Global financial markets began the week on a cautious note after last week’s upbeat performance, when strong U.S. data raised expectations for consecutive interest rate cuts from the Federal Reserve (Fed). That optimism has now faded, as traders turn cautious ahead of a high-stakes week filled with key central bank meetings and the U.S. equity rollover period. In this environment, weekend news from China and mixed remarks from U.S. President Donald Trump drew limited market attention.
Despite hotter readings of the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI), a record downward revision in Nonfarm Payrolls (NFP), and a sharp rise in Jobless Claims, boosted dovish bets for the September 17 Federal Open Market Committee (FOMC) meeting. At the same time, the University of Michigan’s (UoM) Consumer Sentiment Index (CSI) softened, while the National Federation of Independent Business (NFIB) Small Business Index climbed to a multi-month high.
President Trump signaled his willingness to impose new sanctions on Russia and urged Europe to toughen its stance, calling on European nations to avoid purchasing Russian oil and to align their measures with those of the U.S. He also criticized Federal Reserve Chair Jerome Powell as incompetent and accused him of hurting the U.S. housing market. Meanwhile, U.S. Treasury Secretary Scott Bessent opened talks with Chinese officials on Sunday, with TikTok at the center of discussions. Beijing has stressed that any sale must receive its approval and has shown no sign of allowing ByteDance to part with its core algorithm.
China’s economic data for August disappointed markets. Industrial Production slowed to a twelve-month low with 5.2 percent year-on-year growth compared to 5.8 percent expected and 5.7 percent previously. Retail Sales rose only 3.4 percent year-on-year, the weakest pace since November 2024, versus expectations of 3.8 percent and the prior reading of 3.7 percent. The Unemployment Rate climbed to 5.3 percent, the highest in six months, after 5.2 percent in July. Fixed asset investment during January to August marked the slowest growth in five years, while house prices in August fell 2.5 percent year-on-year after a 2.8 percent decline in July. China’s National Bureau of Statistics (NBS) admitted that the external environment remains “very severe,” with rising uncertainties and difficulties facing many companies.
In the United Kingdom, the September Rightmove House Price Index showed a monthly increase of 0.4 percent after a fall of 1.3 percent in the previous month, but a year-on-year drop of 0.1 percent, marking the first annual decline since January 2024 compared with the prior increase of 0.3 percent. Reuters added that a separate survey from Zoopla revealed average rental prices were 2.4 percent higher in the four weeks to September 2 than a year ago, the slowest annual pace in four years. In New Zealand, the BusinessNZ Performance of Services Index (PSI) dropped to 47.5 in August, 1.4 points lower than July, remaining in contraction for the eighteenth straight month and well below the historical average of 52.9.
Geopolitical risks continued to weigh on sentiment. President Trump kept up his pressure on global nations to take a tougher stance against Russia and pushed for higher tariffs on India and China, criticizing their large purchases of Russian oil. So far, however, no concrete measures have been taken, adding to market unease. Global markets also remain unsettled by the international response to Israel’s bombings in Doha.
Against this backdrop, the U.S. Dollar Index (DXY) stayed under pressure, allowing major currencies and risk assets to gain ground. Gold advanced, crude oil prices recovered, and cryptocurrencies snapped a two-day losing streak to start the week on firmer footing. Equities across the Asia-Pacific region edged higher. Meanwhile, USDJPY retreated after a three-week uptrend as traders anticipated greater monetary policy divergence between the Fed and the Bank of Japan (BoJ). The Fed is expected to announce further rate cuts, while the BoJ may defend its hawkish bias even if it refrains from raising interest rates during this week’s meeting.
The U.S. Dollar remains weak and under pressure, leaving EURUSD struggling to extend its two-week uptrend. The pair faces headwinds from renewed geopolitical and trade war concerns in Europe, as well as the European Central Bank’s (ECB) rate cuts and cautious comments from policymakers.
GBPUSD, however, holds slightly firmer than the Euro despite weak UK housing data. Support for the Pound Sterling comes from positioning ahead of this week’s FOMC and Bank of England (BoE) meetings, along with upcoming UK inflation figures and U.S. retail sales. The pair also benefits from a comparatively more dovish outlook for the Fed than the BoE, even as political risks and doubts over the UK’s fiscal plans remain elevated.
USDJPY trades mildly lower after a three-week uptrend, as safe-haven demand for the Japanese Yen (JPY) combines with expectations of wider monetary policy divergence between the Fed and the Bank of Japan (BoJ) following this week’s FOMC and BoJ meetings. The pair also faces pressure from U.S.-Japan trade negotiations and hopes that upcoming Japanese data will outperform U.S. releases, further weighing on the risk barometer currency pair.
AUDUSD and NZDUSD regained upside momentum after breaking a two-day winning streak on Friday, while USDCAD stays pressured, though lacking strong downside traction. The renewed strength in the antipodeans is tied to expectations of fresh Chinese stimulus, as weak data and trade war fears weigh on the country’s economic transition. At the same time, crude oil’s two-day rally adds to pressure on USDCAD sellers ahead of this week’s Federal Reserve (Fed) and Bank of Canada (BoC) policy meetings.
Market anxiety ahead of this week’s major central bank meetings, along with geopolitical tensions involving Russia, Israel, and U.S. President Donald Trump, is driving investors toward safe-haven gold. Crude oil also gains, supported by supply concerns from Middle East tensions and hopes that Chinese stimulus will revive energy demand, even as OPEC+ considers further output increases.
Bitcoin (BTC) and Ethereum (ETH) posted their first daily gains in three sessions, each rising about 1.0%, as markets appeared to favor cryptocurrencies as alternative safe-haven assets alongside gold. Adding support were speculations that the U.S. Securities and Exchange Commission (SEC) may soon announce long-awaited exchange-traded fund (ETF) approvals for select coins.
Following China’s data dump, only a few third-tier European Union (EU) releases appear on the economic calendar, which, along with the quarterly rollover of U.S. stock futures, could result in limited market activity. Traders remain cautious ahead of major central bank events, including the Federal Open Market Committee (FOMC), Bank of England (BoE), Bank of Canada (BoC), and Bank of Japan (BoJ). Some consolidation of last week’s gains in risk assets is also likely before Wednesday’s expectedly dovish Federal Reserve (Fed) announcements.
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