Fed Rate Expectations Jump to Nearly 90%
14th September
Key takeaways
Fed hike odds have surged to nearly 90% ahead of this week's FOMC meeting.
Saudi Arabia's East-West pipeline shutdown threatens 4-5% of global oil supply.
Gold, oil, and Bitcoin are all flagged for exceptional volatility this week as rate expectations and supply risk collide.
Lukman Otunuga
Head of Market Research
The probability of a Fed rate hike has surged to nearly 90%, just days ahead of this week's FOMC meeting.
Key Points
• US consumer inflation rose 3.4% in August, unchanged from July.
• The Fed's preferred inflation gauge, core PCE, has now run above the 2% target for roughly 65 consecutive months - one of the longest such stretches on record.
Inflation well above target + high oil prices = a strong signal of a hawkish Federal Reserve stance.
The Threat to Saudi Oil Supply Is Pushing Prices Higher
Saudi Arabia shut down its East-West oil pipeline this week following drone attacks, a route that typically carries 4-5 million barrels a day - roughly 4-5% of global oil supply. Industry analysts say repairs could take weeks to months, and Saudi authorities have not yet given an official reopening timeline. The longer the shutdown persists, the greater the risk to global supply and prices.
The following instruments are expected to see exceptional volatility and notable technical momentum this week.
XAUUSD
What could move the asset:
Bullish factors: a weakening dollar and falling US bond yields; low expectations for a rate hike; crude oil falling below $90 a barrel.
Bearish factors: a stronger dollar and rising US bond yields; high expectations for a rate hike; crude oil rising above $100 a barrel.
Technical overview: XAUUSD appears to be completing a Head and Shoulders pattern. A confirmed break could see gold test the pattern's medium-term target near $3,960. The $4,280
Crude Oil
What could move the asset:
Bullish factors: escalating geopolitical tensions; worsening concerns over Saudi supply disruptions; stalled negotiations among Gulf states.
Bearish factors: easing geopolitical tensions; easing supply concerns; continued Gulf negotiations.
Bias: bullish. RSI neutral (60, H4). MACD positive.
Frequently asked questions
August CPI came in at 3.4%, unchanged from July, keeping inflation well above target and reinforcing the case for a hike.
It typically carries 4-5 million barrels a day; analysts say repairs could take weeks to months, with no confirmed reopening date.
Higher rates make dollar assets more attractive, often pulling capital away from riskier, non-yielding assets like BTC.
