Daily Market Analysis by Joshen Stephen from Ultima Markets

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81

US CPI strengthens expectations of rate cuts, while the European Central Bank remains cautious

Thursday’s US Consumer Price Index (CPI) data and the latest European Central Bank (ECB) decision delivered mixed signals to global markets, prompting investors to reassess the policy direction of major central banks. US inflation data was broadly in line with market expectations, and combined with recent soft labor market data, reinforced expectations that the Federal Reserve (Fed) will initiate an easing cycle in September. Meanwhile, the ECB maintained interest rates unchanged, emphasizing its cautious, “meet-by-meeting, data-dependent” approach rather than committing to a pre-set path.

US CPI data and interest rate cut outlook

August’s US CPI data showed a slight pickup in inflation, but it remained in line with market expectations. The core CPI annual growth rate remained at 3.1% . While inflation remains above the Federal Reserve’s 2% target, the data has given the market confidence in the prospect of an interest rate cut later this year. Some analysts even believe the Fed may accept inflation stabilizing around 3% as the “new normal” in the post-pandemic era.

Divergence in monetary policy between Europe and the United States

The ECB’s latest decision stands in stark contrast to the Federal Reserve’s projected path. The ECB believes the Eurozone economy is resilient and expects inflation to gradually return to target. However, the bank refused to commit to a timeline for future rate cuts, which the market interpreted as a cautious stance and tempered expectations for aggressive easing.

This policy divergence is expected to be a key driver of the euro, dollar and bond market trends in the coming months.

EURUSD Technical Analysis[

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](https://substackcdn.com/image/fetch/$s_!5NbB!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F46d35983-3d37-4489-9a93-c4d06b4969c1_1036x651.png)Image Source: Ultima Market MT5

The Euro/US Dollar (EURUSD) exchange rate has been range-bound recently. While diverging monetary policies between Europe and the US may provide support for the Euro, technically, the pair is currently facing key resistance at 1.1740–1.1800 . A breakout above this range could open up further upside; failing to do so, the pair is expected to continue its consolidation pattern.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for informational purposes only and are intended to assist readers in understanding market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but its accuracy cannot be guaranteed and is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, lost profit) arising directly or indirectly from the use of or reliance on such information.

82

Global markets await central bank guidance as we prepare for “Super Central Bank Week”

Global financial markets are at a critical juncture. Several major central banks, including the US Federal Reserve (Fed), the Bank of England, and the Bank of Japan, will announce their interest rate decisions within approximately 36 hours. These decisions will not only set the tone for the global economy in the fourth quarter but will also directly influence the direction of major currencies.

Focus: Fed rate cuts and policy game

The most anticipated event of the week was undoubtedly the Federal Reserve’s interest rate decision, with the market widely expecting a 25 basis point cut . While the White House continues to pressure for lower borrowing costs and Fed Chairman Jerome Powell remains wary of potential inflation caused by tariffs, recent signs of weakness in the US job market provide the primary rationale for a shift toward easing policy.

Global central banks are moving at different paces, with policy divergence becoming the key

While the Federal Reserve is expected to shift toward easing, the policy pace of other major central banks around the world is not completely consistent.

  • Bank of Canada : Due to weak domestic economic data, it is expected to cut interest rates in tandem with the Federal Reserve.
  • The Bank of England and the Bank of Japan : Both are likely to keep interest rates unchanged. Markets will be closely watching any adjustments to the Bank of England’s quantitative tightening (QT) program and any hints from the Bank of Japan’s governor on the path of future rate hikes.

This policy divergence is expected to be a key theme in market trading this week and could significantly increase market volatility.

US Dollar Index Technical Analysis Image Source: Ultima Market MT5

The daily chart of the US Dollar Index (USDX) shows that after a month of consolidation, it has fallen below the lower limit of its range. It is currently approaching key support at 96.23 . It is worth noting that as the market continues to price in the Fed’s interest rate cut, traders should be wary of the potential " buy the anticipation, sell the reality " market that could emerge upon the official announcement.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.!

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : All commentary, news, research, analysis, prices, and other information contained herein is for general informational purposes only and is intended to assist readers in understanding market conditions. It does not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but cannot guarantee its absolute accuracy. Content is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, loss of profit) arising directly or indirectly from the use of or reliance on such information.

83

Court rules to ensure Tim Cook’s attendance at Fed meeting, legal battle heats up​

In a legal battle over the independence of the Federal Reserve (Fed), a recent U.S. Court of Appeals ruling temporarily blocked the Trump administration’s attempt to remove Fed Governor Lisa Cook. The ruling ensures Cook’s participation in key Federal Open Market Committee (FOMC) policy meetings on Tuesday and Wednesday. However, the legal battle is widely expected to continue and escalate to the Supreme Court.

The Justice Department’s emergency application was rejected​

On the eve of the Federal Reserve’s crucial interest rate-setting meeting, the U.S. Department of Justice filed an emergency motion seeking to expedite the removal process at a federal appeals court, but the request was ultimately rejected. The appeals court upheld a temporary injunction previously issued by a lower court, directly thwarting the Trump administration’s plan to remove Cook before the FOMC meeting.

Legal Controversy over “Justifiable Cause”

The legal dispute centers on defining the limits of the president’s authority to remove a Federal Reserve governor. Under the Federal Reserve Act, the president can remove a Fed governor only for “good cause.” Previously, a lower court judge ruled that the Trump administration’s allegations of mortgage fraud as a justification for removing Cook might not constitute the legally required “good cause.” Cook will remain in office pending a final Supreme Court ruling.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for reference only and are intended to help readers understand market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of the information, but cannot guarantee its absolute accuracy and may be subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, but not limited to, loss of profit) that may arise directly or indirectly from the use of or reliance on such information.

84

Euro breaks through four-year high against US dollar, market focuses on Fed decision signal

The euro climbed to a four-year high against the U.S. dollar (EUR/USD) on Tuesday as traders prepared for the upcoming Federal Reserve policy meeting, where interest rate cuts are widely expected. Markets are now almost fully pricing in a 25 basis point rate cut and anticipate up to three more rate cuts in 2025.

The Federal Reserve in Focus: Political and Policy Game

The Federal Reserve’s two-day meeting began on Tuesday, with futures markets pricing in a near 100% probability of a 25 basis point rate cut , which could signal the start of a multi-month easing cycle.

The backdrop of the meeting was further complicated by political factors. While a court ruling temporarily prevented the removal of Federal Reserve Governor Lisa Cook, allowing her to participate in policymaking, Trump’s hawkish nominee, Stephen Miran, was confirmed to the board. These developments highlight the Fed’s challenge: maintaining its policy independence while responding to political pressure and market calls for monetary support.

EUR/USD Technical Outlook

After nearly two months of consolidation, the euro has broken through the key resistance level of 1.1800 against the dollar . Analysts point out that the weakness of the dollar is the main driving force, but the subsequent rise will depend on the policy guidance of the Federal Reserve.
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EUR/USD, 4-hour chart analysis | Source: Ultima Market MT5

  • If the Fed leans dovish : EUR/USD may continue its rise, targeting 1.1850 or even higher.
  • A more cautious tone could trigger a rebound in the US dollar, pushing the pair back towards the support area around 1.1740-1.1700 .

EUR/USD has now clearly broken through the key resistance zone of 1.1740–1.1800 , which has turned into important support. As long as the correction can hold this zone, the upward momentum is expected to be maintained.

Market Outlook

The market generally expects the Federal Reserve to cut interest rates by 25 basis points , with three more cuts expected through 2025, reinforcing confidence that a new easing cycle is imminent. Meanwhile, the European Central Bank (ECB) chose to keep interest rates unchanged this week, emphasizing its “meeting-by-meeting, data-dependent” approach, without committing to a specific easing path.

This policy divergence, with the Fed leaning towards easing and the European Central Bank remaining cautious, is expected to be the main factor driving the euro against the dollar and bond markets in the coming months.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for informational purposes only and are intended to assist readers in understanding market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but its accuracy cannot be guaranteed and is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, lost profit) arising directly or indirectly from the use of or reliance on such information.

85

The Fed resumed rate cuts, hinting at more easing to come

The U.S. Federal Reserve (Fed) cut its interest rate by 25 basis points on Wednesday , lowering the federal funds rate target range to 4.00%–4.25% , its first policy adjustment since December. Policymakers also hinted at two more rate cuts possible before the end of the year, highlighting growing concerns about a weakening labor market as inflation remains above target.

The considerations behind the interest rate cut decision

Federal Reserve Chairman Jerome Powell described the move as a “risk management” measure aimed at addressing signs of slowing job growth and rising unemployment pressures. He stressed: “We are not declaring victory over inflation, but we do recognize that the labor market is weakening faster than expected.”

The resolution was not passed unanimously. New governor Stephen Miran voted against it, advocating a larger 50 basis point rate cut, reflecting differences within the Fed over the extent of easing.

Dot plot forecasts and market reactions

The September Summary of Economic Projections (SEP) showed a distinctly dovish bias. The median dot plot projected two more quarter-point rate cuts this year, implying a possible drop of the federal funds rate to 3.50%–3.75% by December . This was a significant shift from the June forecast of only one to two rate cuts.

Fed Dot Plot – September Meeting | Source: Federal Reserve

Economic outlook downgraded

In addition to the interest rate path, the Fed also lowered its GDP growth forecast for 2025 to 1.6% (from 1.9%) and raised its unemployment rate forecast to 4.6% (from 4.3%). However, Powell emphasized that the impact of tariffs is more of a one-time shock than a lasting factor.

Market reaction

Traders interpreted the updated dot plot as confirmation of a new easing cycle. Short-term U.S. Treasury yields fell sharply, initially weakening the dollar, pushing EUR/USD, GBP/USD, and gold to new highs. However, the market quickly reversed its decline, signaling a “good news run” scenario, suggesting the market had already priced in a higher-than-expected rate cut.

US Dollar Index daily chart | Source: Ultima Market MT5

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for informational purposes only and are intended to assist readers in understanding market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but its accuracy cannot be guaranteed and is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, lost profit) arising directly or indirectly from the use of or reliance on such information.

86

Bank of England keeps interest rates unchanged and slows quantitative tightening

At its September meeting, the Bank of England (BoE) voted 7 to 2 to keep the Bank Rate unchanged at 4.00% , although two members supported an immediate 25 basis point cut , indicating internal disagreement.

In addition to the interest rate decision, the Bank of England also announced a slowdown in its quantitative tightening (QT) program, reducing its annual government bond reduction from £100 billion to £70 billion . This move aims to mitigate recent bond market volatility by reducing the sell-off of long-term government bonds and increasing the proportion of short- and medium-term bonds.

Key points from the Bank of England’s statement

  • Inflation : The Consumer Price Index (CPI) rose to 3.8% in August . The Bank of England warned that inflation risks remain tilted to the upside, particularly from pressures on wages and price setting.
  • Economy and Labor Market : Economic activity remains weak, unemployment is gradually rising, and wage growth is gradually slowing, all of which indicate that there is spare capacity in the economy.
  • Policy Guidance : The Bank of England emphasized that its monetary policy “is not on a pre-set path.” Any interest rate cuts will be gradual and cautious, and contingent on sustained declines in inflation. Governor Andrew Bailey also reiterated that the UK is “not out of the woods” on inflation.

Market and GBP reaction

The pound weakened further following the announcement. Investors viewed the slowdown in quantitative tightening and the votes in favor of a rate cut as dovish signals. However, stubborn inflation and the Bank of England’s cautious comments limited downward pressure on the pound.

GBP/USD technical analysis[

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](https://substackcdn.com/image/fetch/$s_!HrkY!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F7c5a0d46-8d36-4109-b335-fa811b2e86d1_1036x651.png)GBPUSD, 4-hour chart analysis | Source: Ultima Market MT5

The British pound (GBPUSD) fell further following the Bank of England’s decision, failing to hold above the key 1.3600 level. Technically, as long as GBPUSD remains below 1.3600 , downward pressure is likely to persist, potentially leading to a near-term range-bound market. Future trends will hinge on upcoming inflation and employment data, which will directly impact market sentiment and policy expectations.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for informational purposes only and are intended to assist readers in understanding market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but its accuracy cannot be guaranteed and is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, lost profit) arising directly or indirectly from the use of or reliance on such information.

87

The dollar rebounded as the market focused on Fed officials’ speeches and economic data

The US dollar started the week on a strong note, rebounding from initial weakness following last week’s Federal Reserve meeting. Despite the Fed’s announcement of a 25 basis point rate cut and hints at two more rate cuts possible before the end of the year, profit-taking and positioning drove the dollar’s recovery.

Fed officials’ speeches become the focus

This week, market attention will shift to a flurry of speeches from Federal Reserve officials. Investors are eager to gauge whether the Fed will maintain its cautious easing stance or issue a clearer policy signal. Traders will be closely watching to see if officials signal sufficient reason to cut interest rates again at a future meeting.

The biggest highlight on Wednesday will undoubtedly be Federal Reserve Chairman Jerome Powell’s speech, which is expected to set the tone for market sentiment. A hawkish tone could extend the dollar’s gains, while a dovish tone could reignite selling pressure.

Key US economic data this week

In addition to official speeches, economic data will also play a decisive role in shaping market expectations. The Federal Reserve has emphasized that future policy decisions will be data-dependent, so the upcoming data will be closely watched. Key data this week include:

  • Tuesday:
    S&P Global PMI , a measure of business activity and economic momentum.
  • Thursday: Second Quarter
    GDP and weekly initial jobless claims are both important signals reflecting the resilience of the U.S. economy.
  • Friday:
    PCE price index , the Fed’s preferred inflation measure, will be carefully interpreted by the market for its policy implications.

    US Dollar Technical Outlook Image Source: Ultima Market MT5

From a technical perspective, the dollar’s rebound has yet to break through the key resistance zone of 97.50–98.50 . Price action in this area will be crucial over the next few trading days. A sustained breakout above this level could propel the dollar further upward; failure to reclaim this range would likely extend the dollar’s overall downward trend.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for informational purposes only and are intended to assist readers in understanding market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but its accuracy cannot be guaranteed and is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, lost profit) arising directly or indirectly from the use of or reliance on such information.

88

Gold hits a new record high, but be wary of short-term correction risks

Gold hit a new high of $3,759.7 in Asian trading today, driven by growing market expectations for continued interest rate cuts from the Federal Reserve (Fed). Last week’s 25 basis point rate cut and hint of two more cuts possible before the end of the year fueled strong buying demand. Furthermore, continued gold purchases by central banks, lingering inflation concerns, and a weaker US dollar have all provided support for gold prices.

XAU/USD, 2-hour chart | Source: Ultima Market MT5

From a technical perspective, gold is approaching the overbought zone, with the Fibonacci extension target at around $3,750 , where profit-taking is already evident. If gold fails to hold above the current high, a short-term correction is possible. The first support below is at

$3,730 , stronger support is at the psychological level of $3,700 .

While there may be a short-term correction, the medium-term outlook for gold remains positive. If the Fed further enters an easing cycle, real yields will tend to fall, which will continue to support the upward trend of gold prices.

Looking ahead, gold prices will depend on comments from Federal Reserve officials and upcoming US economic data. If the data shows slowing economic growth or cooling inflation, it would reinforce expectations of easing and push gold prices to new highs. Conversely, strong data could support the US dollar and trigger a corrective pullback.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for informational purposes only and are intended to assist readers in understanding market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but its accuracy cannot be guaranteed and is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, lost profit) arising directly or indirectly from the use of or reliance on such information.

89

The dollar rose against the yen, supported by comments from Fed officials.

On Wednesday, the US dollar strengthened significantly, supported by cautious comments from Federal Reserve officials. The US dollar index climbed significantly, and the US dollar against the Japanese yen broke through the 148 mark, approaching 149 at one point .

The yen remained under pressure despite the release of the Bank of Japan’s (BOJ) minutes from its July meeting, which showed that some policymakers discussed the possibility of future interest rate hikes.

Bank of Japan meeting minutes: Hawkish tendencies revealed

The minutes of the Bank of Japan’s July meeting showed that while the policy rate remained unchanged at 0.5% , some members expressed the possibility of a future rate hike. The internal debate over inflation, price pressures, and the timing of policy normalization has intensified. Some policymakers believe that with inflation approaching or reaching the Bank of Japan’s 2% target, more aggressive policy tightening is warranted. However, others believe that a cautious stance is warranted given global uncertainties and downside risks.

The minutes also stressed that any policy shift must be gradual and depend on data performance to avoid market turmoil.

Yen reaction and subsequent outlook

The Japanese yen briefly strengthened in early trading Thursday following the release of the July meeting minutes, as more hawkish internal discussions heightened market speculation about future rate hikes. However, despite the Bank of Japan’s hawkish signals, the yen’s upside remained limited. This was primarily due to political uncertainty surrounding the upcoming Liberal Democratic Party leadership election and global trade risks stemming from US tariffs.

USD/JPY daily chart | Source: Ultima Market MT5

From a technical perspective, USD/JPY has broken out of the 146-148 range, but remains constrained by the resistance level of 149.00 . A successful break above this level would open up room for further upward momentum; otherwise, the pair may continue to fluctuate within the range.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for informational purposes only and are intended to assist readers in understanding market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but its accuracy cannot be guaranteed and is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, lost profit) arising directly or indirectly from the use of or reliance on such information.

90

US GDP upward revision drives dollar rebound, market focus shifts to PCE inflation data

The latest data released by the U.S. Bureau of Economic Analysis (BEA) shows that the final estimate of GDP growth in the second quarter of 2025 is 3.8% annualized , higher than the previous estimate of 3.3% . This upward revision is primarily due to strong consumer spending and a sharp drop in imports. This data suggests that the economy is stronger than expected, which may complicate the Federal Reserve’s (Fed) decision on further easing.

The impact of GDP data on interest rate cut expectations

Strong GDP data has helped to temper market expectations for aggressive interest rate cuts in the near term, contributing to a sharp rise in the US dollar on Thursday. Solid economic growth has reduced the Federal Reserve’s scope for rapid rate cuts without triggering inflation risks. However, the Fed has emphasized that its policy will be “data dependent,” so all eyes will be on the upcoming release of key data on inflation, employment, and other key indicators.

US Dollar Index daily chart | Source: Ultima Market MT5

From a technical perspective, the US dollar has regained momentum, with the US Dollar Index (DXY) reclaiming the 98 mark and returning to the key range of 97.5 to 98.5 . This range has long served as key support for the US dollar at its multi-year lows, and this rebound shows that its fundamental support remains solid.

PCE price index becomes key battlefield

Looking ahead, the market’s focus will be entirely on the Fed’s preferred inflation indicator -

PCE price index .

  • If a higher-than-expected PCE reading could heighten market concerns about stubborn inflation, potentially delaying or even stalling the Federal Reserve’s interest rate cuts.
  • On the contrary, if softer PCE data, especially the core PCE excluding food and energy, may revive market confidence in further easing and suppress the US dollar again.

In short, this upward revision to GDP puts the final nail in the coffin on inflation data. PCE is now the main battleground, which will determine whether the Fed leans dovish or remains on the sidelines.

Risk Warning : Trading leveraged derivatives involves a high level of risk and may result in capital loss.

Author：Joshen Stephen｜Senior Market Analyst at Ultima Markets

Disclaimer : The commentary, news, research, analysis, prices, and other information contained herein are for informational purposes only and are intended to assist readers in understanding market conditions. They do not constitute investment advice. Ultima Markets has taken reasonable steps to ensure the accuracy of this information, but its accuracy cannot be guaranteed and is subject to change without notice. Ultima Markets assumes no liability for any loss or damage (including, without limitation, lost profit) arising directly or indirectly from the use of or reliance on such information.