Week Ahead: Fed Cut Timing Repriced After CPI Surprise

Key Takeaways

• XAUUSD, BTCUSD, USDX, and SP500 begin the week reacting to shifting Fed rate cut expectations following a softer US CPI print and a mixed labor report.
• Headline CPI cooled to 2.4% year-on-year, while January payrolls rose by 130,000 amid significant downward revisions to prior months. Markets now lean toward the first Fed rate cut around June.
• If disinflation persists, XAUUSD may continue to rise. If inflation proves sticky again, USDX could squeeze upward and pressure both gold and crypto.

US CPI and Fed Rate Cut Expectations

The macro backdrop this week revolves around a growing disconnect between moderating headline inflation and persistent core pressures.

January’s US CPI slowed to 2.4% year-on-year, below expectations of 2.5% and down from 2.7% in December. The decline was largely driven by softer energy prices, particularly gasoline, which helped ease the headline figure.

However, the underlying inflation picture remains less reassuring. The Fed’s preferred inflation gauge, PCE, remains elevated. December PCE stood at 2.9% year-on-year, with core PCE at 3.0%. Services inflation and essential costs remain sticky, reinforcing the Fed’s cautious tone around easing too soon.

Labour data mirrors this mixed narrative. January non-farm payrolls rose by 130,000, comfortably above expectations of 70,000 and well ahead of December’s revised 48,000 figure.

Yet, benchmark revisions showed that employment levels through 2025 had been overstated, aligning with VT Markets’ research, which highlighted a gradual cooling in labour demand beneath the surface.

Recent Fed minutes and official commentary continue to stress patience. Policymakers describe inflation progress as uneven and reiterate that any rate cuts will remain data-dependent. Some members have even kept the door open to further tightening should inflation stall again.

Fed funds futures and FedWatch pricing now indicate a strong probability of steady rates through March, with the market increasingly positioning for the first rate cut around mid-2026 rather than early in the year.

The Tariff Twist

A major development emerged after the US Supreme Court ruled that only Congress, not the President, holds the authority to impose global tariffs.

This decision removes a key executive policy lever and could potentially trigger approximately $160 billion in refunds to importers.

For markets, the ruling introduces two potential effects:

USDX impact: If importers unwind hedges tied to prior tariff flows, the dollar could face downward pressure.

SP500 effect: Lower effective import costs may support corporate margins and improve forward earnings expectations.

That said, the White House is reportedly considering a temporary 150-day emergency surcharge as an alternative measure. Markets will closely monitor whether this approach withstands legal scrutiny.

Rising US–Iran Tensions and the Geneva Deadline

Geopolitical risk has returned to the spotlight after Washington issued a 48-hour ultimatum to Iran ahead of scheduled talks in Geneva.

US military positioning in the region has intensified, though diplomatic channels remain open for now.

This development directly impacts gold and oil markets:

Heightened geopolitical risk typically supports safe-haven demand, reinforcing XAUUSD above the 5,000 level.

If negotiations deteriorate, crude oil could spike, potentially lending temporary strength to USDX amid risk repricing.

Upcoming Events

Key Symbols to Watch

Gold (XAUUSD) | USDX | Bitcoin (BTCUSD) | S&P500 | Oil (CL-OIL)

Chart Movements of the Week

Gold (XAUUSD)

• XAUUSD climbed toward $5,170 in early Asian trading Monday, approaching the 61.8% Fibonacci resistance at 5,164.35.
• 5,164.35 remains a critical rejection zone, while 4,981.20 serves as key 50% support.
• Catalyst: Fed rate cut expectations and upcoming US inflation releases.

Bitcoin (BTCUSD)

• BTCUSD faced rejection near $65,000 and stabilized around $62,000.
• The $59,500 level remains structurally important support.
• Catalyst: US inflation data and SP500 performance.

US Dollar Index (USDX)

• USDX is testing resistance near 98.10.
• A break above 98.65 would shift short-term momentum decisively bullish.
• Catalyst: Fed repricing and US PPI data.

SP500

• The SP500 trades around 6,912, aligning with the 38.2% Fibonacci retracement.
• Immediate resistance sits near 6,944 at the 23.6% retracement, where sellers may re-emerge.
• Stronger support lies at 6,860, corresponding to the 61.8% retracement zone.

Bottom Line

Gold begins the week pressing against the 61.8% Fibonacci resistance at 5,164.35, trading just beneath a key technical ceiling. The next directional move will likely depend on how rate cut expectations evolve alongside incoming US data.

With PPI and follow-up labor figures ahead, markets are actively recalibrating the timing of the first Fed rate cut. Continued cooling in inflation could allow XAUUSD to extend gains.

However, any reacceleration in price pressures may strengthen the dollar and limit upside in gold and crypto.

The coming sessions will determine whether rate cut expectations gain momentum or face another reset.

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