Oil Prices Keep Fed Rate Cut Hopes Under Pressure

Key Takeaways

-The Fed held rates at 3.50% to 3.75%, but the split vote showed deeper policy disagreement.
-Oil remains the key macro pressure point as prices above $100 keep inflation risk alive.
-US JOLTS and Friday’s Non-Farm Payrolls report could reset rate-cut expectations.
-Gold may stay supported if inflation and geopolitical risk remain in focus.
-SP500 and BTCUSD need softer data or stronger risk appetite to extend gains.

Markets enter the week with one key question: can the Fed cut rates if oil keeps inflation alive?

The Fed held rates steady, but the 8-to-4 vote split showed policymakers are divided. Some officials see slowing growth and want room to ease. Others remain focused on inflation, especially as higher energy prices feed into transport costs, goods prices and inflation expectations.

Oil Keeps The Fed Boxed In

Oil remains the main macro risk. If crude cools, inflation may still ease later this year. If oil stays above $100, the Fed has less room to cut rates aggressively.

Powell’s tone also matters. He described the US economy as resilient, with growth expected to stay above 2% this year. That does not sound like a central bank rushing to cut. It points to a late-cycle economy where growth still holds up, but inflation remains difficult to contain.

Labour Data Becomes The Main Test

Friday’s US Non-Farm Payrolls report is the biggest data risk. Payrolls are forecast at 60K, down from 178K, while unemployment is expected to hold at 4.3%.

A softer jobs print could revive rate-cut hopes, especially if wage pressure cools. A stronger print may support the Fed’s patient stance and keep the dollar and yields supported.

RBA Decision Puts AUDUSD In Focus

Australia also returns to focus, with the RBA expected to raise rates from 4.10% to 4.35%. A hawkish RBA could support AUDUSD, while a cautious tone may limit upside if policymakers focus more on growth risks.

Key Markets To Watch

USDX remains under pressure, with 98.20 acting as the key resistance zone. A break below 97.399 could bring renewed dollar weakness.

Gold has broken above 4633.39, with 4690 now in focus. USOil remains firm after breaking above 103.75, keeping inflation pressure alive. SP500 is still near highs, but a break below 7110 could signal profit-taking. Bitcoin remains constructive while holding above the 75,600 area.