GOLD
Gold prices rebounded in early European trading after slipping late on Wednesday. Following the Federal Reserve’s first rate cut since 2020—a substantial 50 basis points, at the upper end of forecasts—the market's response was somewhat unexpected. Contrary to the usual pattern, the US dollar strengthened against major currencies, pushing gold prices lower due to their inverse correlation. This reaction occurred because, despite the significant rate cut, traders focused more on Jerome Powell’s remarks. While the Fed Chair did leave the door open for further cuts, he struck a less dovish tone than anticipated, noting that the Fed’s neutral rate would not return to the ultra-low levels seen earlier in the decade. As a result, the dollar’s decline was less pronounced, and gold didn’t rally as many had expected. Gold had seen strong gains leading up to the announcement, so the muted post-announcement reaction may simply reflect a classic 'buy the rumour, sell the news' scenario. Over the coming days, however, gold prices could regain momentum as traders refocus on the possibility of additional near-term rate cuts, as hinted at by Powell.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
OIL
Brent oil prices rose in early trading following the Federal Reserve's rate cut and escalating tensions in the Middle East. The Fed reduced interest rates by 50 basis points, its first cut since 2020. This significant move is expected to stimulate economic activity, potentially boosting energy demand. Meanwhile, tensions in the Middle East heightened after a second consecutive attack on members of a Lebanese militia backed by Iran, raising the risk of a broader conflict in the region that could disrupt global oil supplies. Against this backdrop, it’s unsurprising that crude prices are climbing. However, gains remain limited by concerns over the global economic outlook, with China in focus after the release of several weak economic reports.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
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