Key Stories from the past week: Markets rebound as the US Dollar weakens

The US presidential debate seemed to give Kamala Harris an edge over Donald Trump in prediction markets, further adding to the election induced volatility which appears in part to have driven further JPY and Gold upside. US CPI came in mostly in-line with expectations except a slightly hotter MoM core CPI – markets now look towards the FED cut next week and whether it will follow suit of a 25bps cut like ECB this week, or perhaps a 50bps cut which is speculated to be on the table. See this week's key stories from the desk below:

FED rate cut decision too close to call
US Treasuries advanced by the end of the week with investors still divided on the size of Fed’s first rate cut which is anticipated next Wednesday, 18^th Sept 2024. On Thursday the September Fed-OIS sold off slightly, increasing the chances of a half-point rate cut after Wall Street Journal and FT reports indicated policymakers were debating between a 25bp or 50bp cut. By Friday the 10-year yield trading lower to around 3.63% while the important 2-year yield fell by 4 basis points, hovering just above 3.55%, the 2023 low.
The Fed's rate cut dilemma: Start big or small?

Several factors add to bullish case for gold
Gold (XAUUSD) reached a fresh record high of about USD 2,571 per ounce, as it continued to build on the breakout above 2,530 - a level that finally gave way after the ECB cut rates along with speculation about a potential 50bps FED cut still being on the table next week. Saxo clients remain primarily long, with 59% long XAUUSD and 71% long Gold – October futures, however in the past week ratio of long positions decreased about 5.5%. Several factors contribute to a bullish case for gold as a hard asset.
US Election: will gold win in all scenarios?

Yen continues to gain vs US dollar
The broad-focused Bloomberg Dollar Index fell for a second consecutive week dropping around 0.4%, primarily driven by MXN, JPY, and AUD strength. The Japanese yen eased to around 142.5 per USD midweek as the US dollar strengthened on mixed inflation data but by Friday the pair had fallen to its lowest level in 14 months, with BOJ officials indicating plans to steadily hike rates to achieve a 2% inflation target.
Yen upside fuelled by BOJ hawkishness and election volatility

The tech trade is still intact
Equities staged a solid rebound with a strong performance for in focus AI-related investment as OpenAI announced their newest reasoning model called o1 which can solve harder problems than previous models. The VanEck semiconductor index rose +7% on the week, Nvidia rebounded +16%. Oracle shares reached a record high on a bumper AI-fuelled forecast. Adobe fell as the outlook disappointed.
Stocks on the move: Adobe and Oracle

Next week’s main event will be the Federal Reserve policy meeting (Weds). There are also other central bank policy announcements from The Bank of England and Norges Bank (Thurs) and The Bank of Japan (Friday). US Retail Sales (Tues) may alight further slowdown fears and Jobless claims (Thurs) will also be keenly watched. Chinese markets are closed of Mid-Autumn festival on Monday and Tuesday.