U.S. Interest Rate Decision Hesitation by Investors Persists
The financial world is abuzz with anticipation as the US Federal Reserve's two-day meeting begins on Tuesday, with the much-awaited interest rate decision scheduled for Wednesday. Economic data from the US has been weakening for several weeks, and there is potential for last-minute economic impulses from the US retail sales data, which could influence monetary policy. Investors are expecting the Fed to cut its key interest rate for the first time this year, with some considering a large cut of 0.5 percentage points. The significance of the September meeting lies in the signals for the time after. Market analyst Maximilian Wienke of eToro comments that the speed of the Fed's momentum will depend on inflation and the economy. Meanwhile, gold has been one of the most sought-after assets this year, with its price rising by around 40% since the end of 2024. Gold is seen as a 'crisis currency' due to global economic uncertainty. On Monday, gold prices reached a record high of over $3,869 per ounce, and on Tuesday, they continued to soar. Gold doesn't yield interest, but its disadvantage compared to bonds shrinks with lower interest rates. Lower interest rates can increase demand for gold among investors as bonds become less attractive. In the European market, the German stock market showed a sluggish start on Tuesday. The Dax, MDax, and EuroStoxx 50 experienced respective decreases of 0.2%, 0.1%, and 0.1%. There is a lack of corporate news on Tuesday, but Beiersdorf's shares could suffer from a downgrade by Jefferies due to struggles with growth for the Nivea brand and overly optimistic hopes for innovations in the current half-year. In contrast, Rheinmetall's shares, which have been boosted by their entry into the marine business, could be worth a look as they head towards another record high. The Bund Future, a key indicator for the German bond market, dropped back to the level it was at the end of last week on Tuesday morning. On Friday, the Bund Future fell to its lowest level since late March. Elsewhere, Bitcoin has risen by only around a quarter in the same period, while the Dax has risen by around one-fifth. However, the gold price surge has overshadowed the digital currency's growth. Fed Chairman Jerome Powell is under pressure, including due to a power struggle with US President Donald Trump. The focus for the day is on the US Federal Reserve's meeting, which begins on Tuesday and ends on Wednesday with an interest rate decision. The outcome of this meeting could set the tone for the global economy in the coming months.
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