Tech Leads Market Higher on Rate Cut and Chip Stock Gains

EUR/USD advanced for a third straight session on Tuesday, trading near 1.1780 during Asian hours. The euro gained ground as the US dollar remained under pressure, weighed down by last week’s disappointing August jobs report. The weak data reinforced expectations that the Federal Reserve could cut rates at its September meeting, with markets increasingly factoring in the possibility of a larger, 50-basis-point reduction.

Attention will turn later today to the US Nonfarm Payrolls Benchmark Revision, which could provide further clarity on labor market conditions.

The focus for the week, however, is on upcoming US inflation data. Wednesday’s release of the August Producer Price Index (PPI) is expected to show a 3.3% year-on-year rise in headline prices, with the core measure seen at 3.5%. The Consumer Price Index (CPI) due Thursday will likely be the key determinant for the Fed’s policy trajectory.

Across the Atlantic, political uncertainty has resurfaced in France after Prime Minister François Bayrou lost a confidence vote in the National Assembly, following resistance to his budget plans. President Emmanuel Macron is expected to name a new prime minister within days, according to reports.

Meanwhile, the European Central Bank is widely anticipated to leave interest rates unchanged at Thursday’s policy meeting, marking a second consecutive pause. With inflation hovering close to target and growth steady, investors will look for any signals on the ECB’s outlook for the remainder of the year.

Gold surged past $3,600 an ounce for the first time on Monday, setting a fresh record as weaker U.S. labor data strengthened expectations that the Federal Reserve will cut interest rates at its September meeting.

Friday’s U.S. jobs report showed a sharp slowdown in August hiring, prompting traders to price in an 88% chance of a 25-basis-point cut at next week’s Fed meeting, with around 12% odds of a 50-basis-point move, according to the CME FedWatch tool. Lower interest rates typically benefit gold by reducing the opportunity cost of holding the non-yielding asset.

Gold has gained more than 35% so far in 2025, building on last year’s 27% advance, supported by dollar weakness, central bank demand, accommodative monetary policy, and global uncertainty. Data released Sunday showed China’s central bank extended its gold-buying streak to a 10th consecutive month in August.

Adding to the bullish tone, benchmark 10-year U.S. Treasury yields fell to their lowest level in five months. Investors now await U.S. producer price data on Wednesday and consumer inflation on Thursday for fresh signals on the Fed’s policy path.

Oil prices advanced on Monday after OPEC+ announced a modest increase in production and markets weighed the prospect of tougher sanctions on Russian crude.

The producer group agreed on Sunday to raise output by 137,000 barrels per day (bpd) in October—well below the 555,000 bpd and 411,000 bpd monthly increases seen earlier this year. The smaller hike reflects caution over a potential demand slowdown, with OPEC+ highlighting risks from softening U.S. growth and sluggish consumption in China.

The group, led by Saudi Arabia, has been gradually restoring supply to recapture market share, but it signaled that it will remain vigilant against oversupply as the northern hemisphere heads into winter, a period when fuel demand typically eases.

Prices also drew support from geopolitical developments after U.S. President Donald Trump suggested he was prepared to move toward a second phase of sanctions on Russia. The remarks came after Moscow launched its largest air assault of the war in Ukraine over the weekend, killing at least four people and severely damaging a government building in Kyiv. European leaders are set to meet U.S. officials this week to discuss the conflict, while reports indicate the EU is considering fresh measures targeting Russian banks and energy companies.

Despite Monday’s rebound, crude remains under pressure from concerns over slowing global demand. Last week’s dismal U.S. nonfarm payrolls report underscored a cooling economy, raising doubts about fuel consumption even as it bolstered bets on interest rate cuts by the Federal Reserve.

Meanwhile, U.S. inventory data showed an unexpected build, reflecting weaker domestic demand following the end of the summer driving season.

U.S. equities closed higher on Monday, with the US Tech 100 finishing higher, driven by strong gains in semiconductor stocks ahead of key inflation data later this week.

Semiconductor stocks were the standout performers, with NVIDIA  and Broadcom lifting the sector. Broadcom extended its rally after last week’s upbeat quarterly results and positive outlook on AI demand.

Attention now shifts to U.S. inflation reports. August’s Consumer Price Index (CPI), due Thursday, is expected to reflect some of the impact from recently imposed tariffs, which are seen adding pressure to import costs.

Producer price index (PPI) figures are also scheduled this week. While these releases are not expected to influence the Fed’s September rate decision, they could shape policymakers’ stance on future easing. The central bank has repeatedly warned that tariff-driven inflation could delay further rate cuts.

In corporate news, GameStop Corp. will report fiscal second-quarter results after the market close on Tuesday, with investors watching closely as the stock trades nearly 26% lower year-to-date. Oracle Corp.  is also set to release its fiscal first-quarter 2026 earnings after Tuesday’s closing bell. Separately, Apple Inc.  will host its highly anticipated “Awe Dropping” fall event on Sept. 9 at Apple Park in Cupertino. The tech giant is expected to unveil its iPhone 17 lineup, including a razor-thin “Air” model, alongside refreshed Apple Watch devices and the third generation of AirPods Pro.