Hours left for the Fed's decision: What will happen to gold, foreign exchange, and the stock market?

The Federal Reserve (FED) will announce its interest rate decision on September 18. Prior to the announcement, markets are in search of direction as it is likely to affect various data such as exchange rates, gold prices, cryptocurrencies, and local stock exchanges. Uncertainties about the size of the steps the Fed will take in the future continue to make it difficult for markets to find direction. Confidence in the country's inflation reaching the desired level has strengthened with signals from the latest data. Concerns about the labor market cooling faster than expected have brought along recession fears.



Experts expect a 50 basis point rate cut in the money markets due to these developments. It was reported that it is expected that the Fed will make a 50 basis point rate cut with a 70% probability tomorrow.



In addition to tomorrow's monetary policy decisions, signals from the policy text and the speech of Fed Chairman Jerome Powell will also be followed. It is expected that Powell's evaluations will provide information about the country's economic performance and future steps to be taken.



Meanwhile, while waiting for the Fed's interest rate decision, three Democratic senators, including Elizabeth Warren, called on the Fed to cut interest rates by 75 basis points in order to protect the US economy. In the letter written by the Democratic senators to Fed Chairman Powell, it was stated that "if the Fed acts too cautiously in lowering interest rates, it will risk unnecessarily dragging our economy into a recession."



On the corporate side, shares of Apple, one of the US technology giants, lost 2.8% after news that demand for the new iPhone 16 was lower than expected. With these developments, the US 10-year bond yield is currently at its lowest level since June 2023 at 3.63%, while the dollar index is balanced at 100.7.



While the barrel price of Brent crude oil rose by 1.2% yesterday, it is currently at $72.6 with a 0.1% increase in the new trading day. The price of an ounce of gold closed at $2,582 with a 0.2% increase compared to the previous closing after reaching the level of $2,589.70, a record high. Currently, gold is trading at $2,575, 0.3% below the previous closing. A short-term downward trend is expected in gold if the Fed cuts interest rates, but it is expected to recover quickly. Yesterday, the Dow Jones index rose by 0.55% and the S&P 500 index rose by 0.13%, while the Nasdaq index fell by 0.52%.



Index futures contracts in the US started the new day with a negative trend.



While mixed trends dominated European stock markets yesterday, concerns about economic activity continue to persist throughout the region.



European Central Bank (ECB) Vice President Luis de Guindos stated yesterday that the projections show that inflation will be around 2% by the end of 2025, and said, "We want to keep all options open regarding interest rate decisions, we expect inflation to decrease in September, but there may be a rise again in the fourth quarter." ECB member Peter Kazimir also stated that there is no need to rush for an interest rate cut and that it is safest to wait for a clearer outlook, saying, "A significant change in the outlook is necessary for the ECB to cut interest rates in October." ECB Chief Economist Philip Lane emphasized that the data on wages and profits are in line with expectations and said, "If the data comes in line with our base scenario, a gradual exit from monetary tightening will be appropriate."



Yesterday, while the DAX 40 index lost 0.35% in Germany, the CAC 40 index lost 0.21% in France, and the FTSE 100 index gained 0.06% in the UK. The FTSE MIB index in Italy closed flat. Index futures contracts in Europe also started the new trading day with mixed trends.



In Asia, a mixed trend stands out in the new trading day, as there is no trading in stock markets in China and South Korea due to official holidays.



According to data announced in the region today, the tertiary industry activity index for July in Japan increased by 1.4% above expectations.



The dollar/yen exchange rate closed at 140.6 after falling below the 140 level for the first time since July 28, 2023, while it is currently at 140.7, 0.1 above the previous closing.



Analysts stated that the appreciation of the Japanese yen dampens risk appetite in stock markets and said that regional stock markets are cautious ahead of the Bank of Japan's (BoJ) interest rate decision to be announced this week. Analysts reminded that the BoJ made a interest rate hike decision last month that was unexpected by market expectations and said that investors are focused on the BoJ's interest rate decision to be announced on Thursday.



Towards the end of the day, the Nikkei 225 index in Japan fell by 1.5%, while the Hang Seng index in Hong Kong rose by 1.4%.



In Borsa Istanbul, which followed a selling-oriented trend yesterday, the BIST 100 index closed the day at 9,577.46 points with a 1.12% decrease compared to the previous closing.



While the dollar/TL closed at 34.0393 with a 0.3% increase yesterday, it is currently trading at 34.0200 with a 0.1% decrease in the interbank market at the opening of the day.



Analysts stated that today, the housing price index, private sector's foreign debt, and housing sales statistics in the domestic market, as well as the Zew economic confidence index in the Eurozone and Germany, retail sales, industrial production, and capacity utilization rate data in the US will be followed. They also stated that from a technical perspective, the support levels for the BIST 100 index are 9,500 and 9,400 points, while the resistance levels are 9,750 and 9,850 points.