Global markets turned their attention to US President Donald Trump’s peace negotiations with Russia, brushing aside hotter-than-expected US inflation data that cast doubt on the timing of Federal Reserve rate cuts. While elevated price pressures weakened the case for immediate monetary easing, investors remain in wait-and-see mode, needing more inflation data to determine a definitive trend. Markets were already positioned for an extended period of Fed policy stability, muting the impact of the latest CPI report.
The dollar weakened across the G-10 spectrum as hopes for a resolution to the Russia-Ukraine conflict curbed demand for safe-haven assets. Oil extended losses following US-Russia peace discussions, fueling speculation that geopolitical risks to Russian supply could subside. Market sentiment improved on optimism surrounding a potential diplomatic breakthrough, easing risk aversion.
Rate Cut Expectations Adjust as Treasury Yields Retreat
Yields on 10-year US Treasuries edged lower after Wednesday’s sharp jump, prompting traders to recalibrate expectations for Fed policy. Market participants now anticipate the first and likely only rate cut of the year to materialize in December. The January CPI figures, often skewed by seasonal cost adjustments such as insurance, may hold less weight in driving immediate policy shifts, leaving Trump’s tariff policies and geopolitical developments as primary market catalysts.
Gold Holds Firm Near Record Highs
Gold maintained gains from its previous session, inching closer to its all-time high set earlier this week as traders navigated shifting risk dynamics. With inflation uncertainties, shifting Fed expectations, and geopolitical risks dominating sentiment, positioning remains critical for market participants adjusting to evolving macroeconomic conditions.
With diplomatic efforts taking precedence and rate-cut bets evolving, traders must remain agile as geopolitical and economic narratives continue to shape asset price movements.