In the week ahead: FOMC Statement, BOC and BOJ Rate Statements

The euro ended last week modestly higher against the U.S. dollar, with EUR/USD gaining 0.16% as traders positioned for this week’s Federal Reserve policy decision.

Weakening U.S. economic indicators fueled market sentiment throughout the week. The University of Michigan’s September Consumer Sentiment Index fell from 58.2 to 55.4, underscoring Americans’ growing pessimism about the economy. Meanwhile, inflation expectations remain above the Fed’s 2% target, with the five-year outlook climbing from 3.5% to 3.9%.

Earlier in the week, downward payroll revisions and higher-than-expected jobless claims further signaled a cooling labor market. Combined, these developments have strengthened expectations for the Fed’s first rate cut in nine months. Markets now fully price in a 25-basis-point reduction at the September 16–17 meeting, with some assigning a small probability to a larger 50-bps move.

Across the Atlantic, the European Central Bank left interest rates unchanged, emphasizing a meeting-by-meeting, data-dependent approach. President Christine Lagarde noted the disinflationary process has ended, that policy is “in a good place,” and that the latest decision was unanimous. She also highlighted diminished trade uncertainty but warned that risks to growth remain tilted to the downside.

This week’s calendar is dominated by the Fed’s policy meeting and U.S. Retail Sales data. In Europe, markets will focus on ECB speeches, Eurozone Industrial Production, and the ZEW Economic Sentiment Survey.

Gold prices hovered close to all-time highs in Asian trade on Monday, supported by firm expectations that the Federal Reserve will lower interest rates later this week.

The metal advanced 1.38% last week, its fourth consecutive weekly gain, and is up nearly 40% year-to-date amid robust safe-haven demand fueled by trade uncertainty under President Donald Trump’s policies.

The Fed begins its two-day meeting on Tuesday, with a rate decision due Wednesday. Markets have priced in a more than 96% chance of a 25-basis-point cut, while a minority of traders continue to bet on a larger move.

Weak U.S. jobs data, including downward revisions and just 22,000 payroll gains in August, pushed unemployment to 4.3%. The Fed is expected to prioritize labor market weakness over elevated inflation, despite a hotter 0.4% CPI increase.

Gold, which offers no yield, tends to benefit from lower rates as the opportunity cost of holding bullion declines while dollar weakness often provides an additional boost.

China’s latest economic data weighed on sentiment, however, Industrial production growth slowed to its weakest pace in a year, while retail sales also missed expectations, underscoring ongoing pressure on demand in the world’s largest commodity consumer.

Oil prices extended modest gains in Asian trading on Monday, supported by renewed concerns over potential disruptions to Russian supply after Ukrainian drone strikes targeted Moscow’s energy infrastructure.

Traders are also bracing for a pivotal week in U.S. monetary policy, with the Federal Reserve widely expected to deliver an interest rate cut at its upcoming meeting amid signs of weakening fuel demand in the world’s largest consumer.

Prices advanced almost 1% last week after Ukraine escalated its strikes on Russian energy facilities, including the Primorsk export terminal and the Kirishinefteorgsintez refinery.

Efforts by Washington to deescalate the conflict have seen little progress, with Moscow signaling last Friday that ceasefire talks remain at a standstill. At the same time, U.S. pressure on its G7 allies to raise trade tariffs on Russian oil buyers, particularly India and China, has fueled expectations of tighter global supply. Washington had already imposed 50% tariffs on Indian purchases of Russian crude in late August.

On the macroeconomic front, a softer dollar provided some support to crude markets as investors positioned for a potential Fed rate cut this week. A series of weak labor market indicators, coupled with mixed inflation data, has bolstered expectations that the central bank will restart its easing cycle.

U.S. stocks closed mixed on Friday, with the US 500 retreating slightly after hitting an intraday record as rising Treasury yields and softer consumer sentiment weighed on investor confidence. Still, the benchmark index managed to secure a second consecutive weekly gain.

The University of Michigan’s preliminary Consumer Sentiment index dropped to 55.4 in September from 58.2 in August, missing expectations for no change. While one-year inflation expectations held steady at 4.8%, the five-year outlook ticked higher to 3.9% from 3.5%, underscoring concerns that inflation pressures could prove sticky.

Traders now see a near-certainty of a 25-basis-point Fed cut at the Sept. 16–17 meeting, with only slim odds of a larger 50-bps reduction, according to futures markets.

In corporate news, Adobe shares gained attention after the company lifted its annual forecasts, citing strong demand for its AI-powered creative software tools, while Super Micro Computer announced the start of volume shipments of its Nvidia Blackwell Ultra systems.

In the tech sector, Microsoft and OpenAI confirmed they had reached a non-binding agreement to facilitate the AI start-up’s transition to a for-profit structure.