US stocks stage a strong reversal as dovish Fed expectations intensify. The US dollar retreats. Gold surges to a new all-time high, reinforcing risk-on sentiment in Asia Pacific.
Gold (XAU/USD) hits another fresh all-time high as the US dollar retreats
Key takeaways
- US equities rebounded as major indices snapped a three-day losing streak, with the Russell 2000 leading (+1%), supported by stable core PCE inflation and weaker consumer sentiment data.
- Rate cut optimism is alive with Fed funds futures now pricing a 64% chance of a December rate cut, up from 58%, keeping dovish expectations alive for 2025.
- The USD Index fell 0.7% Friday and extended losses in Asia, with JPY (+0.5%) and AUD (+0.4%) leading gains.
- US futures extended gains in Asia, regional markets rallied except for Japan, and Gold surged to a fresh record high of US$3,818.
The major US stock indices broke a three-day losing streak on Friday, 26 September, staging bullish reversals at their respective 20-day moving averages. Sentiment was supported by August’s core PCE inflation, which rose in line with expectations at 0.3% m/m and 2.9% y/y, while the University of Michigan consumer sentiment index was revised lower to 55.1 for September from a preliminary 55.4, down from 58.2 in August.
The small-cap Russell 2000 led gains with a 1% advance, followed by the Dow Jones Industrial Average (+0.7%). The S&P 500 and Nasdaq 100 posted more modest upticks of 0.6% and 0.4%, respectively.
All in all, this set of key US economic data has managed to keep the optimism for further Fed rate cuts alive for the rest of 2025. Based on the latest data from the CME FedWatch Tool, the odds for the expected third rate cut on the 10 December FOMC meeting have increased to 64% from last Friday’s probability of 58%.
The increase in the probability of Fed rate cuts bets in the Fed funds rate futures market has triggered a retreat in the US dollar strength, where the US Dollar Index dropped by 0.7% last Friday and extended its losses to -0.3% in today’s Asia session led by gains in the JPY (0.5%), and AUD (0.4%) against the greenback as the markets weigh the possibility of a US government shutdown on Wednesday, 1 October.
However, the US stock index futures shrugged off fears of the looming US government shutdown in today’s Asia session, and the S&P 500 and Nasdaq 100 E-mini futures extended their intraday gains by 0.3% and 0.4% respectively.
Asia Pacific stock markets have also basked in the bullish limelight today, reinforced by a softer US dollar, except for Japan’s Nikkei 225, as it shed by 0.9% due to numerous component stocks going ex-dividend today. Hong Kong’s Hang Seng Index rallied by 1.8% and Singapore’s Straits Times Index gained modestly by 0.4% at the time of writing.
Gold (XAU/USD) rallied and skyrocketed to another fresh record intraday high of US$3,818 in today’s Asia session. Bullish momentum is back in vogue after its prior four sessions of sideways movement as it cleared above a key intermediate resistance of US$3,785.
Our YouTube video above contains the latest intraday technical analysis on the US Wall Street 30, US Nas 100, US SPX 500, Hong Kong 33, Japan 225, Germany 30, EUR/USD, GBP/USD, AUD/USD, USD/JPY, Gold (XAU/USD), and West Texas Oil.
