Central Banks’ Show: Betting on Rates

EURUSD

Key zone: 1.1680 - 1.1750

Buy: 1.1800 (on a strong positive foundation) ; target 1.1950-1.2050; StopLoss 1.1730

Sell: 1.1650 (after a retest of 1.1750) ; target 1.1500-1.1450; StopLoss 1.1720

All key U.S. economic reports, starting with August’s NFP, point to the need for the Fed to cut rates. Trump’s claims against Powell look fairly justified, although economists still expect tariff-driven inflation to accelerate toward the end of the year—not to mention that Donnie is planning another round of sector-specific tariffs.

On Tuesday, U.S. retail sales for August will be released—an important argument for the Fed, but Powell’s decision will be difficult regardless. It’s hard to imagine a Fed move that fully supports the stock market.

• A 0.25% cut with guidance for another adjustment later this year would push markets lower, showing the Fed’s unwillingness to back the economy.
• A 0.50% cut would require labor market weakness and recession risk commentary—this scenario would boost equities.

Powell is unlikely to focus on equity markets sitting at all-time highs while the risk of a second inflation wave remains. Still, a 0.50% cut cannot be ruled out.

Beyond the Fed, BOC, BOE, and BOJ will also announce their decisions.

• The Bank of Canada has a high probability of cutting rates by 0.25%, with Tuesday’s inflation report a possible decisive factor.
• The Bank of England will likely keep rates unchanged, but this week’s labor and inflation reports may influence the decision. Trump’s visit to Britain comes at a politically sensitive moment for Starmer, who just dismissed two senior government officials, casting doubt on his parliamentary control.
• The Bank of Japan won’t change policy amid political instability, though a hike remains possible after stabilization. The BOJ press conference will be critical.

Last week’s ECB meeting was deliberately optimistic. Lagarde stressed Eurozone internal growth, bond market stability, and liquidity, while pointing only to a strong euro and cheap Chinese goods as concerns. Macron, by reshuffling his government, tried to influence euro depreciation, but instead triggered a Fitch downgrade for France. Bond markets await the reaction.

Before selling EUR/USD, big players will want clarity on the pace and timing of Fed rate cuts.

So we act wisely and avoid unnecessary risks.

Profits to y’all!