NAS100 under pressure ahead of cash open
The NAS100 is sensitive to interest rate movements due to the time value of money. As such, tomorrow's Fed hike is creating headwinds.
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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The NAS100 is sensitive to interest rate movements due to the time value of money. As such, tomorrow's Fed hike is creating headwinds.
Gold has been under pressure since real rates turned positive in late April. The market expects an aggressive Fed tomorrow, weighing on the precious metal.
Wednesday's monetary policy decision is weighing heavily on Bitcoin, with the Fed expected to deliver a 75bps hike. There is also nervousness around cryptos in general due to the White House's plans to regulate the industry.
Last week's CPI numbers showed resilient inflation. This surprised markets and introduced 100bps as an option for the Fed. Join FXCM Market Specialists Russ and Nik as they discuss this, the new terminal rate, and the chances of the Fed overshooting. The two specialists also examine the yield inversion and discuss the BoJ's monetary policy. Please join us for these and more.
The current inflation tends to have a broad sticky element to it. This price resilience will likely concern the Fed until it shows moderation. However, per the preliminary University of Michigan Inflation Expectations survey, consumer expectations moderated to 4.6% (4.8% - previous). Moreover, the pricing elements from last week's Empire State and Philly Fed Manufacturing Indexes indicate moderation. Therefore, 75bps seems to make more sense at this stage.
The US 02-yr Treasury note jumped today, trading at levels last seen in November 2007. It's trading near 3.85%, reflecting market expectations of at least a 75bps hike next week. Some participants have discussed a 100bps increase, reflecting as a 26% probability presently.
Ethereum's "the Merge" upgrade is now complete. The overhaul transitions its blockchain from proof-of-work to proof-of-stake. According to the Ethereum Foundation, this will result in its energy consumption dropping by 99.95%.
Given the need to control inflation, the prospect of higher interest rates is a headwind for gold. As such, in our view, the probability of lower prices is the path of least resistance.
The CPI surprise yesterday led to a 3.9% decline in the US30. This plunge puts the index back in its bear zone between the lower blue and red bands. Moreover, the daily stochastic is rolling over (green rectangle). If it drops below 20 and holds (red arrow), a strong bearish momentum will be underlying.
The hotter-than-expected CPI rate yesterday hurt bitcoin. Headline inflation did not fall as much as hoped, and core CPI was much hotter than anticipated. The Fed will continue to hike, and risk-sensitive instruments will remain under pressure, including cryptocurrencies.
The US interest rate is a crucial driver of financial markets in the current environment. This dynamic is despite the communication out of the ECB. I.e., the chart above shows the US real rate and its correlation coefficient (cc) with the EURUSD. The cc is at -58% and has been robust since the real rate turned positive at the end of April (green dashed line). Therefore, the current upswing in…
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