though he urged Washington not to continue suppressing Chinese companies.
Looking ahead, the data calendar is busy. UK employment and Germany’s ZEW survey headline the European session, while Canada’s CPI and U.S. retail sales are the main attractions later in the day. UK jobs and Canadian inflation carry the most potential to move markets. But all eyes remain on the Fed, where policy direction will set the tone for global markets into year-end.
In Asia, at the time of writing, Nikkei is up 0.59%. Hong Kong HSI is up 0.08%. China Shanghai SSE is down -0.10%. Singapore Strait Times is down -0.07%. Japan 10-year JGB yield is flat at 1.603. Overnight, DOW rose 0.11%. S&P 500 rose 0.47%. NASDAQ rose 0.94%. 10-year yield fell -0.027 to 4.034.
RBA’s Hunter: Inflation near target, monitoring consumer strength
RBA Assistant Governor Sarah Hunter said today the central bank is “close to getting inflation to target,” with risks around the outlook now appearing “balanced”. She emphasized that monetary policy works with a delay and must remain forward looking.
Hunter also noted that household spending has “picked up a bit,” with consumption showing signs of improvement and the broader position “beginning to turn over.” She added the RBA is “very closely monitoring” the underlying strength of consumer demand as it seeks to keep the economy near full employment.
July’s CPI outcome was partly affected by timing of rebates, she explained, while core inflation appears broadly in line with forecasts.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.1728; (P) 1.1751; (R1) 1.1786; More…
Intraday bias in EUR/USD is back on the upside with breach of 1.1779 resistance. Rise from 1.1390 should extend to retest 1.1829 high. Firm break there will resume larger up trend to 1.1916 projection level next. On the downside, below 1.1715 minor support will turn intraday bias neutral again first.
In the bigger picture, rise from 0.9534 (2022 low) long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 55 W EMA (now at 1.1215) holds.
